A major player in Small Commercial joins us on the Trusted Advisor podcast this week. Matt Kirk, SVP and Chief Sales and Distribution Officer for Small Commercial at The Hartford, discusses trends in small commercial. First, he discusses how The Hartford and its many small commercial customers are responding to the pandemic. Next, Matt touches on the evolving relationship between agents and their small commercial clients. Finally, we dive in to the gig economy and how to manage these clients.
Edwin K. Morris (5s):
Welcome to the trusted advisor podcast brought to you by Iroquois group. Iroquois is your trusted advisor in all things insurance. This week, you’re listening to Charlie’s corner, a segment hosted by our very own Charlie Venus.
Charlie Venus (19s):
Welcome to today’s podcast. We have a great guest today. Matt Kirk, senior vice president and chief sales and distribution officer for small commercial at the Hartford. Welcome, Matt.
Matt Kirk (33s):
Well, Charlie, great to be with you. And thanks for, thanks for having me. I look forward to, to getting into it today, about what we’re seeing in the marketplace and, and everything we’re doing together.
Charlie Venus (43s):
What have you seen on the client side, the customer side, in terms of their ability to recover? And going forward, what will Hartford do to try to push, to help customers develop disaster recovery or business resumption plans? Because I think a lot of customers learn that they, they need these plans and that they’ve probably been resistant to putting them in place previously.
Matt Kirk (1m 12s):
You know, everything from the basics like, you know, do they have laptops they can bring home and actually log into whatever the business needs were and operate from home. If they were the type of business that, that could get their business done from home. And so you had the very basic questions of routing of phone lines, ability to log in and just process the daily activities of the business to, you know, what was, what was the way they were going to engage customers depending on what business they were in. Could they engage them virtually? You know, there was obviously a ton done in the telehealth space. And then if they were going to keep their business open to foot traffic say they were an essential business, you know, what adjustments did they have to make?
Matt Kirk (1m 60s):
Everything from, you know, might’ve been a veterinary practice, you know, are you meeting someone in the parking lot and taking the pet in? Those types. So, so there were a host depending on the business, you’re in a host of questions, I think at a very basic level, if your business model was not in a place where digital transactions, so in the insurance case, it could be, you know, processing a certificate of insurance or an endorsement, but things that, things that you might’ve emailed back and forth or called somebody on, you know, many people didn’t even want to receive mail, you know, so they wouldn’t, they wanted to process that in digital, they were nervous about, you know, touching their mail as it was coming in.
Matt Kirk (2m 43s):
And so the transition for many, many businesses, including our agents and, and their customers to a digital world, while, it might’ve been progressing at a pace, It went through the roof. Those are the types of things I think going forward that people now realize they have to be able to be digital and they have to be able to be operational somewhere else that, that right out of the gate, so we saw that.
Charlie Venus (3m 3s):
From a business standpoint, clearly, you know, the pandemic had an impact on small commercial, probably more so than the middle and larger accounts. You know, what kind of results did you see in the second quarter from a bounce back? What’s the forecast for the third quarter? And give me your perspective on the, what you see from an economic recovery standpoint for the fourth quarter in 2021
Matt Kirk (3m 29s):
From a second quarter and just, just the trend line. And now a comment on the economy broadly, what we are seeing is no surprise. The employment dynamics are reflected in the workers comp line. So, you know, depending on what your level of payroll is, how many employees have come back, or how many you have employed, you know, that is certainly there. We’re seeing some real strength and, and the bop line, the property and liability. I think a lot of that is the businesses that have stayed open and, or I think as a carrier, we’re, we’re feeling some real strength. We have a new product in that space that we’ve had a very good reception to. So I described, you know, the, the, those two lines are in a, in a slightly different place based on the economy.
Matt Kirk (4m 13s):
And then to your broader question about the economy, you know, there’s lots of forecasts out there. I know the federal reserve put out, put out a new forecast in, in mid September about what they expect in 20 and, and expect into 21. But, but obviously you continue to see high levels of unemployment. You do see some good numbers on business starts, but those business starts are likely, you know, either an individual, who’s just doing something different on the side. I don’t, you know, you’re not seeing any, any broad-based rebound by any stretch you do see elevated business starts, but I think you’ve got to really get underneath the number of what the business is. And so we continue to manage through obviously a negative GDP and a high unemployment.
