Too many insurance agents lose out on lucrative opportunities by quoting only half of the business available to them. For the typical new agency owner, focusing on personal lines makes sense because it’s easier and more familiar. However, ignoring the commercial lines market severely limits earning potential.
According to the Big “I” 2024 Market Share Report, independent agencies only placed 39% of personal lines written premium in 2023, compared to 87% of commercial lines written premium.
The takeaway? Many individuals are happy to find insurance on their own, whereas business owners are more likely to value the guidance of an insurance expert. And that’s just one reason to offer commercial lines.
In addition to tapping into a massive and highly receptive target market, there are five key advantages to becoming a commercial lines agent.
Advantage #1: A Diversified Business Portfolio
No matter how well you do with a single option, failing to diversify your portfolio will cause you to lose sales.
Let’s say an agency places all of its business with one carrier. Because the carrier is popular, the agent is able to sell a lot of policies. Plus, sticking to one carrier makes things easier. However, there will always be some clients who can’t find what they need with this one carrier. If you don’t offer anything else, you will lose those clients.
This is why so many agents make the switch from the captive to the independent model: They understand the value of diversification. The more carriers you represent, the easier it is to meet the needs of all of your clients.
The same goes for lines of coverage. If you only sell personal insurance, your portfolio isn’t diverse. By expanding into commercial insurance, you’re in a better position to help a greater number of clients.
Advantage #2: The Ability to Navigate Market Changes
When the insurance market changes, agents need to pivot to survive.
Let’s say you only sell personal insurance, and you’re in a state that has been plagued by natural disasters. Rates dramatically increase, and capacity is hard to come by. Then, several carriers stop writing business in your state. Suddenly, you’re struggling. This isn’t fiction–it’s a scenario that many agents in California and Florida know all too well.
Market changes can be disruptive, but agents who offer a wide variety of coverage types are able to pivot. If it becomes hard to sell personal insurance, you can shift your focus to commercial insurance–and vice versa. It’s always better to have options.
Advantage #3: Long-Term, Loyal Customers
J.D. Power says auto insurance shopping has surged. Amid rising auto insurance premiums, nearly half of policyholders are actively shopping for a better deal.
Personal lines policyholders aren’t the most loyal. Most auto and homeowners insurance policyholders simply want the best price they can find.
Commercial policyholders are different. Although they can be cost conscious, they also tend to be serious about risk management and long-term goals. They are often interested in developing relationships. For agents trying to build a future-proof book of business, this is highly desirable.
Advantage #4: More Lucrative Commissions
The commissions that agents earn are tied to the cost of the policy–the bigger the premium, the bigger the commission. Of course, this doesn’t mean agents should try to sell their clients policies that are overly expensive. However, it does mean that focusing on more expensive coverage types is a smart way to boost your revenue.
According to Forbes Advisors, the average cost for a homeowners insurance policy with $350,000 of dwelling insurance is $1,678 per year.
According to U.S. News, the average cost of car insurance is $172 per month, which works out to $2,064 a year.
Commercial insurance policies vary greatly in cost, but the average premium tends to be well over $5,000.
By selling commercial policies, agents command larger commissions. They may also be able to sell more policies to a single client over the years.
With a personal lines client, you may be able to start with auto insurance and then sell homeowners and life insurance. Maybe you’ll even be able to sell a vacation home or boat policy. However, most people don’t need a huge number of insurance policies.
Businesses are different. Even a small business may need commercial property, commercial auto, commercial general liability, and workers’ compensation insurance–and that’s often just the beginning. As the business grows, the size of the policies it needs will also grow. A single business client can significantly increase your book of business.
Advantage #5: The One-Stop Shopping Advantage
Business owners also need personal lines insurance. Likewise, many personal lines clients may be business owners. The cross-selling opportunity is immense.
The U.S. Chamber of Commerce says a record-breaking 5.5 million new business applications were filed in 2023. Some of these businesses may not have a physical location or any employees, and their insurance needs may be modest. However, even small businesses need coverage, whether it’s a professional liability or a commercial auto insurance policy. Furthermore, small business owners may be unaware of their risk exposures. By talking to your personal lines clients about their business ventures and related insurance needs, you’ll help them protect their new businesses while securing additional commissions for yourself.
If you don’t cross-sell to your existing clients, you risk losing them. Let’s say you have a client who has homeowners and auto insurance with you. This client opens a restaurant and needs commercial insurance. Because you don’t offer it, the client goes to another agent. To make matters worse, that other agent may be able to convince the client to move his personal policies–after all, it’s less work to deal with a single agent. Now, you’ve lost a valuable client. As a multi-line agent, you can offer your clients the one-stop shopping advantage.
Getting Started
It’s time to address the elephant in the room. Many agents know they can make money in commercial lines, but they avoid it because it seems difficult. However, with the right support, writing commercial insurance doesn’t have to be challenging.
Travieso, senior vice president, commercial lines, at Smart Choice, has an extensive knowledge of the commercial insurance market and how brokers can succeed in it. He draws on his background in both sales and underwriting. Website: www.smartchoiceagents.com/agent-services.
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