Independent Agents’ Market Share Growing Steadily, Says IIABA Study

March 17, 2004

Independent agents and brokers continue to dominate commercial lines and experienced steady growth in personal lines, the Independent Insurance Agents & Brokers of America’s (IIABA) 2002 market share study.

The report shows that the commercial lines market grew 19 percent to $203.28 billion in 2002, with independent agents and brokers writing nearly 79 percent of the business. Due to the rise in both the market and in market share, independent agents and brokers experienced an increase in premium of $25.4 billion. In 2001, independent agents and brokers wrote nearly 75 percent, or $169.9 billion in direct written premium, of the commercial lines market.

“These figures reveal a continuing trend of significant growth for the independent agency system,” said IIABA CEO Robert A. Rusbuldt. “Independent agents and brokers are moving in the right direction to become more cost effective and efficient when delivering high-quality insurance products.”

In 14 states and the District of Columbia, independent agents and brokers write more than 80 percent of the commercial lines market. The top five markets in terms of independent agent and broker commercial lines market share are Hawaii, Rhode Island, Massachusetts, the District of Columbia and Maryland. Additionally, independent agents and brokers write 57 percent to 80 percent of the business in the commercial lines markets of the remaining states.

The personal lines market also experienced healthy growth in 2002, finishing the year at $188.35 billion, with independent agents and brokers writing slightly more than 36 percent of the business. As a result, the agency system added $6.7 billion in premium in the personal lines market segment. This is an increase from 2001 figures in which agents wrote $169.4 billion in direct written premium, or 35 percent, of the personal lines business.

“When you consider the size of the personal lines market and the fact that 64 percent of this market is not yet written by independent agents and brokers—you create a powerful business case for focusing on personal lines as an additional profit center that merits a pro-active growth strategy,” said Rusbuldt.

As with the commercial lines market, personal lines market share can vary by state. In Massachusetts, independent agents and brokers write 78.87 percent of the market. Maine, Vermont Connecticut and Ohio agents and brokers follow with between 50 percent to 61 percent of the market share. Independent agents in 11 states have more than 40 percent market share. In 17 states, however, they write only 20 percent to 30 percent of the personal lines market.

“There is a tremendous opportunity for growth in the personal lines market, and independent agents and brokers are poised to duplicate the success achieved in the commercial lines market,” said IIABA Vice President of Education and Research Madelyn H. Flannagan. “Success in personal lines requires focus, marketing strategies, improved technology and new innovations that will create a continuing flow of new prospects.”

The study also found that independent agency writers can deliver insurance just as cost effectively as captive agency writers and many direct writers, and in some cases, even more so, says Flannagan.

“Independent agency carriers should gain further efficiencies as they implement real-time electronic interfaces with their agents and insureds for more communications and transactions, thereby eliminating the need for human intervention in these circumstances,” said Flannagan. “These expense differences reinforce the importance of continued investments in technology to maintain and enhance the long-term competitive position of carriers as well as agents and brokers.”

IIABA contracts annually with A.M. Best Company to assess the state of the independent agency system with year-end industry market share and company-expense data. A.M. Best’s 2002 figures show that “it is vital for independent agents and brokers and their carriers to maintain and enhance their long-term competitive position by making the needed investments in technology, branding and sales power,” IIABA concluded in its report.

A complete copy of IIABA’s market share report is available at www.independentagent.com.

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