Matt Kirk (4m 55s):
You know, if you, if you look at what the federal reserve and others have said, that obviously continues into, into 2021,
Charlie Venus (5m 1s):
You were mentioning the resilience of some of the businesses and one area, particularly in the small business side where people change was, you know, restaurants, they started delivering. What kind of impact did that have on, on you from an auto standpoint? And if you can give me more of a perspective because auto is such a troublesome line for, for everyone, what you’re doing on the auto line of business?
Matt Kirk (5m 29s):
Good question. We did allow our restaurant books. So our, our, our customers to, if their operations did change and they were, they started doing delivery, but that wasn’t originally, we obviously allowed them to endorse that on and, and we’re able to adjust those policies accordingly. So we did make that accommodation in order to help them make sure they had appropriate coverage for their operations, even if, when they had first booked the policy, that was not where, what they intended. So the auto line, you know, I think generally, and I, you know, this would be what a lot of folks in the industry have seen is because there’s obviously less traffic on the roads. You are obviously seeing some benefit on the frequency side.
Matt Kirk (6m 12s):
If you look forward in the auto line, you know, as it’s, as it relates to the behavior of drivers and the issues people face with distracted driving the severity on the loss side of, of what people are seeing, you know, if the roads were, were back with their normal capacity, a lot of those things still are out there. And so what I would, what I would guide your, your agents, Charlie, is that the activity in auto reflects, you know, the economy at the moment, the underlying dynamics around the auto line itself, as you go forward, you know, those, those sorts of things still remain.
Matt Kirk (6m 54s):
And, you know, as the activity on the roads picks up, you still have to make sure that the line everyone is trying to get healthy. So the line will still be taking rate. No, there’s no doubt about that going into 2021.
Charlie Venus (7m 8s):
Okay. Now, when you look at, I, you know, property’s got a similar, similar issue, and I think for small commercial, it’s probably reconstruction cost is probably going to drive most of it. What do you see on the, on the, you know, the business owner policy side from a property perspective?
Matt Kirk (7m 27s):
Yeah. So I’ll speak only really in this answer to the bop itself. Cause I think there’s, you know, the property, depending on, if you got all the way up into that large property space, there’d be different dynamics and certainly on liability as well. So, but just to the bottom, so to our product and the small commercial, it is a very, very stable product at the moment, meaning it’s in a strong place. There’s, there’s, there’s a little bit of a rate that ref, but, but nothing is nothing like the auto line. And so very, very stable product I think, is what our agents and their clients are feeling right now, which is a good thing much. I think a bit of a different story, you know, than the middle and large and a large specialty space on both excess liability and, or, you know, property generally in that marketplace, if, from what you hear in the industry.
Matt Kirk (8m 21s):
But the bop line, I think, yeah, what Iroquois agents can, can expect and, and their clients expect is it’s in a very, very stable, good spot. And, and so that’s, that’s a good story. No, no big swings one way or another,
Charlie Venus (8m 35s):
And Matt for the listeners today. And you don’t need to go into great detail on this. So as concisely as you can, if you were from an exposure standpoint, defining small commercial now, because I know, you know, the exposures have crept up, you know, over the past couple of years. So if you can define that for the listeners.
Matt Kirk (8m 58s):
And so what I think surprises a lot of agents oftentimes is how large an account from their perspective, from a premium, in a revenue to the agent actually goes into, into small commercial. And I do this last comment on this, you know, one of the important things for Iroquois agents and certainly, and agents is that we don’t have any gap. So that is to say that, you know, what small writes, you know, we write up to a certain exposure base and then middle takes over. And one of the things that we continue to make sure we’re working with your agents on is that they know that, that they don’t have to eat, sleep and breathe these definitions.
Matt Kirk (9m 41s):
It’s really our job to make sure that when we see that, see that submission, it lands in the right place, whether it belongs on a package or a bop, but there’s pretty large ones. I’ll give you just a couple of, you know, if I think of real estate, we’ll do, you know, 40 million on property value. If I think of financial services, we’ll do 15 million of payroll and I won’t go down the whole line, but I, it generally tends to be bigger than the agents realize.
