Independent Agency Population Holds Steady as Start-Ups Keep Pace with Mergers

The total number of independent agencies in the country remains stable at around 37,500 as start-ups have kept pace with agency mergers and closings, according to a new study of agencies. There are today as many agencies as there were in 2006.

About 11 percent or 4,000 of today’s independent agencies were founded in 2008, 2009 or 2010, according to the 2010 Agency Universe Study by Future One, a collaboration of the Independent Insurance Agents & Brokers of America (Big “I”) and independent agency companies.

There is a definite regional bias in the population of new agencies. Of agencies founded since 2005, 50 percent are located in the South, 24 percent in the South Atlantic states and 19 percent in the West South Central Census division.

The regionalization of new firms may reflect independent agents stepping in to serve markets that many captive agency companies have abandoned. In contrast, only 8 percent of new agencies are located in the Northeast, compared to 18 percent of older agencies.

Diversity

The study suggests some progress is being made in diversification of agency ownership. The results show a slight increase in the number of new small and medium small agencies with minority principals, according to Madelyn Flannagan, Big “I” vice president of agent development, education and research. She said the proportion of agencies with African-American principals grew from 1 percent in 2008 to just over 4 percent in 2010.

Ownership is also changing gender. “In addition to the increasing ethnic diversity of agency ownership, albeit from a very low base, these agencies are also solidifying the position of women as principals in over a third of agencies,” Flannagan said.

Soft Market Impact

The study also outlines how independent insurance agencies have been hurt by the soft insurance market and, since 2008, the recession. While 55 percent of small agencies saw increased revenues from 2008 to 2009, 25 percent had decreased revenues. In all of the other size categories, agencies with decreased revenues have outnumbered those with increased revenues. The decline in revenues has been worse in commercial lines than in personal lines. Consequently, it has hurt larger agencies, more dependent on commercial lines, hardest.

The study surveys independent agencies operating in the U.S. about their numbers, revenue base and sources, number of employees, ownership, mix of business, diversification of products, technology uses, non-insurance income sources and marketing methods.

The 2010 Agency Universe Study was first conducted in 1983. Subsequent studies were released in 1987, 1992, 1996 and 2000. Approximately 2,100 agencies were included in the 2008 analysis.

Topics Mergers & Acquisitions Agencies