The independent agency channel is due for a zombie apocalypse.

The average age of agency principals is 54 years old, with 17% age 66 or older, according to the 2022 Agency Universe Study. Even among the best agencies in the independent agency channel, the weighted average shareholder age (WASA) is 54.3 years, according to the 2023 Best Practices Study—an increase from 53.2 from the previous year's study—and the weighted average producer age (WAPA) was 49.6 years in 2023, an increase from 48.6 in 2021.

Further, producers over 55 hold an average of 36% of Best Practices agencies' total books of business, higher than any other age range. The gap is most pronounced at Best Practices agencies with revenues under $1.25 million, with agents over 55 holding 41% of the book of business compared to those 46-55 contributing to 30%, ages 36-45 contributing to 23%, and 35 and under holding 7%. Meanwhile, Best Practices Agencies with revenues of $1.25 million-$2.5 million witness a similar distribution of book of business, at 39% from producers over 55, albeit with a more even spread among the younger decades.

This means that a significant portion of the independent agency channel's most successful, most experienced leaders are probably thinking about retirement—or at least winding down their careers. In fact, for many, the hard market might be the push they were waiting for.

“From a macro perspective, we're going to continue to see a very tight labor market for the next decade," says Claudia St. John, president of Workplace Advisors. “Given the fact that portfolios look pretty healthy right now in this insurance market, I've heard a lot of people look at this hard market and say, 'This is the perfect time for me to retire.'"

“This market has brought uncertainty, and I see a lot of producers considering even early retirement simply due to those conditions," she adds.

This means that independent agencies across the U.S. may experience a deluge of retirements as their star staff members ride off into the sunset. And with them will go huge amounts of institutional and industry knowledge, leaving the next generation of agents wandering in the darkness, moaning for brains.

“Brain drain" is the loss of skilled human resources, whether from a country, economic sector, field or company. If agencies fail to transfer their retiring workers' knowledge to the next generation, they'll be facing a brain drain apocalypse with a huge knowledge gap in the insurance industry, explains Sharon Emek, chairman & CEO of Work at Home Vintage Experts (WAHVE).

“To understand insurance is not an overnight thing. It's a complicated issue," she says. “Brokers and agents must have a clear, concerted effort to transfer that knowledge from older to younger workers."

Culture Eats Brains for Breakfast

The good news is that, currently, the insurance industry has brains out the wazoo. “The insurance industry is an older industry, but that means it's rich with years of knowledge," says Tyson Perkes, vice president at Beehive Insurance in Salt Lake City. “We're fortunate in this industry, but capitalizing on that knowledge is going to be key."

“Every organization should create purposeful strategies for knowledge and skill transfer to ensure continuity of operations and mitigate the loss of institutional knowledge," agrees Paul Glatzhofer, vice president at Talogy, adding, “a knowledge transfer plan is important when people move around in an organization, not just when they retire."

The keyword is “plan." The conversation in an agency surrounding knowledge transfer should not begin when a star agent announces they're retiring in two months. In fact, St. John recommends a runway of “a minimum of two to three years," she says.

That runway requires an agency to be aware of its employees' career goals well in advance of their fruition—“both for your younger and older workers," Emek says. It's not just the “what" that awaits the end of a retiring producer, it's “who is at the end of their career path? You should be able to match people who want to go on the career path that the person is leaving," she says.

Ultimately, the fight against brain drain begins before a staff member decides to retire. It's won by making knowledge transfer between workplace generations a proactive, daily fixture in the agency's culture.

“Don't wait for the week before someone retires to put a plan in place," says Karen Burke, knowledge adviser at SHRM (Society for Human Resource Management). “You should start the process—mentorship, job sharing, job shadowing and other knowledge transfer techniques—way before anyone even starts considering retiring."

At Mackoul Risk Solutions in Long Beach, New York, knowledge transfer is embedded into the agency processes. The agency starts every year “with a big kick-off meeting in January. In that meeting, we discuss staffing and go over every employee who has growth potential," says Edward Mackoul, CEO. “We discuss it more over the course of the year, too."

“Ed and I speak about our staff all the time, and if there's opportunity for advancement we look within before we hire from outside," confirms Sally Dolce, chief operating officer at Mackoul Risk Solutions. “We challenge people, we give them the opportunity to join some of the conversations that we have about the future of our agency, and we elevate people that show leadership skills and the ability to mentor those below them. Part of our success is not skipping a beat when someone tells us that they're retiring next year."

When an agency maintains a consistent line of communication with its employees and their career goals, a pipeline of leadership and knowledge continuity can be established long before a key staff member retires. Mackoul Risk Solutions proactively facilitates knowledge transfer and succession for many senior staff positions.

