Top Agencies Have Strategies to Weather Soft Market

By | May 7, 2008

Insurance Journal readers were reminded by our recent coverage on how agents are faring in the recession that the effects of the economic downturn vary by agency and region. Some agencies and customers are feeling the slowdown more than others.

But the soft market is a different animal. It spares no agency. Big or small, urban or rural, East or West, new or old— it attacks agencies of all stripes, biting into premiums and commissions.

Unlike other Top 100 lists of agencies and brokerages, the agencies in the Insurance Journal Top 100 Independent Agencies listing (in the April 21 issue) are privately-held businesses. Some of them understandably shy away from making their figures public, and this tendency is most evident at a time when a soft market shows premium volume down across the industry. It is entirely voluntary on their part whether to participate in this Top 100 listing and Insurance Journal editors have always appreciated the willingness of so many agencies to share some of the details of their success stories — in hard times as well as in soft.

While all agencies are bitten by the soft market, not all agencies are hurt equally. As this year’s Top 100 Independent Agency listing demonstrates, the largest agencies are also affected by the soft market but many of them have in place strategies that minimize the impact of insurance cycles.

Mainly, they have diversified their revenues enough so that when property/casualty premiums drop, other money streams fill in. Charging for risk control or other consulting services and selling employee benefits can help cushion the blow of a soft market.

The top agencies use the soft market as an opportunity to recommend coverages for new exposure that clients might not have considered in the past such as business interruption coverage. Or they recommend that it’s a good time to recognize that the customer’s business has grown and increased limits might be wise.

The top agencies take special care with the relationships they have with customers, educating them as to the reasons for the current soft market and preparing them for the time when it begins to harden and those falling premiums begin to level out and then rise. Because it will turn and those premiums will rise.

The lessons from the top are applicable no matter how large an agency is. The scale might be different but the sale is the same.

The most successful agencies did not get to the top by letting markets dictate to them; they took control of the situation. That’s how they stay there, too.

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