Charlie Venus (10m 4s):
Yeah. And I know since my days at the Hartford, those, those exposure basis have, have crept up. So, you know, Hartford’s always been viewed in my opinion, as, as certainly a leader, if not the leader in, from a small commercial standpoint. So let’s talk about what’s next in that, you know, from a technology standpoint, ease of doing business, you know, you mentioned a new product a few minutes ago, so take us, walk us through that.
Matt Kirk (10m 34s):
We’ll maybe we’ll, we’ll parse some of these things out a little bit here, because there’s so much that is coming or alive, that that is out there for, for agents and ultimately for customers. So maybe I’ll start with the digital side and then we can kind of, you know, jump through.
Charlie Venus (10m 52s):
Yeah. That would be great because we have a lot of interest from the agencies, you know, on the digital, digital side of the house.
Matt Kirk (10m 60s):
It’s so important. And obviously, as we spoke at the beginning, Charlie, the dynamics of what happened with COVID really brought this forward for so many of our agents. I’ll start at the agency level. And when I think about what a transaction looks like today, from a servicing perspective or engaging through your agency management system, and then our electronic business center, the volume of transaction. So I’ll make sure I get my stat right here, daily transactions – I’ll just give you a sense – in January, and then if I fast forward to August in our EBC, which would be kind of, you know, where your agents go to do their service transactions with the Hartford, jumped 63%.
Matt Kirk (11m 44s):
So they went from 809 on average, a day in January to over 1300, as we round the corner into the fall. And that just gives you an, and we’re obviously a large small commercial carrier, so it gives you some level of just as a macro matter, the volume of transactions an agent is executing with us on the service perspective through EBC has jumped 63% this year alone, just January through August. And it continues to go up. And what do, what do I mean when I say that, think payroll changes, mailing address changes, certs, BORs. If I could guide your agents at Iroquois, I would say the things that you wouldn’t be doing digitally will now be truly minor as a percentage.
Matt Kirk (12m 37s):
And they’re going to be the complex, and maybe a complex endorsement that you’re calling in on or something. But if it is, if it falls in anything that feels routine, it should be done digitally because it’s real time. So it’s one and done. It’s accurate obviously, and it’s over with, and you can see it done. So at the agency level, if I was to fast forward another nine months, Charlie, I believe truly the only transactions that are really going to be handled by a person, meaning you’re, you’re talking to our team and we have regional service teams dedicated to, from a people perspective, are going to be the more complex.
Matt Kirk (13m 17s):
Routine transactions that are, if it’s agency serviced are going to be done, done right there. So, so that’s really moved a ton. We’re really excited about that. COVID helped, you know, candidly, that’s an area where agents really did start embracing digital, and it’s only going in one direction. The one thing I’d leave you with on the agent on this question would be what we find. And we’re working with our agents on this, is oftentimes they are not utilizing the full capability they are already paying for in their agency management system. So whether it be claim download or policy download, or the ability to, you know, bridge data straight into icon, things like that, which is our quote rate issue system.
Matt Kirk (14m 3s):
There’s so much there that they can be taki advantage of today. And so we do spend a lot of time, not just talking about what you can do in the EBC, but also talking about likely whatever agency management system you have, what you can be getting digitally there. So I’ll pause there and then I can move over to the customer side and beyond, but just if you have any follow up on the agency side, yeah,
Charlie Venus (14m 22s):
I do have a follow up on that. And because you said Covid is going to move this digital process along and, you know, given the, the economy that we’re in right now, and we you know, hopefully the recovery is, is the V-shape recovery, but what can, what are you doing? And what can you do to help the agents from a marketing standpoint, in terms of digital marketing campaigns, to try to get out there and drive new business? The conversations I have with the agency plan is, you know, they’re struggling. They were kind of waiting to go back to normal and normal is going to be, you know, at least another six months, nine months off.
Charlie Venus (15m 5s):
So what do you have that they can use to help them market for new business and small commercial?
Matt Kirk (15m 10s):
I would say there, what we’re finding in our own surveys, and I think what agents are finding as well, is that it’s not business owners want to talk to somebody they really do. And especially in a market where there’s a lot of things going on with their own business and its needs, they might be doing more than they ever thought they were going to be doing from a technology or digital perspective. And now they’re worried more about cyber than they have been before, their operations might’ve changed. They might be doing something different now to promote their business or sell things than they were when they first booked their policy. And so business owners, what we’re finding is just at a very basic level.
