More agents turn to outside organizations to access markets, study finds

More independent agents are seeking outside help to access markets and arrange other business services, according to a newly-released survey presented by the Independent Insurance Agents & Brokers of America (IIABA).

IIABA’s report, titled the “2006 Agency Universe” study, claims “a growing number of independent agents are aligning with franchisors, clusters, aggregators and other networking organizations,” says Madelyn Flannagan, vice president of education and research for IIABA, the nation’s largest independent agency trade association.

Citing a key finding of the Big “I” study, Flannagan pointed out that some 45 percent of all agencies in 2006 dealt with clusters and aggregators and other such groups to access markets, arrange financing to acquire agencies, and obtain other professional services. The figure was 30 percent for 2004, the year of the previous Agency Universe study.

The new Agency Universe study focuses on why agents are aligning with clusters and other such organizations and what services they are using.

“A lot of agents want to be associated with that cluster’s name, the training they receive for their CSRs and producers, as well as for the administrative and accounting support,” Flannagan says. “With cluster-type organizations, you may be giving up a percentage of your commission and in some cases paying access fees and other startup charges. Is it a good tradeoff? More and more agents seem to think so.”

Flannagan stated that some 45 percent of the agents surveyed by the Big “I” said they plan to continue or increase the use of these insurance marketing networks. The reason? “You might need a market for one or two risks, and you might not have a company appointment. With a cluster or similar type of entity, you don’t have to deal with a carrier’s premium quotas, and you can serve your overall account needs with no huge out-of-pocket expense.”

Flannagan noted that clusters’ aggregate premium volume generated by its member agencies to thereby give “producers access to markets that wouldn’t otherwise do business with them as individuals because of low premium volume and other factors.”

So, what is the future of clusters, networks, aggregators, franchisors? “I think they’re part of the new ways of doing business with the carriers, and how they’ll access markets,” answered Flannagan. “Our survey shows they’re providing a real service.”

In light of IIABA’s study, the president of a Pennsylvania franchisor expresses optimism about the future of the independent agency system. “It’s alive and well and will continue to be in the foreseeable future,” said Keystone Insurers Group’s David Boedker. “I believe there will always be a niche for small agencies, but I think that you’ll see that the vast majority of tomorrow’s independent agents will be much, much larger.”

The Agency Universe study’s findings didn’t surprise Networked Insurance Agents’ Chief Operating Officer Brent Humes. “The study shows that there are resources for small agents — insurance networking organizations — and they’re taking advantage of the opportunity.”

Standard markets including The Hartford do a growing amount of business with clusters, and for good reason. “We’re doing more and more business with clusters because they bring us profitable accounts in both personal and commercial lines,” says Wayne Spooner, director of agency management, Property Casualty Operations, at The Hartford, in Hartford, Conn.