Patrick Kinney of Travelers joins Jason Keck, CEO of Broker Buddha, and Dean Gemmell, to discuss carriers and the agency ecosystem, and why it's vital to leverage technology and remove unnecessary steps that complicate the insurance process.
Patrick brings his expertise, humility, and inspiring life experience to our conversation. Listen, learn, enjoy.
Dean Gemmell: Hey there, Jason; it's great to see you again, and great to have another episode to share with people today. In this one, we talked to Patrick Kinney, from Travelers. It was an interesting conversation. You think about insurance people, agents, and professionals, and a lot of people don't realize how human they are. He reeks of humanity!
Jason Keck: Patrick's great; I met Patrick almost two years ago. He came into our office in the city back when we had an office. So much about him is warm and welcoming. He's got real, first-hand experience in the industry - you see it, and you'll hear him talk about it: 38 years. The amount of stories he has to share and experiences they have come through, he was kind enough to share those with us today.
DG: Yeah, and despite the fact he's a veteran of insurance, he certainly does seem to believe in the value of technology and sees the myriad ways the industry could change.
JK: Yeah, he's a super-sharp guy - really on top of things. You don't have to know what the technology is; you have to know what the problems are. And you have to know that there's an opportunity with technology. He's got good people behind him on the innovation team. I'll talk about that a little bit in the podcast. Overall, he's a fantastic guy, and I'm thrilled to have him on the show. I look forward to seeing him again in person when the time comes.
DG: Yeah, when we can get out of this pandemic and meet in person again. With that, let's get right to this episode.
Hi, and welcome to another episode of The Enlightened Agent, the podcast that brings you conversations with insurance professionals and gives us their perspective on the industry. I'm Dean Gemmell, and I'm joined, as always, by my host, Jason Keck, the CEO of Broker Buddha. Our guest today, someone we're honored to have here, is the Executive Vice President of enterprise distribution management at Travelers. Patrick Kinney, welcome to the podcast.
Patrick Kinney: Thanks for having me.
DG: Hey, great to be here with you and get your take on some things. But let's get our take on you, Patrick. Give me a little bit of your backstory and how you entered the insurance industry. I've seen your terrific speech on YouTube, but fill us in a little bit more on how you wound up in insurance and at Travelers.
PK: Sure. So if you would have asked me in 1983, when I was graduating from Penn State, if I would be in the insurance business, I would have said absolutely not. I interviewed with Travelers on campus and didn't get the job. I didn't have a job. In 1983, interest rates were probably still 17-18%, coming out of the great recession of the 70s. There really weren't a lot of jobs around. The economy was switching over. Coming out of the 70s with the crisis with Iran, the economy was in a bad place. So when a job came available to go into the insurance business, I thought, well, I don't know anything about it. I'll give it a year. I'll go to Hartford, and then after that, I'll find a job in the Philly area, and I'll go home. Thirty-eight years later, I'm still here.
It just turned out to be something that I really loved. As you went through it, I didn't know anything about it. But as you learn that it touched everything in the economy. You had to learn how to underwrite the economy, and it had all the aspects of dealing with technology and people. I had no intention to get in it, and as I did, I probably for many years was gonna get out of it, but that actually never happened. Travelers was happenstance. They had selected a class with 21 people in the class to be hired to be national account executives. Number 21 came to the class and went to the school for two days. He said he hated underwriting and numbers and quit. Then they called me, and I got the opportunity to come in. I don't know who number 21's name is, but that young man changed my life.
JK: A big thank you to him.
DG: Yeah, it'd be great if we could find out who he is through the podcast.
JK: It's been, you said, 38 years of Travelers, Patrick?
PK: 38 years in July.
JK: I'm sure you've played a lot of fun in different roles and seen a lot of things. Do you want to tell the audience what you do specifically for Travelers now? What does enterprise distribution mean?