Matt Kirk (15m 54s):
I think there was a hesitancy, which interrupt them and, and, and reach out to them and talk to them because you felt like maybe you’re interrupting them, they’re dealing with so much, but, but what we’re finding is a real openness to engage about their business today, what it looks like today, and then get the advice and counsel from an agent about what does that mean from an insurance perspective? What should they be buying? What do they need? So the first order of business, which, you know, you’re, you, you know, well is make sure you are externally engaging. And you’ll find, we believe that that business owners are open to a zoom to talk about what’s going on with their business and talk to an agent about what that may mean or need for them.
Matt Kirk (16m 41s):
So that’s just at a very basic level. Then beyond that, I think really importantly, in this time is what are their needs. So \ when you think about that, that very basic needs analysis, and you say, well, what are they doing today? And what does that trigger from a coverage perspective? And how do I consult on that? We have, you know, the new product we rolled out actually has coverage consultation live right there as you’re quoting it. So it’ll say, you know, businesses like you tend to buy this. So, so the agent has that, and then it explains both the coverage itself and the description for the client as to what does that mean?
Matt Kirk (17m 25s):
Why would you buy that? So those things are alive and happening. And as you build the policy and you choose those different optional coverages, you know, you can really tailor that policy to that specific client need. Let me give you some stats. So we’ve seen a 5% increase in the take up on our stretch, which as you know, is, is basically a property expanding coverage, depending on, on your industry. We’ve seen an 8% take-up on our cyber. We’ve seen 5% take up on the E&O. So what we’re seeing is, as the agent is getting that live activity, as they’re building the quote coverage counsel, they’re really providing good, good advice to the client and they’re buying as they need that type of a coverage.
Matt Kirk (18m 13s):
So, so that’s the first thing is, assume they, the, the business owner wants to talk to someone and then secondly, assume your coverage consultation has never been more important and then draw on the assets to help make that tailored to their needs.
Charlie Venus (18m 29s):
Well, I saw a similar survey and it was more geared to middle market, but it echoed everything that you just said, that, that people are really dying to talk to an agent right now, and that the whole pandemic has put them in a position of really just talking to somebody to really understand their coverages that they currently have and what they really need. It was an industry study, more focused on middle market, but the responses were very similar. So that, that was actually, I mean, that was great, Matt, just giving that recap, but I did want to get back to what you, you know, from a marketing standpoint, what you have that an agent can use when they are looking to, for new business, in terms of doing a, you know, a marketing campaign on a specific industry, specific territory, whatever that might be, you know, what tools do they have available through the Hartford?
Matt Kirk (19m 26s):
I would bucket them in the two areas. The, the ones that, you know, agents have come to know when you, when you have both our own available training, which we’ve had a ton, I saw some staggering statistics just about, you know, getting them in a position where they’re comfortable talking. So we do the training and help them talk about the product, but, and then also in that bucket, then designing things that they can co-brand and go out to prospects with around, you know, you’re in this. And again, it’s all about tailoring. In fact, Charlie, it’s so important. I, I don’t want to lose sight of this, this topic, which is, we often find people don’t even like to be referred to as a small business.
Matt Kirk (20m 8s):
They want to be referred to as no I’m in the accounting business, or, you know, I have a retail shop where I sell this. They’re very, it’s very important to the business owner when you’re speaking to them that you’re thinking about the business, they do, they don’t, they don’t want to be broadly categorized. And so when you think of marketing to them and the assets that we, we support your, your agents with them, you really want to be tailored. If you were going out and prospecting or bringing something forward to them, I’ll give you just one thing that we’ve seen a, an explosion of this year is payroll billing. So we are up over a hundred percent and we’re pretty big in this space with our agents just this year.
Matt Kirk (20m 54s):
And obviously in talking to clients for our agents about taking their workers’ comp and going to payroll billing so that their actual bills, their workers’ comp premiums reflect their actual payrolls. So think of a time when payrolls are moving all over for a lot of businesses and cashflow management is at an absolute premium for that business owner. This has been something that getting that customer on payroll billed worker’s comp so that they eliminate their down payment and their work comp premiums reflect their actual payrolls. And of course, then you minimize the audit surprises at the end by doing that.
