Filling the Funnel with Good Leads

I have learned that I need to ask the hard questions up front, you know, like how would you envision this integrating with this tech stack that we're running? And I tell them about that tech stack and make sure that they have good answers to that before we go too far because there's been a lot of conversations where you walk away going, man, that's really cool, but it's just not practical.

Right.

This is the Insurance Technology Podcast where we bring interesting people from across the insurance ecosystem to discuss and debate technology's impact on the industry. Join us each episode for insights and best practices from industry stewards and tomorrow's innovators. Now, here's your host, Reid Holzworth.

Welcome to the Insurance Technology Podcast. I'm your host, Reid Holzworth. In this episode, we're back in Savannah, Georgia at the Big "I" Insure Tech Summit. And I'm interviewing Jay Eshelman. Jay runs small business, which is small commercial, personal lines and affinity at the behemoth, Gallagher. I met Jay, probably about a year and a half ago at their corporate office in Chicago. And Jay has a real interesting take working at a behemoth like that, Gallagher, and in those lines too.

Yeah, glad to be here.

So what do you do with Gallagher? What's your J-O-B?

So we call it Select. It's three different high volume, very digital businesses. About five years ago, we pulled all of our small business across the country out of branches, and put it into a centralized PnL, and built a leadership team, and finally, some strategy around it. It was largely business that we didn't have a good strategy for in the past-- largely wrote as kind of accommodation business in our branches.

Yeah.

And if you're not familiar with that term, that's generally where we are selling insurance through third parties. So we partner up with different groups that have members, consumers that might want a certain type of product. And then we help customize the product for them and sell through that organization. So a good example is a professional association that might need an E&O plan for their members.

Yeah, totally.

We also sell a lot of student health insurance through colleges and universities and things like that. So it's a pretty fascinating part of the industry that can include all sorts of things.

It's why-- my ex-wife actually, she ran a program for-- it was massage magazine, and they built an insurance product for all these misuses.

Yeah.

I guess-- I think [INAUDIBLE] worldwide because they need insurance and little small itty bitty policies, but they just sold thousands of them. That kind of same kind of thing.

Exactly. Low premium. Have to be digital.

Yep.

But if you customize the product well, then you can market it to thousands and just let the machine do the work to bring in people into the funnel.

It's a good business. So tell us about you. Before we get into the deep business stuff, where'd you grow up? What did you do as a kid?

Tulsa, Oklahoma. Yep. [LAUGHS] Most people ask if I had a horse or-- [LAUGHS] [INAUDIBLE] a teepee and neither of those things. [LAUGHTER] My extended family are Kansas farm people but grew up in Tulsa. Went to OU, so I'm a Sooner. I lived in Colorado for a while before--

Nice.

--we had kids and did all the fun stuff out there. And then when we had kids, moved back and then lived in Tulsa ever since. Gallagher's let me stay there. I just fly a lot. [LAUGHS]

You guys have an office there? You must have.

We have a sizeable office.

Yeah, yeah. That's awesome.

Yeah.

That's awesome. How did you-- so college, did you just wake up one day when you were a kid and you're like, I'm going to go to college, I'm going to be getting into insurance? How did you fall into insurance?

Yeah, what can I say? Isn't that what everybody does?

Yeah, yeah. Right.

Right? Typical story. I did completely fall into it. I'm a CPA by trade. I got an accounting degree. Got my CPA. Worked for Ernst Young.

Oh, wow. You don't strike me as an accountant.

Thank you. I'll take that as a compliment. [LAUGHTER] So I looked at the partners in that firm and thought, I don't think I want to live that life, and I don't want to be stuck as a desk all the time. So after that I did a gig as a CFO of a little startup company. And that's where I really got into overseeing sales and working with a lot of it stuff. And it was a little dot com. It was kind of a fun gig.

That's cool.

And as that was winding up, I just decided, you know, I want to move away from accounting, but that was the best thing I had to sell. So my first job at Gallagher was a controller.

Oh, wow.

And I went to work for a guy named Wally Brice, who had just sold his family firm to Gallagher.

Sorry. So Gallagher was your first--

It was.

--insurance. OK, and how long ago was that?

That was the beginning of the 2004? So almost--

Oh, wow.

What is that? Nineteen years now?

