Why Forward-Thinking Brokerages Are Rethinking Small Business Operations

Broker expert Lillie Axelrod explains why the timing is right for brokerages to update their tech stack or risk getting left behind.

Independent insurance brokers have built their businesses on strong relationships, niche expertise, and operational discipline and have been successful following this model for decades. But now, the brokerage landscape is rapidly changing with the approach of the softening market in many lines. Additional pressures from rising labor costs, talent shortages, and evolving policyholder expectations have caused brokerages to rethink profitability and operational excellence.

Few people are more qualified to speak about those pressures than Lillie Axelrod, a 40-year veteran leader in the brokerage space who has spent the last few decades building, running, and optimizing brokerage operations across various ownership structures. Her perspective is shaped by her expertise and experience with private equity-backed brokerages, public and private firms, and bank-owned agencies. Axelrod is a board member and advisor to Layr, a technology platform designed to help brokers manage their SBUs more effectively.

Her message to brokers is clear: brokerages that modernize their technology infrastructure will be well-positioned for growth, while those that do not modernize will quickly fall behind.

“Maintaining the status quo is so dangerous because we have a softening market where rates and income are coming down, and we have a war on talent so it’s harder to hire good people and it’s more costly,” Axelrod explained. “The time to modernize is now.”

Operational Insights From A Career Built Inside the Brokerage Business

During her 40-year career, Axelrod worked with organizations ranging from small regional firms to global brokerages. She built and led a team that grew from zero to roughly $26 million in revenue, managing around $250 million in premium, and she learned that to succeed she had to constantly evaluate operations and find efficiencies that she could scale.

“To hit your metrics and keep your company willing to invest in you, you have to look at every opportunity for improvement,” Axelrod said. And one of the most significant operational insights she learned involved small commercial accounts. She realized her team could not profitably service small accounts internally at the volume needed to profit from the business and instead needed to strategically outsource these accounts using partners.

The results were dramatic and Axelrod realized that outsourcing specialty account needs and administrative actions to an expert partner was a multiplier that exponentially increased results.

When Axelrod met Layr, it was at the request of a broker client who asked her to evaluate small business solutions. With a high volume of low profit accounts, the client required three full-time employees and a variety of internal resources. Axelrod quickly realized this model was not profitable or sustainable between manual workarounds and E&O risk. “It’s a formula for disaster.”

While she was initially skeptical about any tech solution that claimed to solve these problems, Axelrod compared Layr to other platforms on the market and found two details that resonated with her. First, client satisfaction was consistently high. Even more important, however, was the financial impact firms felt after deploying Layr’s solutions.

“One firm told me that from a financial impact standpoint it was a ten,” Axelrod said. “That really resonated.”

Clients also commented on the responsiveness and quick turnaround resolutions from the team at Layr. “They are partnership oriented and committed to correcting issues,” said Axelrod. Another significant benefit of using Layr that Axelrod stressed was its dedicated service teams that work alongside digital automations, ensuring broker partners retain the critical human element that many policyholders expect.

The result is a model that combines operational efficiency through digitization with client service excellence through continuity and transparency.

Broker Valuations and Market Shifts

The brokerage market today is influenced by M&A activity and private equity more than ever. This is driving the importance of operational efficiency and technology infrastructure as value propositions for brokerages. And for small business operations, which are often overlooked in valuation, Axelrod emphasized the importance of having materially more earnings to result in a better valuation.

Many small business segments operate at very small margins or even at a loss. By contrast, using Layr’s platform typically guarantees brokers a significantly higher margin while allowing them to retain ownership of the client relationship and carrier contract. Private equity and strategic buyers analyze operational risk as part of the due diligence process and SBUs with hundreds of accounts and manual workflows increase operational complexity and E&O risk.

“When a buyer steps in and looks at how efficiently your operation is run, that matters,” Axelrod said. “If the SBU is structured, standardized, and managed through a system like Layr, that removes a lot of perceived risk.”

Taking it a step further than valuation, Axelrod believes that platforms like Layr enable brokerages to scale in ways that traditional operational models simply cannot. The key component of this is redeploying internal resources on higher-value work and the parts of the business that generate the highest margins. Offloading small business servicing to Layr allows brokerages to focus their staff on higher-value accounts and growth initiatives.

The Risk of Doing Nothing

In today’s competitive environment, doing nothing carries growing risks. Insurance markets are softening across lines, putting pressure on brokerage revenue. And at the same time, the industry faces a growing talent shortage with rising salaries and high turnover among service staff.

“The war on talent is real,” Axelrod said. “The cost to hire someone to service basic accounts has gone up dramatically.” These pressures make basic operational efficiencies even more glaring as they cause bottlenecks and delays. But brokerages that modernize their small business operations realize significant opportunities for growth and sustainability.

“If you can take something that probably isn’t producing strong margins today, offload it, and double the margin while freeing up resources to grow the business—that’s just smart business,” Axelrod said. “Virtually every broker and agent is understaffed—and many are severely understaffed. Who wouldn’t want additional service staff or FTEs as a result of letting Layr take over all servicing for the guaranteed margin typically 25-50% greater than the broker or agent currently earns.”

For brokerages focused on long-term growth and enterprise value, the question may not be whether to modernize, but how quickly they are willing to act.

Axelrod said, “Layr is a great solution for those forward-thinking firms that want to continue to grow and scale their business.”

Contact Layr to Learn More

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Connect with Lillie Axelrod on LinkedIn.