Business Breakdowns
· Geoff Collette, Matt Reustle
And by working very cohesively with them, they're able to understand a carrier's risk appetite and basically use their technology to deliver the exact type of client that those carriers are looking for through one scale distribution partner. In that sense, effectively Goosehead is getting increasingly scarce capacity in certain instances where carriers may be shutting off distribution to all but Goosehead, which can be particularly important given the discussion we had around the availability of product and what that means with respect to retention and writing a business. [00:00:00] S0: I want to break down a few things in that. On the point about 200 providers that are in the network, how does that compare to some of the competition? [00:00:00] S1: If you think about the typical mom and pop agencies, they don't have the scale to essentially support as many carriers. At the end of the day, you don't necessarily need an endless amount of carriers, but you need enough product choice. There are instances where Excess and Surplus insurance that's less regulated has actually become a critical product to have. In markets like Texas where the traditional insurance market has become so scarce in terms of product availability, that ends up being a critical thing that Goosehead can bring to bear for its clients. Whereas I think a lot of other insurance agencies may not have the wherewithal to really stand up those relationships and offer it to their clients, forcing clients to look elsewhere for business and creating difficulties in retaining existing clients.
· Geoff Collette, Matt Reustle
[00:00:00] S1: If you think about the typical mom and pop agencies, they don't have the scale to essentially support as many carriers. At the end of the day, you don't necessarily need an endless amount of carriers, but you need enough product choice. There are instances where Excess and Surplus insurance that's less regulated has actually become a critical product to have. In markets like Texas where the traditional insurance market has become so scarce in terms of product availability, that ends up being a critical thing that Goosehead can bring to bear for its clients. Whereas I think a lot of other insurance agencies may not have the wherewithal to really stand up those relationships and offer it to their clients, forcing clients to look elsewhere for business and creating difficulties in retaining existing clients. [00:00:00] S0: Is there a segment of the market that is outside of the small mom and pops, not captive, but looks similar to Goosehead in some way, shape or form? Breaking down what you mentioned, the 200 providers—let's say, even if it's 50 or 100 providers—are there a lot of competitors that kind of operate in that scale?
· Matt Reustle, Geoff Collette
[00:00:00] S0: Is there a segment of the market that is outside of the small mom and pops, not captive, but looks similar to Goosehead in some way, shape or form? Breaking down what you mentioned, the 200 providers—let's say, even if it's 50 or 100 providers—are there a lot of competitors that kind of operate in that scale? [00:00:00] S1: There's certainly competition without question. I think the important thing to understand is all the different components that go into the value proposition within their specific go-to-market approach. So by focusing on the home purchasing process, winning in that specific channel, that's how they're driving success. Whereas many other agencies are basically spending a lot of money on mailers or Internet leads, which are highly inefficient relative to what Goosehead's doing. And by bringing to bear not just product choice, but the technological capabilities and the service levels, it's the totality of what they do that leaves them in somewhat of a category of one within their preferred way of going to market.
· Geoff Collette, Matt Reustle
[00:00:00] S1: There's certainly competition without question. I think the important thing to understand is all the different components that go into the value proposition within their specific go-to-market approach. So by focusing on the home purchasing process, winning in that specific channel, that's how they're driving success. Whereas many other agencies are basically spending a lot of money on mailers or Internet leads, which are highly inefficient relative to what Goosehead's doing. And by bringing to bear not just product choice, but the technological capabilities and the service levels, it's the totality of what they do that leaves them in somewhat of a category of one within their preferred way of going to market. [00:00:00] S0: I sometimes try to overpower and isolate things which I understand can't really be isolated because it all operates in a system together. On the referral partner aspects and what that's doing, I thought it was interesting. You mentioned there's not actually a payment made. It's much more about what they can do. In my mind, I'm thinking if I am one of those referral partners, maybe I'm the real estate agent, I would certainly prefer to get dollars in if I can. Is Goosehead really just filling a void in the market where those underwriters that might pay that referral don't have policies but you know you can rely on Goosehead for it? How would you describe that? Because it is an interesting dynamic when there's not dollars and cents being exchanged.
· Geoff Collette
[00:00:00] S1: You have to really think about the different types of competitors that they're competing against. A captive, as we discussed before, they're not able to compete in the vast majority of situations in terms of the best price for a given coverage. If you were a referral partner that's relying on a captive, your clients are being underserved from a product channel choice and pricing perspective. I think that with the affordability challenges today in the housing market and the dynamics around monthly payments, if you're able to bring down that insurance cost, it can really move the needle with respect to people being able to get into the homes that they need. So that part is really important. A more traditional IA lacks the service capability that Goosehead is so known for. Go back to the business model design of separating sales and service. A lot of traditional IAs are overwhelmed with the various aspects of running their business, including servicing their clients, that they're not able to be as responsive as Goosehead. And so in the context of the referral partner, they want to solve for that financial aspect to it. They want the service aspect to the binder and the closing process to always go off without a hitch. And effectively they want their client to feel really well served and be willing to refer that loan officer or real estate agent to their friends or do business with them again. And so I think that in my discussions with referral partners and Goosehead agents, the cohesiveness with which they work together in shared outcomes is really paramount relative to what's really a nominal fee that someone could be paying them to get business that really isn't matching up against everything I just described.
· Matt Reustle, Geoff Collette
[00:00:00] S0: And on the individual agent side, are they compensating their agents any differently? I understand there's a separation in terms of they let their hunters be hunters and not have to worry about the harvesting aspect as much, which I think is an extremely valuable strategy, especially with something like this. But is there anything else when it comes to compensation that differs from the rest of the industry? [00:00:00] S1: I don't know that that's particularly different. I think what's different is the productivity levels result in an ability to scale a business either as an individual corporate producer or as a business owner. In the context of the franchise channel, that's otherwise much more difficult to do. And so I think the way that the franchise commission splits work is Goosehead will receive 20% of new business commission as revenue and then 50% of renewals. And so I think that the value proposition as a franchisee is that Goosehead's effectively providing this proven go-to-market strategy and all this infrastructure, training, support in order to grow their business in a relatively unfettered way that's much less capped in terms of the profitability that they can generate relative to many other franchise opportunities and other ways of operating as an insurance agency.