Canadian Underwriter

Succession Goes Boom

December 27, 2012  

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Daryl Angier

Those looking for a deeper understanding of the insurance industry’s current human capital challenges would do well to read David K. Foot’s seminal work on demographics, Boom Bust & Echo. Its thesis is that many different societal and economic pressures are explained by the simple fact of the average age of populations at a given moment in history. Thus, public policy and strategic business decisions about how governments and corporations invest—or proportionately allocate—money and resources should be determined by the size of various age groups within the population, and what the greatest needs and opportunities are around those age cohorts. Should we be opening (or closing) more daycares, hiring university professors or building more retirement residences (or funeral homes)? The answer will always be: “That depends. Which group is the biggest?”

First published in 1998, the book was occasioned by the impending retirement of the Baby Boom generation and the maturing of the smaller cohort behind it. We have caught up to that moment now, and in the insurance industry, Boomer retirement means a mass exodus of experienced senior executives, leaving behind a void in intellectual capital, business acumen management capability that cannot be completely filled by the smaller age group moving up through the ranks of the industry now.

For brokerage owners planning their succession, the hollow created by the demographic shift also means that there is less investment capital to tap into in Generation X. This has engendered much hand wringing in the independent broker community. Many owners feel they have no other viable succession option than to sell to a consolidator or insurance company that can offer much higher multiples than investors such as their own staff. It’s worth pointing out that company strategy here is also driven by the demographic shift. Industry consolidation and pitched battles between insurers for market share are inevitable in a mature market where the next cohort of clients will be smaller than the last.

These pressures aside, the independent broker channel will survive the current demographic shift. Attendees at our 5th annual Succession Planning Conference this month learned that owners that engage in thoughtful long-term planning can sell from a position of strength rather than “selling out.” But those owners that do chose other options should not be judged harshly for making decisions shaped by macroeconomic factors that, as Boom, Bust & Echoreminds us, are out of their control.


Copyright 2012 Rogers Publishing Ltd. This article first appeared in the October 2012 edition of Canadian Insurance Top Broker magazine.

This story was originally published by Canadian Insurance Top Broker.