PK: Traveler sells its product through independent agents. We really don't sell almost any of our $32 billion of premium directly to the consumer. It's all through independent agents. Those agents are how we distribute the product. At one time, there were many independent agents who were on your local corner. They were phenomenal business people. Over the last 10 to 15 years, the industry has continued to consolidate significantly on the agent side of the house. What we do is manage all those relationships.
Travelers sells almost 24 different products through our distributors - auto liabilities, private nonprofit insurance, D&O - and we distribute through a very common platform for PI, business insurance, and BSI. You have to manage all those pieces - you have to figure out how you pay them there. We have 13,000 agents, but about 250 of them drive 85% of our volume.
JK: Got it. So those are the special ones; those are the ones who get your time.
PK: Well, they get everyone's time because insurance is still local - you still trade at the street level. You have to know what's going on locally to underwrite it. But you also have to be able to see now that it's become a very national system, owned by significantly different public and private equity players than it was 20 years ago. 11 of the top 25 distributors are owned by private equity.
JK: 11 of the top 25 are owned by private equity.
PK: That's a stunning number.
JK: What was that like ten years ago, for example?
PK: It didn't exist. Private equity in the 90s and the 2000s, you had a period where our friends Brown & Brown were the acquirers - they did a phenomenal job with it. You had a long period where the banks were buying the agencies, and then you've now seen a rotation. Private equity, if you watched the numbers, really rotated in 2010, after the financial crisis, and has ramped up its investment over the last 11 years. So that's where the money's been coming from, to buy it.
JK: In 38 years, you've seen a lot. You've seen the agencies moving from independent, local shops into these private-equity backed large groups driving a lot of the business. I've spent the last 20 years in the technology industry, and as I came into insurance, people were telling me the agents are becoming less important because technology is coming. I'd be interested to get your take on why are agents still important? If there is change on the private equity side, why can't tech replace them? What do they do that is so special?
PK: I get that question all the time. The first thing is that the agency side and distribution side of the agency have been consolidating my whole career. There are names that are lost to the history of the industry, but Johnson, J & H, and other names, Corroon & Black and Friedrich James and Sedgwick, were all bought. For a long time, it was the big that bought the big, but the big didn't control the market as they do today. It shifted from the big buying the big, to the big buying the small to become big, using private equity money to do that.
So, who's been buying has changed, and what they're buying has changed over the years. But the idea of consolidating has not been different. For my whole career, as you said, the agent has been rumored to be extinct. It has not happened in any way, shape, or form. The number of independent agents has grown. Even with consolidation, more people have entered this business. I think COVID is going to speed up the integration of technology for the customer and the agent.
In this industry, let's face it, we have these great conversations about technology to change the business. The problem is so fundamentally easy; it's scary. Can you take in information to give me an application with an answer? You sit there and say this is not brain surgery to solve this, yet you've got five different people trying to do it. What's going to happen is there are technologies coming into this, like Broker Buddha and other technologies coming into the front.
The agency management companies are remaking themselves as they speak because the consolidation of distribution is changing. In my opinion, it is changing the leverage in this equation because we and the agency management companies always built our process around us controlling the process, i.e., being the carrier. At one time, we actually owned the agency management companies. We started them. I sold technology in this business back in the early 80s. That's going to change because with this shift in leverage, the distributor will define how the process happens, not the manufacturer, and that's us.
JK: It should be the customer.
PK: It should be that way.
JK: Look at the way that Amazon's been successful by creating a great client experience. At the end of the day, this is one of the things that shocked me coming into the industry. The sellers had most of the power in this industry in the past. And by sellers, I mean the carriers, the providers.
PK: The surplus.
JK: But it's rare that you have an industry where the buyers don't have more control. The buyers have the money; they're spending the money; you would think that they have some leverage and control, but they haven't.
PK: I think it's a great question and a complicated problem because it's one of the few products where you're actually selling an intangible product, and you're taking risk. When you start with a product, you get out of bed and say, I don't want to sell them all. It's a really interesting mindset of how you think about it. And because it grew up the way I explained before, I think now it is going to change.