Whoa. Man, yo you're a young looking dude. [LAUGHS] That's awesome.

Appreciate it.

OK, yeah sorry. Go ahead.

So, yeah, he said-- Gallagher was very decentralized back then. Not so anymore. But back then, it was kind of like, they'd buy it, and you just did your thing. But they had grown a lot. Wally's team had grown, and he didn't have the back office talent. And it was kind of a disorganized mess. And he said, if you can help me clean all this up and get going well, I'll teach you the insurance business. And I thought, that's a good offer.

Let's talk about that because that's exciting, man. I mean, I love the story of large agencies going, hey, why are we throwing this stuff away? Right? I've said this before on the podcast. I have a buddy, not even close to the size of you, guys, but they throw away 2,000 to 3,000 leads a month on small commercial. They're just like, we don't want it.

Yeah.

You know, just like-- I don't know-- figure it out. Call somebody else. And I mean, you guys are massive, and the size deals you guys write on average are way bigger than the micro or small stuff that's out there. So going after that and saying, hey, what do we do with that? I mean, that's interesting.

Yeah, so Gallagher has always been focused-- middle market and large account space, but we've always been really acquisitive. And every acquisition we do has some small business-- some personal lines. But in the past, it kind of-- I always say Sally took care of it over there in the corner, and nobody really knew what Sally was doing every day. Sally didn't have anybody to report into that understood it either. She just kind of had her own challenges, but she kind of worked through it, right?

Yeah.

And people would ask our producers to write it, and we would. But nobody was thinking, oh, this could actually be a growth area.

Totally.

And I pointed that out to Pat Gallagher because--

Did they look at it as unprofitable though?

No. Well, personal lines--

Yeah, I can see that.

Highly profitable.

OK.

Small business though. We were struggling because Gallagher had centralized-- put a lot of systems in place.

OK.

As we got centralized as a big company, put more what we call standards of excellence-- but professional standards in place. And the people who are doing 350 to 400 accounts annually, they were drowning in all this process and stuff. And so we just kept throwing labor at it, and it wasn't profitable.

Interesting.

It was marginally profitable, I should say, like in the low teens.

Yeah.

So we kind of re-engineered everything on the small business side and made a more simplified version of the systems-- the processes. And just with that focus, we're able to kind of lean up the team-- do a better job. We start using carrier service centers, for instance, on micro accounts that we never had done before.

Yeah.

So just somebody focusing on it-- got It.

We were talking about that when we're [INAUDIBLE] about the service centers and whatnot. Those can be a game changer. But they can also hurt revenue wise as you really start to get super efficient I mean, are you finding that-- I don't know. Like--

Well--

I hear mixed results--

We're lucky because of scale that we can get some pretty good deals on that, but it is a challenge for small agencies as I talk to them all the time. We're always trying to acquire stuff, and that's a common challenge for them. I would say that there are-- if you can offload a thousand out of 1,500 accounts and the customers are happy?

Yeah, totally.

It's worth the money because then you're putting your time and effort on the 500 best accounts in that book, right? And getting better results.

For the audience-- and I don't know why. Maybe people don't know. I mean, I figure they would, but maybe they don't. What is the service? When we say that, how do you classify that?

Yeah, so the large carriers have all built really nice service platforms. It's essentially a call center, but they're highly trained. One thing that we like to do is go in and actually audit the performance of those, and that's the only ones that we'll do business with. So there's other carriers that have them that want us to use them, and we don't.

Oh, so you've had some that you just said, this is not good?

Yeah.

Because we're losing business?

Exactly.

Wow.

Yeah, so we hold them to a standard. And every couple of years, we go in and kind of audit how they're performing, but most of them have become really good.

I actually don't know this. Do most of the carriers have service centers now?

Yes.

I remember a number of years ago, just a few like the big bigs, the big tier ones, a few of them had it. But now, is everybody starting to offer that? And so

Well, it's still the tier 1. I would say that a lot of the regionals and state-specific companies don't.

Yeah, right.

But--

Is that challenging to you, guys, sometimes because you want to offer other markets and whatnot?

Sure.

Yeah, I could see that. But then do you guys just handle it? So then if they don't, you just take it?

