Reports on the market and blogs about the insurance industry regularly address the changing market and trends relating to M&A, but they don’t often look at the impact such transactions have on the insurance producers within those agencies. In the midst of these transactions, insurance producers are seen as assets of a company or bench strength to the buyer, which is often a major component in the buying decision. When new management takes over, however, they utilize the strongest players to hit new revenue marks, potentially negatively changing their client base, commissions, and more.
What Can Producers Do Post M&A?
Most traditional insurance agencies require producers to sign a noncompete upon joining the team. In the event of a merger or acquisition, you may wonder about the enforceability of your noncompete agreements and whether you can safely get out if the M&A was not advantageous for you. Here are a few things you must consider:
- What State You Are In. Unfortunately, not every state handles noncompetes the same. Before leaving your agency to join another, review the laws surrounding noncompetes for your state and speak to an attorney about your options. Something that may be enforceable in Delaware, for example, may not be enforceable in Ohio.
- Whether the Agreement Was Assigned to the New Owner. Jim Southworth, an employment and labor law principal attorney at Dickie McCamey & Chilcote, P.C. in Pittsburgh, spoke to the Society for Human Resource Management (SHRM) about noncompetes post-merger, and stated “In some jurisdictions [assigning the agreement to the new owner]—by statute—happens by virtue of the merger or acquisition. In other jurisdictions, that is definitely not the case. For instance, in Pennsylvania, generally it requires that the original noncompete agreement contain an assignment clause, pointing the noncompete agreement to successor owners.”If you are in a state where the agreement requires an assignment clause, such as Pennsylvania, check to see if the assignment clause has been added. If not, the agreement is not enforceable, which means you can move on to a new agency and a new position without potential conflict.
- Determine If Your Agreement is Enforceable. If you have determined your agency’s new owner was assigned the noncompete, work with your attorney to determine if your agreement is still enforceable. If the agreement is not, you can move on to other agencies as you please. If it is, you will need to abide by the terms of the noncompete as you exit the agency, whether that includes losing your book of business or working outside of a specified geographic area.
Become More Than Bench Strength
At traditional, corporate agencies, you may feel like just another member of the team, even as a top producer. As a result, you are skeptical when the potential for mergers and acquisitions arise as that can leave you feeling helpless about your future – a new manager may decrease your commissions or adjust your book of business, hindering your growth.
Fortunately, another option is available. Entrepreneurial or lifestyle agencies provide producers options for equity interest in their book of business, stock in the company, and higher commissions, all with the freedom to move if desired. As such, producers have more say in their personal future, whether or not the agencies experiences a merger or acquisition. If you are looking for a more secure option for your future and would like to learn more about the transition process, download our complimentary eBook, “Dare to Jump: Overcoming Noncompetes and Other Roadblocks to a Better Agency Fit.” In this ebook, we break down restrictive covenants, financial concerns, and other roadblocks that may be keeping you from moving to a better agency.