Matt Kirk (21m 36s):
So if I was to guide, just take that one thing, if you were going out and talking to especially a seasonal type client, you know, it could be someone landscaping, it might be someone who’s, you know, their, their payroll is tend to fluctuate, a lot of peoples’ are well beyond seasonable, as if you were marketing to them and you just said to them, well, how are you? How is your worker’s comp structured? Yeah, I don’t know. I’d probably make a down payment. And I don’t know, then I get these audits. I mean, those are the likely answers you’re going to get from a client, right? That’s right. Well, if I’m an agent, I say, well, how’d you like to not have a down payment? How’d you like to have your premium reflect your actual payrolls and minimize any audit surprises?
Matt Kirk (22m 19s):
I’ll bet you get a second phone call and they might say, tell me more about that. We have seen that, as I said, agents are taking advantage of, we have over 500 payroll companies integrated into icon. So you just pull them in the dropdown. You know, you say the customer, which payroll provider to use, and then they can go right on payroll billing. So that would be another key capability that is really important to small business owners is cashflow management to premium. You know, those, those would be a couple, couple of ways that, you know, I think going out to clients and have any of the coverage conversations or capability conversations and using our assets to drive that conversation is, is a area that hopefully can help generate some new business.
Charlie Venus (23m 1s):
So the next thing I wanted to move on to is given, is to ask you about the gig economy. I know, you know, you do a lot of business in that space already, but what you see developing there, and then anything else from an emerging market standpoint,
Matt Kirk (23m 18s):
It’s an interesting time because we are seeing, you’re seeing an industry. So I should make this a broader statement, a lot more employees being 10 99 employees. And, and it’s really not specific to any one thing or another. And of course that brings a whole bunch of coverage questions, not only to, you know, what type of insurance that a person may or may not need, depending on how they’re set up, but then also of course to a business owner who may have someone who is 10 99, but beyond their premises and doing some type of work there, you know, much like the way you’d think about in some ways the construction industry, when you have subs coming on, you’re on, we see that often with people, say technology consultants who may get a contract with a larger company, and they’re going on premises and doing some work for them for a shorter period of time.
Matt Kirk (24m 16s):
And what type of coverage does the, the person who’s having them under the consulting contract require of them in order to come onto their premises. And so, so this is an area where we do as you point out, we do ensure a lot of those folks. And I think it’s an area that’s growing, but knowing the differences from an opportunity perspective inside that as an agency, meaning it’s really important as you know, from a financial management of the agency, you know, what’s the acquisition cost to the new client? What is the likely retention, meaning are they going to be a consistent client of yours?
Matt Kirk (24m 58s):
And then ultimately, you know, what is, what is the ongoing revenue stream look like? And so I think in some ways, the other decision, if I would guide agency owners on, on this question is, you know, as you think about that client base, the sort of gig, it is very different, depending on the way they’re structured, what they’re doing as to the likely, you know, is, is it going to be an, a creative client to your agency from a financial perspective and so big differences there, but, but certainly a growing and I think can be an area where an agent should be opportunistic about the style of that kind of gig worker.
Matt Kirk (25m 37s):
And do they look like someone who, who ultimately is going to be a creative as a, as a client to the agency? That’s one thing I would say there, I’d say there’s a whole separate area of called some more usage based insurance that is, is I’d put it much more in the emerging space of, is there going to ultimately be safer, someone who’s doing some interior carpentry or something like that, or they actually only turn on their insurance or buy even their insurance for short periods of time, depending on their jobs. And again, for, for an agent, that would be a question around if you were going to look at that space, how does that work from a, your own expenses to provide and do that coverage against, against the ultimate revenue to the agency?
Matt Kirk (26m 24s):
The final one, Charlie that I think is out there is obviously e-tailers, I would call them sort of people who are online sellers, whether through Etsy or Amazon, or, or places like that, where they’ve got a little business, they may sell something through a platform and a, and there’s likely a, a GL and, and depending need there. So lots of areas to, for agents to educate themselves on. And I guess my only guidance to them would be a, you want to ask, you know, those second, third and fourth level questions as you’re talking to someone engaged in that as to how, how is that client likely to play out as part of your portfolio? Because again, there’s some, as we know, all the expense usually tends to be upfront.
