Crop of New Agencies Is Defying the Hard Economy and Soft Market
The independent insurance agency system is enjoying a resurgence. For years, the number of agencies nationwide declined, but that trend has halted. There were 37,500 agencies in 2008 — the same as in 2006, according to the “2008 Future One Agency Universe Study,” sponsored by the Independent Insurance Agents and Brokers of America, Trusted Choice and several carriers.
The study attributes the stabilization to fewer mergers among larger agencies and more start-up agencies. Eleven percent of the agencies studied were founded after 2004, and about 4 percent were founded in 2007 and 2008.
The new agencies appear to be concentrated in Florida, Louisiana, Texas and states where coastal concerns have prompted some long-established insurers to reduce writings, creating opportunities for other carriers to wade in and appoint agencies. Also, some agents acquired years ago may be re-entering the fray as their non-competes expire.
Not surprisingly, most new ventures are small; few if any have the resources of a giant like Marsh, which is behind one new agency in 2008. But new agency entrepreneurs are not small in ambition. Insurance Journal interviews reveal they have big plans and, in some instances, are showing promising results.
New York: Marsh & McLennan Agency
New York-based global insurance broker Marsh, accustomed to handling large accounts, announced in October 2008 that it is setting up a separate retail agency to go after a share of the $80 billion in premium paid by smaller and emerging growth companies. The new entity, Marsh & McLennan Agency LLC, will be hiring producers as it opens in select cities starting in the first quarter of 2009.
According to Jack Butcher, president and CEO of the new venture, the agency will conduct its business separately from Marsh’s insurance brokerage operations, although the launch is part of the overall growth strategy.
The target market will be small business and emerging growth companies, which Butcher considers to be firms with revenues from about $75 million to $50 million and some below that. He said Marsh does not have a large customer base in this range, although it does have some customers that size, and some with the brokerage division could become customers of the new agency.
“When we do operationalize, when we do go live, this will be a national agency, meaning, I do expect to have a footprint that will be attractive to carriers who are looking for an effective distribution model,” Butcher said.
He said Marsh will “almost certainly” be looking to hire producers to staff those locations, in addition to using current employees. The company also will be looking to acquire agencies.
California: Timothy Gaspar Insurance Services
Family — you can’t leave them, so you might as well love them. Timothy Gaspar embraced this when he formed his property/casualty insurance agency — Timothy Gaspar Insurance Services — within the confines of his stepbrother’s and stepfather’s Los Angeles area financial planning firm.
Gaspar built a book of P/C clients with another agency for five years before deciding he wanted more control over his destiny and flexibility in dealing with clients. His stepbrother and stepfather owned Financial Management Services, which has handled life and medical insurance, and financial planning issues for business owners for 34 years. Often, the family members would have clients who would need each other’s services, but Gaspar was unable to make referrals. So, he used his own financing to buy his book of business and joined his relatives in April 2008.
“Because we’re family, we’re in the same social circles and network, and now I have flexibility with who I can work with,” Gaspar said. “Previously, when I worked for another firm, I was not able to refer business their way. This way, I can include them on a lot of accounts and referrals.”
From a product standpoint, Gaspar said he handles several types of business. Between his insurance agency and his step family’s, they aim to handle all of the personal and business insurance for their clients, often upper income business owners and entrepreneurs.
“Our whole strategy is about relationships and taking care of people,” maintaining 100 percent client satisfaction, Gaspar said. He said he will go to great lengths to provide privacy and protection for high-profile clients.
“The best marketing strategy for new business is to provide good service. If you provide good service, your customers will do your referrals and you’ll keep business for the long-term. … it’s expensive to get new clients,” he said.
That strategy has helped Gaspar weather the economic downturn. Premiums are down, but “knock on wood, business is doing great,” he said. “It’s easy to use the economy to justify less business, but people are looking to save money more than ever on insurance and a lot of people are shopping and taking a look at what they currently have.”
Nevada: Trenchant Insurance
At first glance, it seems like Gina Russo’s new Las Vegas agency, Trenchant Insurance Co., has three strikes against it. First, Russo is a woman operating in a male-dominated industry. Second, she’s only 27 years old and has eight years of insurance industry experience. Third, she’s juggling the demands of running a new business and being a parent to a nine-month-old. But Russo is proving that she has the gumption, authority and knowledge to run an insurance agency.
Trenchant opened in Las Vegas in Oct. 2008, catering primarily to clients in Clark County, Nev.
Russo, a native Las Vegan, said building her business in the city was a natural progression. She attended the University of Nevada, Las Vegas, and started in the insurance field in that city in 2000. For three years, she worked for a captive insurance company, and then she transitioned to the independent channel, working for another agency that was owned by someone else, but where she acted as the agency manager.
“Even though I didn’t technically own the business, I always felt like it was my baby,” Russo said. That gave her the impetus to start her own agency. She received a business start-up grant from the Moms in Business Network and she secured financing from Oak Street Funding, which specializes in insurance agencies and commission redirection finance loans.
Trenchant Insurance specializes in home, auto, life, health and flood insurance for residential and commercial clients, as well as handles business insurance and bonds.
“I have had circumstances inside and outside of my office where people have questions about my authority and knowledge,” Russo said. “But when the whole experience is complete, customers can see the job I’ve done, my level of expertise and professionalism, know that I’ve explained coverage well, and leave with the experience that I’ve done a good job.”
New Agencies Fact:
- 20% in West South Central states
- 10% in West North Central states
- 80% grew between 2006 and 2007 at an average of 55 percent
Source: 2008 Future One Agency Universe Study
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