Agency Networks: Thriving Now and in the Future

By | September 19, 2022

Agency partnerships and networks continue to grow and add value for property/casualty independent agencies, large and small, by adding greater market access, offering services and technology, and the sharing of ideas that are helping them build their businesses.

For nine years Insurance Journal has recognized the nation’s largest agency partnerships and networks in its annual Top 20 ranking. This year, the Top 20 Agency Partnerships again showed considerable growth in both total property/casualty revenue and property/casualty premium. The Top 20 grew by nearly $400 million in total P/C revenue in 2021 and by nearly $10.5 billion in total P/C premium (see page 24 for the 2022 Top 20 list). That growth has continued into 2022, according to the handful of agency partnerships interviewed for this report.

Agency partnerships and networks are not new. Some have existed for decades. While the first networks started in the 1970s, these partnerships have grown in the past decade into organizations with diverse products and services.

According to the Insurance Network Alliance’s 2022 Insurance Networks Study, there are more than 150 insurance networks today and more than 22,000 agencies belong to them.

The INA study estimates that total network premiums controlled by networks and agencies is about $138 billion and total network-controlled premium is about $66 billion. Insurance agency networks’ total network-controlled premium accounted for 5% of the $1.28 trillion in U.S. insurance industry net premiums written, according to the Insurance Information Institute in 2020.

No two networks are alike. According to Andrew Caldwell, president of Smart Choice based in Greensboro, North Carolina, there are major differences in everything from size and structure to location and what they’re looking for in members. “But they share the fundamental purpose of helping independent agencies connect with carriers,” he told Insurance Journal.

That there are so many successful networks operating today tells an important story, Caldwell believes. “Something is working,” he said. “Carriers want to find agencies that are a good fit and that drive organic growth, and networks are ideal at matching agencies with carrier partners to achieve these goals.”

Agency partnerships have moved well beyond market access providers. “Years ago, it was about market access,” Matt Masiello, CEO of the nation’s largest network, SIAA. “It’s no longer about market access. Agencies can access markets anywhere.”

Today, when agencies join a network or partnership they should choose one based on their own goals and how that group can help them achieve those goals, Masiello said. Agency owners must consider how their goals will change in the future as well. “Because your goals are different tomorrow than they are today, right? So, you want to make sure you join a network that is scalable for your business as you continue to grow.”

Masiello tells prospective members to make sure they understand how the network shares dollars down to the agency before they join any organization. He advises them to be sure there is transparency in how commissions are paid to agencies and how carrier incentives are shared among members.

Perhaps most important — Masiello says agencies must review in detail all terms of any agency/network contract. “We always tell everybody they’ve got to understand, not just the business model, but they must understand the contract that they’re going to sign,” he said. “They should really take their time, and when they’re sitting with any of these groups, they should go through that contract with a fine-toothed comb and make sure they understand what the contract means for them today and tomorrow, and even at the end of the relationship.”

New Partnerships

The newest agency partnership group to join IJ’s Top 20 list is The AC Companies, or The Agency Collective, which was founded “out of necessity” in 2020 by Kenny Urbania and Gary Hines following the release of all Nationwide Insurance’s exclusive agents.

Urbania, a 25-plus year Nationwide exclusive agent, said converting to the independent agency model was challenging for many of his Nationwide agent peers, so founding The AC seemed like a natural progression. However, as he and Hines began developing the framework for The AC they realized other agencies, those already working in the independent agency channel, could also benefit from the model that their network would provide.

“We formed our group to disrupt the network industry and do it better,” Hines told Insurance Journal. “Although we started with the Nationwide agents, the sky is the limit as we are rapidly growing in the independent channel.”

Urbania said that The AC currently has about 750 active members with an average size agency ranging between $4 million to $4.8 million in premium per agency. Established independent agencies represent about 30% of its new membership.

M&A Hits the Scene

A trend felt elsewhere in the industry hit the agency partnership sector in 2022 — consolidation.

Insurance agency network Renaissance Alliance acquired two other agency networks in January. Massachusetts-based Renaissance acquired Agency Network Exchange (ANE), a 60-member exchange based in New Jersey, and Fresno, California-based United Valley Insurance Services, with 92 member agencies. Both ANE and United Valley held spots in the Top 20 Agency Partnerships’ ranking in Insurance Journal.

Renaissance itself was purchased in 2018 by Long Arc Capital, which has invested in personnel and operations, a Long Arc partner said. That capital investment put Renaissance in a position to expand capabilities for agency members, said Robert Bondi, CEO of Renaissance Alliance. That also meant expanding its geographical footprint, which had traditionally been centered in the New England market.

Today, Renaissance Alliance has nearly 300 agencies in 13 states with about $3.6 billion in premium.

More recently, in September the MarshBerry Platform announced a merger with First Choice Agents Alliance (FCAA). MarshBerry Platform and FCAA, each on its own, represent two of the nation’s largest aggregators. According to Insurance Journal’s 2022 ranking, MarshBerry Connect Platform’s represented $917,556,522 in total 2021 P/C revenue while FCAA represented $365,512,729 in total 2021 P/C revenue. [Editor’s Note: Because the merger occurred in 2022, both firms are represented on the 2022 ranking, which uses 2021 figures.]

MarshBerry Platform and FCAA are now known as FirstChoice.

First Choice was created in 2015 as a wholesale outlet for Nationwide captive agents looking for commercial market access. In 2017, the model moved to an agency member network to provide direct carrier access, strategic planning, education, and technology as well as market access.

MarshBerry, an investment banking and consulting firm serving the insurance distribution industry, initially launched the MarshBerry Platform in 2019 as an exclusive benefit for MarshBerry’s Connect members, which are typically larger agencies.

John Wepler, MarshBerry chairman and CEO, said the merger will allow the combined First Choice to serve independent agencies writing less than $1 million in revenue to those with greater than $1 billion in revenue. Wepler said that the two firms’ business models fully align in that both organizations strive to develop tools, resources and capabilities to help participating firms grow while remaining independent.

Earlier this year, MarshBerry announced a partnership with Atlas Merchant Capital, which supported efforts to grow. Combining forces with FCAA is one example of that intentional growth.

Keith Captain, FirstChoice’s president, said the ability of the combined group to help every business from a frontline retail agency all the way up to a sophisticated firm is what will set them apart.

“There is no other network or group out there that’s able to provide the breadth of support that we’re going to be able to provide. And that’s really what takes this to a whole new level for all of us,” he maintained.

Future of Agency Partnerships

Agency networks that responded to INA’s 2022 study see an optimistic future for agency networks and their agency members but caution that industry trends such as consolidation and market demands will challenge some networks going forward.

“As with other segments of the insurance industry, networks are faced with key challenges including the continued consolidation of both carriers and agencies, evolving demands of stakeholders, and regulatory issues,” the study said. “On the other hand, there are tremendous opportunities to be pursued such as greater technological advances, M&A activities, and further growth.”

Renaissance’s Bondi said the future for agency networks looks good, but that success is centered around the strength and importance of the independent agency itself.

“We believe that piece of the insurance distribution channel is by far the strongest and most important,” he said. “As independent agencies themselves continue their growth in the market — and representing that they are the strongest component of insurance distribution — good networks should be driving greater value to these independent agencies to allow them to outperform other parts of distribution.”

Additional investment from private equity players will help the network space to continue providing value to the independent agency system, he added. “The future is extraordinarily bright, and I’m very optimistic.”

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Insurance Journal West September 19, 2022
September 19, 2022
Insurance Journal West Magazine

Top 20 Agency Partnerships (Aggregators, Clusters & Networks); Professional Liability Directory; Market: Small Trade Contractors