Incoming Big “I” chairman John Costello on independent agency growth, the war for talent and association relationships.
John Costello has seen it all. From growing a family agency to being acquired twice before joining one of the largest national brokers in the United States, Costello understands the independent agency system from root to branch.
Despite the challenges in the economy over the past two years, a darkening economic forecast and hardening insurance markets, Costello believes that many of the qualities that have served agents in the past will steer them through the months ahead.
“Focus on the customer, utilize technology, cultivate market relationships and invest in your human capital," says Costello, vice president and construction practice member at USI Insurance Services in Rochester, New York.
Prior to his installation as Big “I" chairman at the Big “I" Fall Leadership Conference, to take place Sept. 14-18 in Niagara Falls, New York, Independent Agent magazine talked with Costello about his experience in the independent agency channel and goals for his chairmanship, as well as his thoughts on the evolving workplace and the mergers and acquisitions environment.
How did you get started in insurance?
My father had an agency, but he was very open to allowing me to do whatever I wanted. I went to Villanova University, where I majored in finance and graduated in 1976. Then I started working for an insurance company in Philadelphia called General Accident where I was an underwriter trainee. I moved around within the company and got exposed to underwriting at the company level, which served me very well because I gained an understanding of what underwriters are looking for and how to promote a positive profile of an account. After two years of that, I went back to Rochester, New York, to work for my dad's agency, Costello Insurance.
Can you tell me about your agency?
Our agency has been through a couple of iterations. We were approached by MarshBerry about an unknown buyer who was interested in buying us. My partner and I were doing very well at the time and we wanted to be a purchaser of agencies. We knew MarshBerry has some good processes to evaluate agencies, so we figured we would work with them to see how they do it.
The buyer was disclosed to us and was a local financial institution. We initially rebuffed them, but two years later they came back and made us an offer we couldn't refuse. Importantly, they wanted us to stay on. They were not looking to purchase an agency where the principals would be heading off into the sunset. They wanted somebody who was going to build the branch in that territory. Thirteen years later, the business was sold to KeyBank, but a large national bank didn't understand insurance and didn't know what to do with us. Thankfully, they sold us off to the best option, which was USI Insurance Services. I don't think it was for the most money, but it was the best fit for the employees.
What are the secrets to your success?
I try to do the right thing for the client. It's incredibly important for your personal integrity that you've got your client's best interest in everything that you're proposing. Another aspect that people don't realize is that your staff is watching what you're doing and why you're doing it. Doing the right thing affirms to your team that you're one of the good guys. Also, to retain clients and create referrals, you to have a great reputation in your community. People might not know you, but a lot of times they know of you.
As chairman, what expertise will you bring to the role?
From starting out as a small, family-run agency and growing our business to going through mergers and acquisitions to become part of a publicly traded, large regional agency, I think I understand all of our members. Smaller agencies have concerns that I'm sensitive to because I was there. Then you've got your mid-sized agencies, which our agency became. And now, I'm part of a large national player and understand what larger agents and brokers need from their association. I think that experience is going to be very valuable.
Thoughts on the M&A environment?
It's confirmation that the insurance business is a great business. I don't think it's slowed down, and if you look at the age of a lot of agency owners, it might continue. However, it's still important that agencies continue to grow and don't rest on their laurels because the valuation is going to be significantly higher if you're a well-run business. Also, if you have a vibrant, growing organization, you will be able to attract talent, which will enhance your ability to grow.
What are you looking forward to most about being chairman?
I want to effectively communicate what a great industry the insurance industry is and the fact that when people are in need, we're there to help put their lives back together. Our industry makes a huge difference in people's lives. I know the younger generation is looking to make a difference in what they do for living. I think there's a story to be told about being part of something that truly helps other people. It shouldn't be lost on people. This is what we do and I'm very proud to be part of it.
Priorities and goals for your term as chairman?
Given the circumstances we are in as a country economically, there are five pillars to our strategic plan: national and state association relationships; membership; technology; products and services; and governance. Making sure that the national association is doing whatever it can to help our state associations be successful with resources, products, services and technology to serve our members is job No. 1.
How have you been involved with the Big “I"?
I started out with the Independent Insurance Agents of Monroe County. I'm a joiner. I like being involved and in the know, particularly to understand the connection between our business and regulation and legislation. I ended up joining the board and became chair of the board. Then I served as a director for the western region of Big I New York and was asked to throw my hat in the ring to become chair, which I did.
I was part of the original Trusted Choice Taskforce, which was not even a committee or a board at the time. Then I was asked to serve on the professional liability committee, which is obviously very important because that's the No. 1 product purchased by agent members across the country. I was the director of Big I New York for four years and then ran for the Executive Committee.
Addressing the talent gap?
It all goes back to why someone would consider insurance. To me, it's the altruistic virtues of what we do and what it does for people. Also, there are all kinds of careers in insurance, because it's a varied industry. InvestSM has been working on this issue for years. It plants the seed in the high schools through courses on what insurance is and what an insurance career might look like. I think it has been very successful, especially the turnkey opportunities for agents to go and teach a course at a high school. It helps agents help themselves. Big “I" Hires is another program that helps agents attract talent, track candidates and properly vet them. Once you hire them, you can train them and hopefully retain them.
Being successful in the remote work environment?
Remote work is a challenge, but agents are still in a great position to get the job done. Our work allows for remote working without much of a drop-off in productivity. Remote work is going to be important to attract people moving forward. With staff being exposed to remote work, it's going to be a challenge to get people to return to the office on a regular basis. It's important to create a corporate culture among your staff, but fully remote teams make that difficult. Each agency needs to find the correct balance for their particular agency. Also, agency management systems can track tasks. If someone is not fulfilling their duties in a timely fashion while working remotely, there are all kinds of reports that can be run on people.
Predictions for the coming year?
It's looking likely we will have a recession and a hard market at the same time. It's a double whammy. The price of everything is going up, including insurance. It's just a natural consequence when the costs of repairing or rebuilding things are skyrocketing. Insurance cannot be separated from that, and it's reflected in the rates. In the near term, you can expect rates to rise and carriers to pull back on capacity. We are blessed that independent agents have multiple options when it comes to finding carriers and responding to our clients needs. We have all the tools to get the job done right!
Will Jones is IA editor-in-chief.