LenderHawk analysis. Not affiliated with or endorsed by Search Funded: The ETA Podcast.
Tom Gilroy explains how GKG Risk supports searchers from LOI diligence through closing and ongoing operations, with a focus on insurance due diligence, loss-run review, and proactive risk management. He also shares how GKG built a strong internal culture, why commoditized brokerage forces differentiation, and how searchers should think about insurance as part of both acquisition diligence and post-close management.
Searchers, ETA operators, and acquisition entrepreneurs who need practical guidance on insurance diligence, risk management, and building a durable operating culture.
Insurance diligence belongs in acquisition diligence because policy gaps, misrated coverage, and hidden claims can materially change the economics of a deal after closing.
A five-year loss-run review is one of the highest-value checks a buyer can request because it shows the actual claims history rather than relying on seller assurances.
A seller’s workers’ compensation reporting can be a deal risk if payroll or class codes were handled incorrectly, especially in businesses with changing operations.
Searchers should budget insurance diligence as part of the deal process, but the upfront cost can sometimes be waived if they commit to the broker long term after closing.
Insurance brokers that only renew policies once a year can miss changes in the business; a proactive model is better for companies planning to grow quickly after acquisition.
Culture is a competitive advantage in a commoditized service business because strong retention, recruiting, and employee engagement support better client service and long-term growth.
Searchers planning an eventual sale should think like buyers themselves: sustainable EBITDA, manageable owner dependence, and a clear growth path matter more than headline revenue growth.
A passive insurance model where the broker presents renewal terms once a year, the client signs, and coverage rolls forward with little ongoing strategic review.
When to use: Useful as a cautionary baseline for understanding why proactive insurance management creates more value than annual renewal administration.
An ongoing advisory approach in which the broker continuously reviews risk, pricing, and coverage throughout the year rather than waiting for renewal time.
When to use: Best for growing businesses or acquisition rollups where changing operations can quickly make existing coverage stale.
Insurance diligence can cost roughly $5,000 to $15,000 upfront.
Tom describes typical pricing for diligence work before a searcher closes a deal.
Tom says loss-run reports are usually requested for a five-year period.
He recommends reviewing this history to identify hidden claims and understand a business’s insurance exposure.
GKG says it has a 98% retention rate.
The host references this as evidence of the firm’s long-term client relationships.
Private equity entered the insurance agency market more than a decade ago, pushing multiples up materially.
Tom uses this to explain why many searchers are priced out of direct agency acquisitions.
The insurance industry still includes carriers where documents are faxed and online bill pay or e-signatures are treated as major technology upgrades.
He gives this as evidence that the sector remains operationally behind other industries.
Request the current policies and a five-year loss-run report early in diligence.
Why: Those two documents quickly surface claim history and coverage gaps that can change the underwriting and pricing of the deal.
Treat insurance diligence as part of the broader quality-of-earnings and legal review, not a substitute for them.
Why: If the QofE does not work, insurance diligence will not rescue a bad acquisition.
Avoid a sign-and-bind approach once you own the business.
Why: Coverage needs to be reviewed as the company changes, or the business can drift into underinsurance and unexpected cost increases.
Reassess top risks annually with an advisor as the business grows.
Why: Growth can create new exposures faster than a standard renewal cycle catches them.
Build a business that can operate without you as the key person if you want a clean exit later.
Why: Buyers discount companies that depend too heavily on the seller-operator.
Push insurance and other support functions toward proactive management if you plan to scale quickly post-close.
Why: Rapid growth can expose stale coverage and operational blind spots that a static broker model misses.
Tom describes reviewing loss runs for a business whose seller said there had been no problems, only to discover a prior incident where an employee fell through a trap door, suffered a broken hip, and had a concussion. The example shows why seller representations are not enough when assessing risk.
Lesson: Always verify claims history directly through loss-run reports instead of relying on verbal assurances.
Tom cites cases where the seller’s insurance had been misrated, causing the buyer’s insurance expense to increase sharply after acquisition. That kind of surprise can materially damage the buyer’s model even when the operating business itself is sound.
Lesson: Insurance pricing diligence can protect the acquisition model from post-close cost shocks.