If they don't in you micro space, we have built a service team that is pooled. So instead of having an assigned book of business and that customer knowing they only call Sally, its first in, first out. You know, phone rings and the next person picked--

So you dedicate people to the accounts?

Yeah.

Even on the micro stuff?

No, no. Micro is pooled.

OK, I'm sorry. Yeah, OK.

But above that-- so for us, a $1,000 up to $10,000 in commission revenue--

On commission.

--would not be my-- micro is less than a $1,000. And then $1,000 to $10,000--

That makes sense.

--is the rest of our small business book. And those have the account-- assigned account managers.

Yeah, that's great.

Yeah.

That's great.

Works well.

So how's it going?

It's going very well. So we took that low teens margin up to now. We're in the mid-30s.

Wow.

And I don't want to get any higher. I mean, we're in a sweet spot.

Yeah, why? Why would you not want to get higher?

Because I think you, eventually, start hurting the service the customers are getting.

OK.

But we've really refined it. And the biggest challenge there was not changing those processes and getting the margin up. It was figuring out how to grow it.

Yeah.

And what I looked at was you don't see a ton of traditional producers coming across that can do enough $500 deals to really move the needle new business wise. Let's say our retention rate is about 91, so if you're dropping 9% off every year and you've got to refill it at $500 a pop-- [LAUGHTER] You really got to be hustling, knocking on a lot of doors. So we decided let's focus on an inside sales approach. And so we've now built a team. I think we have 32 inside salespeople.

I love it. Gallagher. Just like, yeah, let's just build a team of 32 people.

Well, it started with three, right? [LAUGHS] And we just had success and kept at it. So-- [LAUGHTER] I really get the budget to add in 30s. [LAUGHTER] But it's been fun because now as a management team, we're focused on putting good leads in the funnel. And there's just been insurance professionals walking people through needs and quotes and closing business as opposed to a lot of fruitless calling that it takes, [LAUGHS],, in order to fill the funnel.

How do you keep the funnel filled? I mean, do you guys just get tons of inbound on that type of stuff just because your brand or your name? Or is it, are you really like truly having to go and hunt that stuff? And if so, how do you get it?

Yeah, about half of it is coming from internal referrals.

Yep. Yeah.

Just phone ringing.

And I'll just say something on that too.

Yeah.

It's tough as far as like, if I'm a large business and I own a large company and my best friend owns a small business, right? And I refer them, oh, hey, call Jay over there, like, he'll take care of you. And these large agencies, if they don't do that, that can actually hurt my relationship with my large cluster.

Sure.

Right? If I'm like, yeah, we don't do that. Sorry. You know, I don't know. Maybe. Maybe not. I don't know.

Yeah, then going back in the story, there was a time where the executive team was talking about whether they should just sell all of it because we weren't doing it well.

Yeah.

We didn't have a plan, and what I told Pat Gallagher was, listen, we're going to keep getting it, or the phone is going to keep ringing. I told him, somebody's wife is starting a dress shop or--

Yeah, exactly. Yeah.

Whatever it is. Somebody driving for Uber, you know. Somebody needs help, right?

Yeah, totally.

Plus, we do all these acquisitions, and it's going to keep coming, so we need to get good at it. And so it's been fun to-- working in a big company like Gallagher, it's a bit like steering the Titanic sometimes.

Oh, yeah. Totally Yeah.

If you get the right people, it happens.

So 50% of is inbound. The rest of it-- you got to go and find it.

Yeah, so we're buying those.

OK.

We created some strategic partnerships. So do you buy

Leads?

Yeah.

Wow. No kidding. Wow. That's awesome. How are the conversion ratios on that stuff? You struggle with that? I mean, what's that cost look like? I'm not asking for numbers or anything. But is it tough?

It's getting tougher.

Yeah, I bet.

When we got started, that was the easiest place to go first to fill that funnel. It was just buy as many as we can.

Totally.

And you know, anybody who's done that, it takes some time to figure out, how do you get the good ones? How do you filter out the bad ones? how do you dial in to certain industries that you are going to have most success with? And so we just kept tweaking the dials on our lead partners and trying to figure that out over time. But what I saw was as COVID hit, everybody's marketing efforts ramped up, and those lead costs just got more and more expensive.

Oh, yeah.