Where you'll see a change and where we have to see a change is first to see the customer adapt tools. They can put their information in and use the ACORD forms, connect the exposure information, connect the experience, so they only have to do it once. They get their information back and start creating a virtuous loop of how it's going to work.
If you get that with the technology like yourselves and others have brought in, that enables you to connect to a better technological stack coming in. Either you want to come into Salesforce, or you want to come in anywhere else - you want to go to your agency management system. We start with a significantly better process. I have never seen an industry in my life that cannot get a name, address, and phone number correct. It drives you insane. I've been watching them chase it for 38 years.
JK: Where do you draw the line here? By that, I mean, what do you think technology can do, at least for the next five years? Obviously, in 10 years, who knows? Technology could do a lot more, but what are the agents critical for, and what do you expect technology to be able to do?
PK: I may have been significantly afflicted with, you know, old dinosaur disease.
DG: Nobody's accusing you of that.
PK: Where I'm going to go in a minute here is that the sale of the product is complicated if you look at and break it down. Personalized insurance - I love the product; it's complicated to make money on, but for the customer to understand and buy, it's a house, or it's a car. You can rate it; you can do it online and quickly. The variables don't change a lot in terms of what the customer needs to give you. What you need to be extremely good at is the risk selection and the parsing of the information to understand where to where, how, and when to take risk, and when to move the dial as an insurance carrier.
That basically makes the front-end NPI that you see is comparative rated to others, unless it's Amazon. We're having to supply to Amazon. Why hasn't that come to major parts of the bond business or the business insurance business? You immediately get to multiple levels of complexity of what you're insuring. It's extremely hard for the customer. If I say to Dean, look around your office, and tell me everything you have to insure right now and the things you have to fill out on the form. It's significantly different than what you have to do for a personal insurance policy.
Forget how the industry is overcomplicated by building their own process to get access to the supplies specifically around their own product. That's a problem all across the board in terms of how to make it simpler in terms of the connection between us and our distributor. But the trade for the customer is still complicated. What is business insurance? How does it work? Where does it come from?
The other part is, it's still a product that's sold. No one gets out of bed, at least nobody I know, saying, I'm gonna buy insurance today. I really want to buy business insurance today - this is gonna be a big day! It doesn't happen. It's a product that's sold. And it's a product no one wants to buy. Do you want to buy insurance?
JK: I do because I need to, and I know that there's a time when I need to.
PK: That's a different equation. You need it because you can't do business without it.
JK: That's fair.
PK: If you could do business without it, I think you'd tell us what to do with our product and our process. You tolerate it because you cannot do business without it. That really taints over the industry's history, their desire, or how it's gotten fixed. Think about it; it's a risk transfer product. We do make it hard to buy.
JK: People don't like thinking about risk. They don't like thinking about when things are gonna go wrong.
PK: The customer doesn't think about it that way. But I've got to think about it that way because that's how we make money.
JK: The reality is, customers need it. We'll come to this later - I know there are stories out there where businesses have been saved by the fact that they have policies.
PK: To your point, the hardest part about selling insurance, as my partner Scott Higgins always says - he runs our middle market operation - you can't test drive insurance. The only time anybody sees if our intangible product works, is if unfortunately, something goes wrong in their life. When that interaction happens, unfortunately, we're not starting off with the customer in a good mental place or in a good mood. You're picking that up and saying, something's gone wrong - it could be something minor to something incredibly tragic. How we interact and deal with the customer, that's the point when the product matters.
JK: One of the things I realized coming into the space is that for most businesses, mine included, it doesn't make a lot of sense for me to be an expert in insurance policies - the details. I rely on my brokers, my agent.
PK: That's why you need the agent.
JK: Exactly. What scale do I need to be at in order to either have a level of expertise or have somebody who's in a risk management world?
PK: That's a great question. Think about your business and what you do for a living. You're a technology guy, and you don't get out of bed and say I'd like to do this by myself. I'm gonna hand it over because I don't understand the D&O, and with the E&O, there are parts of it I just don't get. If it doesn't work or something happens, I can go back to the agent and hold them accountable as the expert. It's a complicated trade, and that's what I think makes it hard to do.
