Applied Systems Acquires EZLynx.
Earlier this month, it was announced that Applied Systems was acquiring the agency management system EZLynx.
Another day, another acquisition, courtesy of the emerging duopoly that is headed by Applied Systems and Vertafore.
I’m not here to whine about a company like EZLynx executing an exit strategy. Good for them. As a venture capital- backed startup, I have a responsibility to investors to think about exits, especially if it was a scenario that was good for our customers, employees and users.
But I do question how another acquisition like this one, the latest in a regular series over the last year, serves the independent agent.
Why are Applied and Vertafore buying?
Let’s start with the logic behind most acquisitions in the world of tech. The motivation behind the purchase typically falls into one of these four buckets:
1) Company A wants to add a specific tool to its offering. It’s more financially viable to buy it fully-baked than develop it from scratch. Company B is purchased.
2) Company A wants to bolster its roster of talent. Buying Company B is a way to onboard a whole bunch of smart people virtually overnight.
3) Company A wants to eliminate a competitor, so they purchase Company B to make it go away. Sometimes it disappears overnight, but typically it’s a longer process that involves wilful neglect, eventually followed by a quiet press release that mentions “sunsetting.”
4) Company A wants to purchase an asset, Company B, that they understand and can grow. They leave it alone—mostly—but give strategic guidance because they know the space.
How does Applied/EZLynx help independent agencies?
Only Bucket #1 offers value to the independent insurance agent. If the AMS you’re already using gets upgrades to help you work more efficiently and build stronger client relationships, that’s a positive. But I’m afraid this acquisition doesn’t pass the sniff test for #1. It’s a behemoth AMS buying another, um, AMS.
So if this acquisition falls into Buckets #2, #3 or #4, aren’t there arguments to be made that it still provides value for independent agents? Wouldn’t there be some user benefit to brokers who have been on either EZLynx or Applied?
Okay, let’s look at Bucket #2. Sure, that shift of tech talent might bring a spark to the larger enterprise. Maybe all of a sudden that clunky AMS of yours is humming with new features that help your agency team deliver a positive customer experience. We’ve all heard the case made that the “greater resources” at the bigger organization will give the bright minds that were onboarded a chance to really shine.
It sounds good on paper. But chances are those additional resources will come with increased stipulations, a lot more meetings, and a much bigger org chart to navigate. The freedom that existed at Company B prior to the acquisition evaporates, and eventually a lot of the new talent moves on or just gets comfortable punching a clock every day. It turns out the best thinkers love seeing unicorn ideas come to life on shoestring budgets. And they’re not as excited about watching clunkers get pushed ahead just because they’re backed by big budgets.
What about Bucket #3? Well, there’s really no way to see the elimination of competition helping the independent agent. In any industry, the absence of competition is bad news for pretty much everyone, except maybe the company that has wiped it out.
Bucket #4? Just doesn’t make sense. Why buy an asset that competes with something you have? Why divide and conquer when you can focus? That’s what good companies do.
For independent agents, a decrease in AMS competition should be alarming. Quite simply, it leads to an absence of genuine choice. It removes leverage. It leaves you stuck.
Insurtech needs competitive fire.
Fact is, innovation is fueled by a demanding marketplace. When it’s challenging to put together a tech stack that delivers the most value for your firm, the companies in control—the two that are now at the top—don’t need to hustle to improve theirs.
Clearly, I’m not a fan of two tech companies gaining a stranglehold in an industry that I think isn’t doing enough for independents. If you’re an agency counting on either Applied Systems or Vertafore to offer solutions that help strengthen bonds with clients, you’re not using the power of positive thinking. You’re being naive.
You won’t find many people who are bigger technology enthusiasts than I am. I’ve worked in tech my entire career. But when we launched Broker Buddha, we didn’t set out to replace brokers with mouse clicks. Instead, our aim was to give independent agents the tools they need to compete in a demanding insurance ecosystem. Our users get access to their own data and features that help them analyze it...and we don’t charge them extra for it.
We know it’s working and making independents stronger—agencies on our platform get higher Net Promoter Scores than ones that are not. So while the world of insurtech got a little smaller last week, we remain confident that our belief in putting agents first is the best way forward.
—Jason Keck, CEO, Broker Buddha
Wednesday, January 27, 2021