For example, Dolce is mentoring three staff members in various aspects of her role. Additionally, “we always hold eight to 10 planning meetings at the end of the year, and those used to be just Sally and I, but that's changed," Mackoul says. “Now we do those meetings in three or four five-hour blocks and involve many key staff."

“The biggest thing to prevent brain drain is to create a culture of collaboration and teamwork," Perkes agrees. “We drive a culture where newer employees are not afraid to ask questions and learn from each other. If your culture is 'every man for himself,' you're going to lose knowledge."

Here are seven concrete ways to build a culture of knowledge transfer:

1) De-silo existing information. “If an employee's store of knowledge is known only to a few co-workers, then it is largely useless to the organization as a whole," wrote Nancy Germond, Big “I" executive director of risk management and education, in her whitepaper, “Brain Drain: 22 Steps to Reduce the Impact of Retirement and Increase Employee Retention." “It becomes an information silo, a vertical information cluster that is not transmitted laterally to co-workers, usually to the detriment of the organization."

One account manager at Beehive Insurance has years of experience with large builders risk projects, and “everyone knows to go to her with any question on the topic," Perkes says. “That means she's sharing her wealth of knowledge. People feel a lot of value in being able to share the knowledge they gained over the years, and we like to give all our key staff the opportunity to pass that information along."

2) Identify potential and gaps on an ongoing basis. “I'm a big fan of the nine-square succession plan model, which takes into account current performance and potential," St. John says.

“Recognize that people show up with different skill sets, and you might have somebody who's really knowledgeable about a product or specific market but maybe isn't as strong with building personal connections," she continues. “Or, someone is very strong in personal lines, but there's a lot of opportunity for your agency in commercial lines." 

Last year, Mackoul Risk Solutions instituted an employee recognition system called Motivosity. Each employee is allotted money that they can award other employees with, along with recognition, praise or a positive comment about their work. Employees can use the money they're gifted by others to spend in real life. “While we don't see how much an employee gives another one, we do see the compliment, and we keep an overview of what people are saying about each other," Mackoul says.

3) Upskill and cross-train. Beef up your brain bank by identifying where employees can grow in relation to the company's needs. “Make sure employees understand their role in achieving company goals, and how this benefits them by becoming a well-rounded employee," Burke says. “In small and midsize companies, employees can think there's nowhere to advance to until someone more senior retires. But that's not necessarily true—you can upskill and change your role, adding responsibilities and contributing to the organization's growth."

Similarly, cross-training employees “will help you strengthen your talent inventory and allow newer workers to get hands-on experience in the areas of the company that are unfamiliar to them," Burke says. 

4) Organize teams with diverse experience levels. Work groups are a great opportunity to encourage intergenerational knowledge transfer. “Let's say you need to update some procedures in your agency—you should create a team that includes older and younger workers to complete the project," Emek says.

Team projects that incorporate both younger and older workers will allow managers to get a better idea of younger workers' skills, potential and coaching needs. “Mentoring happens almost naturally when you create a team like this," she says.

5) Implement job shadowing. At Beehive Insurance, “we have new producers shadow more seasoned employees," Perkes says. “There's just so much you have to learn firsthand, and they can learn not only about coverages but also different ways to sell."

Support staff go through a similar job shadowing process, “learning not just how to perform proper workflows and documentation, but also learn how to interact with customers and carrier representatives," he adds.  

Perkes has found success having new employees shadow several different seasoned employees, rather than being paired with one. “We want them to experience a wealth of knowledge from various people," he says. 

6) Set frequent team meetings. With the hard market, “there is nothing like colleagues supporting each other both intellectually and emotionally," Germond says, encouraging agencies to ask employees to return to the office at least a few days a week. “The more employees feel supported and not left to fend for themselves, the better your organization functions and the more you can reduce errors."

“For remote workers, set consistent and frequent team meetings that allow all employees to feel a part of the organization," she adds. “This helps keep them updated on important changes or challenges."

Mackoul Risk Solutions has a remote workforce but does a team-building activity every month. “We have virtual team building three or four times a year, such as a virtual escape room, but the other eight or nine times we meet in person—we did pickleball in July and had a field day in June," Mackoul says.

In April, the entire staff and their spouses went to Antigua. “My father always said, 'What problems we can't solve in the office, we can solve on the beach drinking a margarita,'" he says.

“We have a lot of fun on these trips, and the bonding that goes on permeates into the office," Dolce adds. “You can see the respect that's being built."

7) Implement a mentoring program. “Mentorship is a great way to help a new worker gain perspective on how to apply solutions to industry issues," Burke says. “It also gives the opportunity to underrepresented groups like women, for example, helping them build the confidence to further their career."