Inside companies, the CFO will handle it to a certain level. When you get up to an account in insurance that has over a million dollars a year in losses, then you have perfect, which leads to significantly more in premium and risk transfer. But, over a million dollars in losses and a million dollars in premium, then you get to your professional risk managers who do a phenomenal job managing that risk. I will tell you; they don't come in to manage risk to take the risks themselves. They come in and manage risk to reduce the risks - they may unbundle claim handling, look at a lot of ways to have more control over the process. But they don't, 99% of the time, ever take the risk. Outside of what they can self insure. But that's when you get the professional Risk Manager because the portfolio across all the lines is so big, you need somebody an expert in your company and insurance.
JK: I hope I never get $2 million in losses. But yeah, maybe I hope I do!
PK: If you get to a million dollars in premium, you won't be worrying about anything else in your life!
DG: You guys have touched on a couple of great points about business insurance; both the complexity of it and the stakes are higher. It's not a simple task. It's one thing to click online to insure my car, but when you're talking about a business or company and people's lives, the stakes are considerably higher. Whether people realize it when they're talking to their agent or not.
PK: The individual buying it, the individual that needs it, being the business owner, is exposed in many different more ways. They run a business; they're in the community; they have a Board of Directors, a footprint, employees, and a homeowner's policy. They have a home. I have a car, and you can understand pretty quickly. Buy the car; I put the limit. I've got a $100,000 limit if I hit somebody.
DG: You might really hate both of them, too. You might not be too unhappy if you lost your home and your car.
PK: But you know what it is. When you buy auto insurance, most people look at it from the standpoint of minimizing the cost, not maximizing the production. So when they get in, they underinsure themselves.
JK: Having spent as much time in tech as I have, I can help steer the conversation back that way. Insurance and Silicon Valley aren't typically used in the same conversation very often. As a leading commercial insurance carrier in the country, how do you guys approach innovation and technology? It's the classic innovator's dilemma: big company, you got to innovate. But there's got to be things you do. What does Travelers do in that world?
PK: Travelers across the board established an innovation office. We embraced agile in our technology in our claim area probably almost ten years ago. We have brought it into our businesses; we've integrated value streams, circle teams across all of what we're doing. We're infusing what we're learning from innovation. We've also taken a much bigger, much different thought about the process than when I started with technology. We would say, how long is that going to take? How much? $6 million - two years. We'd send somebody off, and they'd build it and come back - it would be $12 million, only 70% complete, and it comes over to law. The only thing you're assured of at that moment is everybody's unhappy.
JK: Change is hard.
PK: Change is hard. But where I see tech right now for us is we've taken in innovation, and we said, let's look at every aspect of our process. We feel the tech deficiency for the industry is in a couple of places. The interface with the customer. Boom - it's gotta be better in personal insurance, in any insurance, however you define what the interface with the customer is - if it's the front end part of taking ACORD forms that are digitized by your company and brings it to us for the customer. Then bringing them back a rate, like you might do on personal lines, or is it servicing endorsements in the back end?
There are two major deficiencies, the front-end connections are not what they are in any industry, and they've got to be fixed. The data that's transferred between the two sides is broken from the start. That's why you need a Broker Buddha to feed it into our agency management systems that feed it into us. We need to verify that data that comes in, connect it with things like certified business and other information, wash it up against what we have, and repeat it. What's changed is, we're not taking it offline and thinking, let's take six years to solve it. We're saying, what's the problem? These three areas. What can solve it the fastest?
We're not sitting back any longer and saying we're gonna wait for the industry to solve it. We've said it's time to go; let's see if we can figure out where it's going. It feels like the industry is really thinking, but needs to change. I've never seen a better opportunity to integrate better tech into the process. But it all has to be designed for a frictionless process for the customer, in whatever aspect it's solving.
JK: So you guys have an innovation team that's doing the build partner? Is that the idea - that you get the problems and they go figure it out? Maybe we should build it; maybe we should talk to company X, company Y.
