Large and small agencies clash over opinions on the future

The future of the independent agent is a hotly debated topic, and producers’ opinions on certain trends depend on their size.

Insurance News

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In a changing workplace environment, the gap between large and small agencies and their perceptions of the future continues to widen.

A new survey from technology provider Vertafore and analyst firm Aite Group, “How Independent P&C Insurance Agencies Are Thriving in Today’s Competitive Marketplace,” reveals that while 70% of large agencies describe themselves as “very optimistic” about future growth, just 25% of smaller agencies feel the same.

For the purposes of the survey, researchers considered “small” to be bringing in less than $1 million in revenue, while “medium”-sized agencies earned $1 million to $10 million and “large,” more than $10 million. Roughly 40,000 agencies nationwide were interviewed.

Todd Eyler, research director for Aite Group’s insurance practice, suggested some of the lower enthusiasm among smaller agencies could be due to their heavy focus on personal lines products. While agencies surveyed reported gains in business across nearly all insurance lines, auto insurance business actually decreased and 39% of respondents noted they have not made and do not plan to make any changes to combat the shift from purchasing through independent agent to carrier.

By contrast, larger agencies are expanding more heavily into emerging commercial lines products such as cyber liability, identity theft protection and worksite insurance products.
Additionally, Eyler noted that larger agencies typically have the resources and staff to “stay ahead of the insurance game.”

“The larger agencies have greater sophistication of knowledge and are able to more quickly adapt to changes in the economy,” he said. “There’s a greater ability to have access to knowledge allowing you to stay ahead and benefit from changes in the economy.”

Despite this less-than-positive attitude from smaller agencies, the survey reported generally upbeat outlooks from the majority of independent agents. Given predictions from groups like McKinsey, which anticipates the eventual extinction of agents and brokers, these results may be surprising.

For Vertafore vice president of business relations, Bruce Winterburn, however, they bear out what he hears in conversations with independent agencies every day.

“We, like everyone else, hear about the changing economy and how that will negatively impact the channel, but what we have been hearing from our agents is that things are going well,” Winterburn said. “They’re growing their businesses and having success with emerging technology.”

Other survey results show homeowners insurance sales have grown for 58% of agencies in the past 24 months, while cyber liability is now offered by 50% of large agencies and is among the fastest growing offerings.
 

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