Bob Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America (Big “I”), sat down with Insurance Journal‘s Andrew Simpson at the association’s recent legislative conference in Washington, D.C.
The following excerpts are from the complete interview, which may be viewed at www.insurancejournal.tv.
Insurance Journal: Every year the Big ‘I’ conducts a market survey to gauge where independent agencies are in market share and other metrics. Were there any surprises in the most recent survey?
Rusbuldt: There were two pleasant surprises actually. The first one is that new, small independent agencies are being started at much greater numbers than we thought they were going to. You read all about the M&A activity in our side of the industry that agencies are getting smaller, but there are less of them. Interestingly, there’s a counter trend to that. A lot of people are leaving larger agencies, particularly bank-owned agencies, and starting their own agencies. There are people that were entrepreneurs and they miss that challenge of running their own business, rather than working for a larger corporate outfit.
So we’re seeing that trend, and I think it’s refreshing. I also think it’s good for the marketplace. There’s more competition. And some of these younger owners or older owners that are now entrepreneurs again are hungry for business, and there’s a lot of competition that’s being created.
The second phenomenon we noticed is that M&A activity is not affecting the overall universe of the independent agency system. Certain groups like Marsh Berry and others have predicted that there will be less and less independent agencies. But that number, over the last couple of years, has remained static from an agency universe perspective.
So it’s a little counter to conventional wisdom, but the numbers are showing that new agencies are starting and that the M&A activity is not affecting the overall number of independent agencies.
IJ: So to the extent that there is continued consolidation, there’s enough new blood or people reentering to make up for that?
Rusbuldt: That’s exactly right. The new startups are offsetting the M&A activity that’s taking place.
IJ: Agents are being hit by a double whammy of a recession and a continued soft market. What do they tell you across the country about how they’re doing in this combined recession and soft market?
Rusbuldt: Well, you know this all started … the economic problems that we have … in Washington, D.C., and on Wall Street. It was a combination of both. But now Main Street America is catching the cold and independent agents are no different. We’re feeling the effects of a soft market. We’re feeling the effects of a national and global recession. When people aren’t buying new homes, when they’re not buying new cars, when they’re not starting new businesses, when they’re looking at reducing their premiums, increasing their deductibles, and changing their coverage limits, it affects independent agents. It’s less commission; it’s less revenue.
We have been living for the last couple of years on contingency compensation. It’s been very important. And as that is starting to wane, for a variety of reasons, we’re seeing independent agents that are feeling the economic pressures that everybody else in this country is feeling. So it’s getting tougher.
IJ: In this environment, what seem to be the concerns that agents have with their carriers and those relationships?
Rusbuldt: Interestingly, certain surveys have come out in the last year saying that agents have never been closer to their primary carrier. But for carriers that aren’t the primary carrier, relations are still sometimes tense and stressed. There’s a number of areas where we’re working very well with our company partners to make the workflow situation in independent agencies more efficient; areas of technology is just one example. Real Time is a campaign that the Big “I” has been spearheading through the Agents Council for Technology. We’ve made great strides in that area.
But there are a number of other areas [where] we need carrier support. Certificates of insurance is a perfect example. Agents are burdened with certificates of insurance problems now, where they’re hiring full-time people to do nothing but issue certs. It’s very inefficient. We need the efficiencies that our carriers can bring to that problem to make it more efficient.
The issues of compensation have sort of died down from the Eliot Spitzer investigation days. But we still have pockets of areas where it’s an issue. New York state, right now, the legislature and the insurance department are looking at all these new transparency and disclosure laws.
So there are still issues on the table, both with our carriers and with regulators that we’re trying to work out.
IJ: How has the AIG crisis affected the ability of independent agents, in particular, to be heard in Washington?
Rusbuldt: The AIG debacle has been like a nuclear bomb that’s gone off in this town. The issues with AIG have been misunderstood by many members of Congress, and by a lot of people in the media. Credit default swaps is just one example of how members of Congress have misinterpreted the property/casualty insurance side versus the products side, which were not regulated by state insurance regulators. And to lump, as many decision makers do, the AIG issue and problems with the insurance regulatory system is wrong. It doesn’t mean that the state regulators were perfect. We know the life insurance company side of AIG had problems and the state regulators probably should have caught some of the securities lending practices that were not caught. No regulatory system is perfect. Look at the bank regulators. So we do need some enhancement in that area. But saying that we have to replace the entire regulatory system because of AIG is just wrong.
So there has to be a lot of education that takes place. It has affected independent agents. Not just on the regulatory side and the debate that is taking place in Washington right now; it is affecting independent agents in the marketplace. We get questions that we don’t really answer about what they should do for their customers, vis-a-vis AIG. Of course, every independent agency has to make that decision for themselves. They have to do their due diligence, look at ratings of companies, and make those decisions. So it has been a huge issue in the industry, in Washington, and it has affected the debate on regulatory reform.
IJ: There’s a lot of noise about who’s doing what on Capitol Hill. I want to give you a chance to toot Big ‘I’s’ horn a little bit. It’s recognized as the largest and most influential lobby for agents. What’s the size and scope of the Big ‘I’s’ operation in Washington? How does it work?
Rusbuldt: Well first of all, when you start with a base of 300,000 people that you represent, that is a true grassroots organization. And our people are primarily small business people. We do represent a lot of large agencies as well. But we have 1,500 people that have come to this legislative conference, and that speaks for itself. That is the largest industry legislative lobbying event. As we speak right now, we have all of those people on Capitol Hill, hopefully meeting with 435 House members and 100 U.S. Senators and their staff today. And we have meetings at the U.S. Agriculture Department today on crop insurance. We’re meeting with the Flood Insurance Administration. We have meetings at the Treasury Department.
We have real business people from every single state in the country here today, educating decision makers on the future of their business and what’s important for their clients. So that, in and of itself, is impressive.
We have 15 people in a Capitol Hill office; that’s beachfront property. We are right on Capitol Hill. We are a part of the culture of Capitol Hill. Everybody in that Capitol Hill office for the Big “I” worked for members of Congress, including myself. We worked on the inside. We know how it works.
IJ: How does that make you feel knowing that many people are out there looking to you as their leader in many ways?
Rusbuldt: The reason Big “I” has influence is not just because we have great lobbyists that worked on the Hill, understand the system, and are hardworking and dedicated. Our influence derives directly from our members. When these 1,500 people leave here today and go back to their homes, the residual effect of that is incredible.
To watch an IJ video with Bob Rusbuldt titled “What Most Irks Independent Agents With Their Carriers,” visit: https://www.insurancejournal.tv/videos/2471/.
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