PK: Thanks for asking that question. I just came off a two-hour innovation jam that we did internally. It was phenomenal. We sponsor multiple innovation jams throughout the year now.
JK: What's an innovation jam?
PK: We go out to our folks, and I actually participated in one this year. We say we're going to spend 48 hours, you're going to come up with what your idea is, a team, and you're going to say what I want to solve today is ergonomics from home. You get your team together; we put together a process for you. Before COVID, they would all come into our building. It's a 24-hour event, and you work with your team. You have rules and processes, and then you present your idea.
These folks that we went through today, they're down to the final six ideas. They're incredible ideas, all around different ways to use technology, most of it being connected and used differently than we ever have before. There were conversations about how do you manage that API store? How do you maximize yourself on the ratings you're getting on an API? If you asked me what's changed in insurance? I can guarantee you we're not having that conversation in 1983.
JK: That's true. APIs in 83? No, definitely not.
PK: I had the first personal computer at Travelers, the first portable one. It weighed about 40 to 50 pounds because I was selling systems from the Travelers to the agent, and it had about a six-inch screen. You had a floppy disk. You put your phone in the side of it, and it had a Rachael Vedic modem that went at 9600 baud.
JK: That was top-notch at the time!
PK: I was watching paint dry!
JK: But you didn't have to write it out by hand and send it in the mail. I had to mail some stuff this morning - what a pain in the butt. Really? You need something physical? It took me 30 minutes to print, sign, package it and get to the store.
PK: Think about what you're just saying there. The way the industry has historically thought about that, or any industries are thinking now. Customer inconvenience around something that shouldn't be inconvenient is no longer going to be tolerated. COVID has put that on steroids. Any company that cannot respond to that and cannot bring their people to understand that you have to be constantly thinking about where it's going will not be able to keep up.
That's why we're taking multiple technologies, multiple paths, testing where it's going, but constantly going at the three main problems: connection, integration, and information. Creating it in the loop that keeps coming back around and taking needless processes out of it. We offer renewal on 95% of accounts, that doesn't mean we renew them all. The industry starts that process every time as if we don't know the customer. My friend and boss, Greg Toczydlowski, says we start to think by frisking the customer, instead of saying Hello, thank you for your business, here's your information. Here's your information from last year; think about how your product can help the renewal and the process of the renewal.
Ultimately, it isn't just about the start. It's about completion, keeping it all the time, and what it can do for the broker. Our distributor has to be much easier to do business with, like us, because they have to bring an Amazon experience too. It's pushing the boundaries on what each of us has to do to deliver where the customer's going.
JK: I came into this four years ago, and the low-hanging fruit here was, give the customer the information they gave you last year and get them to update it. Don't make them fill out forms again. I mean, that is just asinine. We've solved that - we're doing a lot more than that. That was the first thing. I said, How does this work? They started telling me, and I said, Okay, stop. We're gonna fix that problem, and then we're gonna go from there.
PK: I have a common phrase for that, but I'm absolutely certain that the lawyers would scratch that one.
DG: We'd love to hear it, though, but we won't go there with that, Patrick. You mentioned COVID and how it's changed consumer expectations. How else do you see it accelerating change and impacting the work?
PK: I don't think that there's anything COVID hasn't impacted. I don't think some of us will be here to know what the ultimate long-term impacts of it will be because I think this will impact the world for 40 or 50 years, in things that it's done and where it's at. If you look at the last Spanish flu, what happened after that was good for a while and didn't get better after that. This is not over. The fact that we will be able to take our masks off does not tell us what's going to happen to the global economy, governments. There's still a lot more to play out here.
How it's changed the business is that all of us had to be able to complete the trade at home. All of the ways we thought about how to do it before or had built - send me a fax; I want that in the mail. That might all have worked on March 13, but it didn't work on March 16. It put the entire well industry into - how are you going to deal with this right now? How are you going to change the process? What do you need, and what don't you need? How are you going to rationalize where you're going. It brought a ton of focus. I would think Jason, in your company, you've seen more interest post-COVID. I can't go across the street and see the customer or have lunch with them. I now have to complete this whole thing online.
