Silicon Valley operatives like to gloat about a shrinking independent agency system. Today there are 42,000 independent agencies in the U.S., down from 46,000 in 1992. Nearly three out of 10 independent agencies have been involved in a merger or acquisition in the last four years.
Look below the surface, people. Today’s average agency “survivor” is larger, stronger, more profitable, more customer and product-diverse, and more technologically advanced. And by and large it still is serving the local community.
Average agency revenues have increased by more than 53 percent in the last eight years, notes Madelyn Flannagan, researcher extraordinaire who oversees the Agency Universe Study, the expansive industrywide survey conducted every four years by the Independent Insurance Agents of America. (The 2000 study is coming soon.)
And new agencies are being formed. Some 17 percent of firms have been opened since 1996. To be sure, a small percentage of those new agencies were started by producers in their 50s who splintered off another firm. But the rest largely are in the 35-year-old range—probably newer producers who left to start an agency from scratch, Flannagan said.
These are startup firms that never had been in business for themselves before, “which bodes well for the agency system,” Flannagan observed. “Owning an agency is a viable new business. The economy is doing well, and this is something people are looking at again.”
Neal Montgomery, director of agency marketing at Travelers Insurance who chairs the committee that handles the Agency Universe Study, noted that 8 percent of agencies actually were founded in 1999 alone. “Sounds to me like the independent agency system is actually growing—getting some new blood into it,” he said, attributing part of the growth to a flight of producers from direct writers.
Despite the good news, it seems agents are pretty cranky. The survey detects only moderate agency “satisfaction” with carrier partners. Love isn’t in the air here.
The following areas reflect those service items considered most important to agents yet agents rate them the worst in company performance. The obvious message: Carriers should focus on these areas to lead to noteworthy gains in agents’ overall satisfaction.
• Personal Lines: Make it easier for CSRs to write business; strive to understand the specific insurance needs of each agent’s customer base; employ underwriters knowledgeable about agents’ particular risks.
• Small Commercial: Collaborate with agents to help serve their markets’ specific needs; when possible, be flexible in underwriting decisions; examine base commission plans, as agents have concerns here.
• Medium Commercial: Underwriting flexibility where possible; evaluate current minimum-volume requirements; demonstrate a commitment to covering risks agents present.
• Large Commercial: Build knowledge and expertise in specific industry segments; help agencies enhance the value of their agencies; demonstrate solid commitments to the markets your agents serve.
If companies “want their number-one distribution force to be happy with them, these are things they need to work on,” Flannagan said. “Carrier satisfaction was lower than we anticipated.”
“I’m wondering how much of this is just general frustration,” Montgomery said. “We do have an aging set of agency principals. We are in a situation—because of the soft market and depressed income where agents are not retiring when they want to. Their ability to sell their agency and live a comfortable retirement has been impacted.”
What else is in the 2000 survey? Tons of info. We see again the agency universe really doesn’t reflect America. Yet. Multicultural producers are making some strides. Women are making more progress in agency ownership. The survey spotted a 33 percent growth in women as principals between 1996 and 2000. (There had been a paltry 8 percent growth in 1992-96.)
Today, one-third of agencies have women as principals. Still, only about 20 percent of new agencies had women as principals.
The survey also asked a lot of questions about technology. It seems agencies are more Internet transaction-ready than companies give them credit for, Montgomery said.
Afterthoughts: In a recent column we mention that it’s tough to find fans of Reliance Chairman Saul Steinberg. Now The Wall Street Journal reports Anne Steinberg, 83, is suing her son for allegedly failing to repay a $4.7 million loan.
I realize this is business and that there’s three sides to every story (Saul’s side, mom’s side, and the truth), but isn’t this just a bit nuts? Can it get any worse than your own mother suing you? Even this jaded Jersey boy shudders at the thought.
Peter van Aartrijk owns a communications firm specializing in the independent agent
distribution channel. To comment on this column, e-mail ijwest@insurancejournal.com
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