To develop a formal mentorship program, “develop your goals around how you'd like mentorships to benefit your employees as well as your company, and match mentors and mentees with career paths," Burke continues. “It's also important to establish communication standards, including any confidentiality issues or boundaries. And make sure to provide support for both mentors and mentees, so you can make sure it's going well for both sides and implement any feedback for next time."

Brain Dump: Create a Formal Knowledge Transfer Plan 

When a tenured agency star announces their retirement, the agency should already have a culture that has made knowledge sharing a priority. However, agencies should formalize a knowledge transfer plan to ensure the aftermath of the retiree's departure doesn't devolve into the night of the living dead.

Here are five steps to create a formal knowledge transfer plan as a staff member retires:

1) Solidify a retirement timeline. St. John recommends formalizing a succession plan “for anybody who is at a certain age—perhaps 50—by asking 'What's your plan?' 'How many years do you want to work?' It might be three, it might be 15," she says.

If a key staff member is planning to leave sooner, “you could ask them to consider alternatives to full retirement," Burke says. “Phased retirement programs can be a good way to prevent a hole in your talent and give the opportunity for ongoing mentorship and training." 

For Kellerman Insurance in Holton, Kansas, a three-year phase-out is allowing retiring agency owner Cindy Hower to smoothly hand off the agency to Kristy Wilson and her husband, Rob Wilson, after they purchased the agency from Hower in December 2022. 

Kristy Wilson has worked at the agency for 32 years, and Rob Wilson for 18 years, and even with this depth of experience, “having Cindy stay on after we purchased it has been so nice because we can run things by her and make sure we're on the right track with coverage or getting her opinion on how to best communicate with a long-standing client," Kristy Wilson says.

2) Identify what knowledge needs to be transferred. Agencies should inventory the retiree's knowledge, skills and relationships, determining what actually needs to be transferred. “One-hundred percent transfer isn't likely and things change. We don't want to spend time transferring knowledge that's going to be obsolete in 12 months," Glatzhofer says.

“The retiring person might have exclusive relationships, they operate in certain verticals, they're known in the industry or the community for certain expertise," St. John says. “Audit what they possess in terms of relationships, skillset and leadership ability. Identify those different components to their job, and then you can begin to ask: 'How can this be transferred, and who is best to transfer this to?'"

3) Identify the successor or successors. A retiring staff member leaves big shoes to fill, but it's a limiting belief that only one successor must be chosen.

 After auditing the retiring worker's skillset, “you may realize some other staff member can take a certain vertical and nurture it, but might not have the knowledge base or skillset for other components," St. John says. “A lot of times in succession planning, business owners are looking for the new Lou or the new Susan. There is no replacement for Lou or Susan. What we want is a transfer of those qualities that Lou or Susan have, and that can be handed off to multiple people."

4) Communicate and document information. Glatzhofer shares that Talogy has a process in which “the current consultant creates a client brief, which is a two-page brain dump on everything the current consultant knows about the client and any nuances that might be helpful," he says. “It gives you a document to hand over, but it also gets the retiree to start thinking about what other things need to be communicated." 

Hower has been systemizing her wealth of knowledge, as well as its storage. “For some of the farm accounts that I work on, I have a detailed list of notes," Hower says. “Just this morning in our staff meeting we had a discussion about where the notes will be housed so that everyone who touches that account can be reminded of the proper way to do the endorsements, or things to keep in mind when they're reviewing the policy."

5) Transfer relationships. Before any conversations happen with clients, “everyone at the agency must be clear on how this transfer happens," St. John says. “Not just the responsibility of servicing the client, but also the financial rewards. It's important to determine who does what work and how commissions are split."

For transferring a book of business from a retiring agent, “we've learned that it's good to take into account that certain clients may mesh better with one producer versus another," Perkes says. “Instead of moving a whole book of business to a new individual, we identify select accounts to move to certain producers."

Beehive Insurance conducts the handoff over “a couple of years, where the exiting producer works in tandem with the new producer for a couple of years, and both of them are key contacts for the insured," Perkes says. “They work on renewals together and work together to answer questions from the insured. Eventually, the exiting producer takes a lesser role and the newer one assumes the lead."

Agencies also must ensure carrier relationships get a smooth and seamless transition. “When company representatives came into our office, Cindy always made sure that all staff got the opportunity to talk to them," Wilson says. “Additionally, I served on the Kansas Association of Insurance Agents (KAIA) board and am a past president, so I made a lot of connections with carriers that help Rob and I continue those relationships."

AnneMarie McPherson Spears is IA news editor.