I feel like it's plateauing now. I don't know if it'll move back down because I think, a lot more people are exercising that marketing skill than they used to.

Yeah, yeah, well, dollars are drying up too for people. A lot of people raise a lot of cash to do those types of adverts.

That's true.

And so it's going to-- I assume the cost will start to come down to some degree back again. Who knows? We'll rock it up.

But it is fruitful. I mean, ROI is still there.

Yeah, yeah, what about the personal line side? How did that go?

Yeah, so we started that journey the beginning of 2020.

Because that's another one. That's a tough one, man.

It is.

Personal lines-- but I mean, you can make money on it like you said. And guys like Marsh, they do the whole private client and all that kind of stuff. And they have the different programs and whatnot. But again, it's like, how do you not ensure the owner of that large company's personal stuff and then his kid, right? [LAUGHTER] You know? How do you not do that? Right? It's tough. So you had that. You said it was somewhat profitable in the beginning.

Yeah.

It was always there. So what did that look like?

What I like to say about personal lines is the most challenging part about it is that it's personal. People can get bent out of shape real quick if something doesn't go right.

So true.

So you really got to be on your toes.

That's a good point. So actually, come to think of that, it could actually bite you in the ass. Even if you're doing a good job at it, maybe the carrier doesn't do something right. They can get irate. Yeah.

That's kind of what--

Leave the whole town.

It was a different challenge that I inherited when I took that one on because like you said, people ask us to do it, and we would do it. But in certain areas where we didn't have enough talent at the desk, we would underperform. So a producer in Gallagher would throw a referral over the wall and ask somebody to handle it.

Yeah.

So we took that team and started trying to build the quality back in to start getting that loyalty and trust back. And that's an ongoing challenge. I mean, we're not completely there yet, but that's the most important thing. When I think about the success in small business, I've got to turn in that 50% of the lead flow back on, and it's a kind of a trickle right now because it's in pockets. We've got little pockets of greatness, and it's a good referral flow. In other parts, it's a desert.

What do you see as the biggest kind of growth lever for you and your units? The Affinity stuff? I could see that being a big one, especially with your name and brand and whatnot coming in and building those products for those companies.

Affinity is very cool. It's a different sales approach. You're selling the ability to customize and deliver a product to their members that they care about. So it's more business development, I would say, up front, and then it's almost like building a program for every deal. You're building the product. You've got to build the technology delivery.

Yeah, it's so true.

And so there's a lot of coordination and cooperation. But what is cool is once you get them going, then you just pour gas on it.

Yeah, totally.

A lot of them grow nicely, so longer lead time upfront, but good rewards on the back end. And what I think is exciting is, since I have all three of these groups together, we're not quite there with our systems yet. But once we get to the point where we can really data share across the three groups really effectively--

Oh, yeah. Oh, true.

There is tons of cross-selling ability that we're not executing on yet, but that's an exciting opportunity for us in the future because these members, they have a personalized need as well. And they might own a small business or whatever. So I think, the three are pretty symbiotic.

Yeah, it's pretty awesome, man. What do you see as a challenge? What kind of challenges do you face like technology wise? I mean, I'm sure you face a lot of them, but tech like you said in the beginning, technology is kind of your secret sauce in making all of this work as efficiently as possible outside of the right people and the right seat and all of that. But I assume you've struggled a lot with technology along the way. And you've been doing this a while.

A good example is the Sensei world. People have been using Easy Links on the personal line side for a while, but there wasn't a good small business one. And over the last couple of years, several have emerged.

Yes.

So we partnered with one called Tarmika in 2021 and mostly focused on new business approaches and strategic partnership like white labeling it, so that we could bring lead flow in through a system that could--

You use the tunnel and the bridge, basically. And for those that don't know, they're kind of funny names. [LAUGHS] Thank you, Rogoff, for your great naming conventions there. [LAUGHS] But the tunnel was really kind of more the pipes, where you kind of build out your own solution in ways and connect that up and can embed the solution. In other products, if you will.

Exactly.

Right? And I think you're using more tunnel than bridge. I know this because we bought Tarmika, so I'm involved in some of that.

We're doing both. So the bridge, basically helps our people quote new business with multiple carriers simultaneously and streamlines that process. We're now doing that with the renewal marketing and things like that. But then the tunnel is great for us because we have interested partners, who want to have an insurance offering.

