It’s only the beginning of March, and Consolidated Insurance Agencies (CIA) already knows it is headed toward a fourth consecutive year of double-digit organic growth.
So says Consolidated’s CEO John K. Tiene, a former president of the Insurance Council of New Jersey, who leads the 5-year-old Monmouth, N.J.-based organization. “The challenge and the reason we were created is to help mid-sized agents who want to grow and expand,” Tiene said.
As a way to get past the obstacle of gaining access to markets and carriers, many independent agents are embracing the concept of banding together in networks such as Chicago-based Insurance Noodle, the Satellite Agency Network Group in the Northeast, and Consolidated Insurance Agencies. Networks typically allow agents to maintain 100% ownership and control of their agencies while providing them with the economy of scale to increase income and compete with bigger agencies.
The model is working. At CIA, premium grew 10.2% in 2011, 11.6% in 2012 and 13.7% in 2013 from organic new business, and Tiene told Insurance Business America
that double-digit organic growth is already in the bag for 2014, for all intents and purposes. In 2013, CIA members generated a combined $350 million in premiums, and could surpass $450 million in 2014.
Tiene said the growth is the result of a confluence of events. In the Northeast, he says the network model has become a real focus in the industry in the past three years. CIA has grown from 10 agencies in 2011 to more than 40 right now, and Tiene is expecting to top 50 agencies by the end of the year. CIA is also expanding from New Jersey into Pennsylvania, which is scheduled to happen by the end of this summer.
“We’re just finding a huge amount of appeal with agents – startups and established,” Tiene said. CIA was founded by agents and remains extremely “agent-centric,” with a goal of being the best place for independents to get access to markets. This, in turn, helps clients of member agents by providing them with better access to regional and national carriers while still keeping the attentive service of a local agent.
CIA pools the premiums its members generate into a single master contract with an insurer such as Selective, Travelers, The Hartford or Chubb. Members can deal directly with the insurers and their underwriters, which can lead to faster and more efficient service. CIA gets a portion of the premium. This differs from the traditional route of going through a wholesale insurance broker, which places the policy and splits the commission.
“It’s a more efficient model for the agent, and it’s a growth focus. We align the agent with the appropriate carrier,” Tiene said.
Tiene said carriers are being much more selective in terms of appointments and premium commitments, which can make it harder for agents to expand. If an independent agent were to take on a new carrier on its own, Tiene notes they have to commit to a significant premium volume, which can be in the range of $1 million in 18 months. That can be tough even for larger agencies. “We match the right carrier with the right agent so that the hit ratio is higher,” Tiene said. “No agent gets access to everything. They are appointed on a direct-access basis.”
Tiene said this is a big issue for agents right now, and that in the next 5 to 7 years, if an independent agent is not aligned with a network, they may find it hard to compete.
“Agents are going to have to figure out the way forward. What we do is that way forward,” Tiene said. “We offer access to markets, scale, support, and resources to grow.”