JK: 'I don't have access to my printer.' We have agents calling who say we're starting to use you guys more because our team can't use the printer at the office now they're working from home. They'd rather do things digitally.
PK: Great! I don't care what makes it change, but it's clear to me that the breadth, width, and intensity of this wave of acceleration in the change of the process is unprecedented in our industry, and I believe we'll change it forever.
JK: Good. I want to wrap things up. This has been awesome. I want to wrap things up with a question we ask all of our guests at the end of the podcast. It's related a little bit to who we are, what we do, and the brand here. Enlightenment is defined as the state of having knowledge and understanding. This podcast is all about enlightened insurance agents, i.e., the people you rely on to distribute your products. I'd love to hear any stories you can share about enlightened agents you know and some of the things that they've done that make them special.
PK: That's a great question.
JK: You don't have to name names; stories are great.
PK: I'll give you an example. Just recently in Connecticut, and very close to our hearts, with the Travelers charity being the Hole in the Wall Gang. With the recent tragedy of the Hole in the Wall burning down, many of our agents across the country, knowing we're a sponsor of it and knowing how much the Hole in the Wall Gang means to the Travelers, said that we would match up to a million dollars of any donation.
JK: What happened there? I don't know that everybody's gonna know about what happened.
PK: The Hole in the Wall Gang takes care of sick children. It was started by Paul Newman. Paul Newman was with the Sundance kids. I think Jason doesn't know who he is. I've run into this before - if I ask him who Freddie Flintstone is, we're going to be here a while. Watch Butch Cassidy and the Sundance Kid, one of the best movies ever made. Paul Newman really cared about children. He built what he called the Hole in the Wall, which was featured in his movie. It was for very sick, very ill children.
These were children that couldn't go to camp, so he built the whole place where they could come to camp for a week to be a kid. They have all the facilities to deal with any issue that a child has, so it's really special. He built that, and unfortunately, two weeks ago, a fire broke out, and it burned to the ground. To be clear, obviously, there's insurance, but we offered to put up a million dollars to help build it better. Our agents and our community partners across the country, especially in Connecticut, came in and matched our million dollars in less than five days. That would tell you all of the spirit that we always receive from our agents in the community. I've got no better way to show them gratitude and thank them than that story.
JK: That's pretty special.
PK: Hopefully, we'll get it back up and back in business for the kids as fast as we can.
JK: Good for you for leading the charge. That's awesome.
DG: Yeah, for sure. I've really enjoyed all this, Patrick, and I just want to give you a chance in case there's anything else you'd like to add before we go. We don't have another hour, so I don't think you can talk about your Philadelphia Eagles, but quickly.
PK: Dean, I might be an underwriter, and I might be judicious about taking risks, but not with the Eagles, my man. I'm gonna tell you we're gonna win the Super Bowl next year. I'm gonna be in my seat in Philly, opening day. I don't care if you're a quarterback, man; we're going to win. That's how I start every year, buddy. I've been right once in 59 and 302 days.
DG: I think that boundless enthusiasm and optimism have served you well in your career, though.
PK: If you guys ever want to really understand a Philly fan and Eagles fan, go on Prime Video, and rent the movie, Maybe Next Year. You will see my childhood.
DG: All right! We got a film recommendation from The Enlightened Agent! I really have enjoyed all this, Patrick. You talk about a lot of issues that are near and dear to your heart, and your speech when you were honored by the Spencer Education Foundation - it's a really great piece on YouTube. I encourage people to look it up. I want to thank you for your time. I don't know if you or Jason have anything else to add, but I'd love to conclude there.
PK: Thank you for having me. I'm flattered to be here. Thank your audience for spending time with us today.
JK: Thanks, Patrick. I appreciate it. We'll see you soon and look forward to seeing you in person.
PK: Take care, guys.
DG: All right. Take care.