Yep.

But we don't want to go staff up 30 more people to just start doing all this stuff ourselves. So they can the interested party can start a digital journey online with that partner. Put in information. Start to see who the suggested carriers are, and then our team, our sales team can get involved at that point. So it get some way further down the funnel, which is great for us because then we've got the information at our fingertips, and we have a better conversation. So that's pretty cool.

That is pretty cool. Do you have a bunch of insurance technology companies? InsurTech guys that can call on you and try to--

For sure.

--tell you that they have the next best thing out there? I bet you get a lot of that, right?

Yeah, I've done so many wild goose chases. [LAUGHS] I've learned that I need to ask the hard questions up front, you know like, how would you envision this integrating with this tech stack that we're running? And I tell them about that tech stack and make sure that they have good answers to that before we go too far because there's been a lot of conversations, where you walk away going, man, that's really cool, but it's just not practical for me.

Right.

We are in too many systems already, and that's the challenge. Bouncing in and out of 20 systems is not fun every day.

What does that look like for you in this kind of perfect state? Everything connected, one system?

Yeah, at least talking to each other very well. But yeah, if you could be doing it in one system and then that becomes the system of record that feeds everything else, that's the ideal state.

Yeah, I think things are getting there. It's getting closer.

Yeah, I'm super encouraged by the progress the last two years.

Yeah, no kidding.

People are thinking that way now.

Absolutely.

It's like, five years ago, they weren't thinking that way.

No, not at all. But I think it's different. I think five years ago, guys like yourself, weren't building these programs and really focusing on it.

Maybe true.

Yeah, so I think it's really driving--

But it's a problem that all the independent agents have had for years, right?

Yeah.

You know? It's, OK, so we're supposed to get into 10 different carrier systems and do all these things individually?

Right.

OK, that's not great. [LAUGHS]

It's funny because we still hear it all the time, man. So many agencies-- they push back, and they're like, well, we are people still like to just go to the individual portals and quote and do all of that. Blows my mind. You know? But they're not looking at all the numbers like you guys are. And you're very efficient company in that way. And I think as you have a large business, you have to. You have to watch all the numbers and understand everything.

I would also say that that answer is because the account manager is comfortable in that system. That's what they know. But if you think about it, they're limiting what the customer gets access to because they're deciding, I'm going to work in this one system with this one carrier most of the time, and I hope it fits you.

Yeah, totally.

Right?

Right.

But that's not the best thing for the customer. A customer should get access to and looks from all the different carriers.

Absolutely. Totally. Totally. Well we're at time. One more question for you. What's your favorite drink? What do you like to drink?

Oh, good question, Reed. [LAUGHTER] I like bourbon way more than I should. That's my new hobby.

I can see you being a bourbon guy.

Yeah, the I like to make cocktails too. So when I have people over, the cocktail I always make for them-- it's called the boulevardier.

OK, I don't know this. No.

You ever had a Negroni?

Oh, yeah. Yeah.

So it's a bourbon Negroni.

Oh, OK.

It's Campari, which is the bright red, Italian liqueur, and then you got to have good Vermouth , so I get Dolan which is the French vermouth and those three. Not quite in equal parts. I go a little heavier on the bourbon. [LAUGHTER] But it makes a pretty good cocktail. People love it. [LAUGHS]

That's awesome, man. Well, thanks again for joining.

Yeah, good talking with you.

Super good. Really good context. People are going to love this. I mean, it's really great to understand how your view on the industry and these products and these things and what you guys are doing. I mean, Gallagher is a monster, man.

Well, I appreciate it. We're glad to be a part of the big guy, and I think, this is great that we're putting more focus on InsurTech to help everybody swim through this--

100%.

--crazy maze.

Yeah, right? [LAUGHTER] Well, thanks again, Jay. I appreciate you, man.

All right, take care.

Wow. That was awesome. Jay just has such interesting perspective on everything. And I mean, to run all of that at Gallagher is just amazing, and he's making big moves. And once again, like everybody on this podcast, he's just an awesome dude. He really, really is. I want to point out too that was the first time we ever interviewed an agency on the podcast, and man, what a big one to interview. So that was super cool. Well, stay tuned.