Matt Kirk (27m 5s):
And are you going to be able to amortize that over the life of the client,
Charlie Venus (27m 9s):
That you got to wonder how sticky that business is going to be? And then, then the other piece is it’s gotta be the ease of doing business has to be there. On that ease of doing business topic, I think it’s a good segue to service centers. So how are the service centers doing and what do you see expansion of, expansion of the service centers given everything that you just said, and, and even trying to bring in more products into the service? Yeah,
Matt Kirk (27m 39s):
Very good question. And so in small commercial, any thing we sell in small obviously can go into the service center. So that’s just kind of a simple way to think about the service center. And it is a obviously very large part of our business. I won’t use the actual numbers, but it is a big, big part of our business. We are seeing it grow as we’re seeing our agent partners really want to manage their own expenses and look at service centers as part of that, that management. So it has been a growing piece of our book of business. And I would expect that to continue. I think some of the activity on the agency side, you know, the, the, the volume of the M&A transactions and the bringing together of large organizations have introduced in many ways, you might have one agency that was, you know, 80% of its small commercial was in the service center.
Matt Kirk (28m 29s):
If they acquire an agency that has only 10, they’re bringing that experience to that agency. And so it’s a peer to peer sale and effect on the use of service centers versus the carrier kind of, you know, talking about it to the agent. So we, we expect it to continue to grow and we expect it to become an even more important component of an agent managing its overall margin. Let me give you one other thing on that, Charlie. And it’s really important right now is we’re also seeing a massive take-up rate and what we call my account, but the way to think about it is it’s, it’s the mobile response that’s customer facing from a service perspective. So just think of Iroquois agent signs up a new, small commercial customer, and then that customer is offered the ability to register for my account.
Matt Kirk (29m 18s):
And they, you know, just like you do anywhere else in your life, you register for it. Well, what we’re seeing there is then that customer can do many of those transactions, whether it be paying a bill, getting a cert, could be getting auto ID cards, whatever it might be right there. And that is of no expense to the agent or the customer. It’s just, it’s just giving them a customer experience that meets what they want. We are seeing a large take up there as well from both our agents, making sure their clients are using my account. And then of course, clients transacting business there. And the way I would think about that, and this is really important for agents is if in the client’s mind, the transaction they need to do is simple enough that they should be able to do it on their phone, They’re going to figure out how to do that.
Matt Kirk (30m 7s):
How many times I always tell people this, have you spent 30 minutes on your phone trying to get, figure out how to get something done that you might’ve been able to solve in a couple minute phone call, because your expectation generally in the world is that if you believe you should be able to get it done, mobily, you’re going to get it done mobily. And so I think that’s another piece of the service center, the agent using the EBC, and then the final leg of that stool, I would say is the client side, are they using in this case from Hartford, the, my account technology, all of which lowers the expense coming into the agency of, you know, dealing with incoming email or phone calls and the cost of those transactions.
Charlie Venus (30m 46s):
Yeah. And that, and then I assume on that, if there’s any question, if it’s going to the service center, they’re going to get back to the agent.
Matt Kirk (30m 53s):
Yep. It all downloads real time. So any activity – that’s a great question, I’m glad you asked that – any activity, if the client pays a bill, gets their cert, that then downloads right into the EBC and the agent will see it. So they will know exactly what their client was doing in real time. If it’s a policy, other service than any questions the client would have would go to our PHS team. And if it’s agency service, any question they have, obviously it goes to the agent,
Charlie Venus (31m 19s):
Matt, this has been great. Unfortunately we’re out of time, but we could continue this conversation for quite some time. Thanks again, for being with us today.
Matt Kirk (31m 28s):
Let me just close by saying, thank you for hosting me. Obviously this is a, been a, a long standing and just wonderful relationship for the Hartford and being partnered with your agents across the country. So I just appreciate the time to spend a couple minutes with you. Thanks, Charlie.
Charlie Venus (31m 43s):
Thank you, man. Have a great day.
Edwin K. Morris (31m 46s):
Thanks for listening to this edition of Charlie’s corner brought to you by Iroquois group. I am Edwin K. Morris, and I invite you to join us for the next edition of the trusted advisor podcast.
