Marsh lays off a couple of thousand employees and as a result finds cash to consider buying up a slew of smaller agencies to feed their need to have a small business division. Sure, some independent agencies are marginally surviving on $150,000 revenue or less with one or two CSR’s and 5-10% commission, but is that really living? The independent agency system is dying, and has been for a very long time. Our own companies are selling directly to the public. We are competing against direct writers and captive agents…and we are also competing against our own contracted carriers! Where will it end?
Before long, all the smaller, family held firms will have to sell to the big 100 in one form or another. All the old timers are out there trying to convince young brokers with no markets to place clients with them in return for a nice commission split so they can feed their companies…translation? They have no more clients!
I don’t wish to be the harbinger of doom as I am in this Insurance industry like the rest of you, but let’s be frank. There is no new blood entering the industry because there is no appeal.
My vision of the future of the independent agency system is clear. All (or most) insurance companies will be selling either through the big 100 firms in the country, or directly to the public. The future of the insurance industry is to evolve into a fee based society of insurance and risk professionals providing consultative advice for clients and managing their self-purchased and/or self funded insurance portfolios.
Look…not really a bad future, but we need to embrace this, and fast…and we need to attract fresh blood into this industry to help us evolve that much faster.
We need to be considered part of the same team of advisors that everyone has – CPA, Attorney, Banker, Financial Planner, Insurance Advisor.
Has anyone read the Marsh Berry report that came out this year – called Hanging by a Thread? IIABA’s report seems to completely contradict what MB reported was and will occur to independent agents. It can be accessed here: http://www.marshberry.com/Spring2008StateofIndustry/
I read the MB report, and do not see a contradiction with the IIABA article. Independent agencies are again growing because technology, while a valuable tool, is cold and impersonal. MB is in the business of consolidating independent insurance agencies to build “agency” value, not necessarily “value” to the customer. MB will target and approach the “biggest and best” in order to grow their bottom line, and to enrich acquired agency principals and owners. “It’s business!” MB still promotes the independent agency as the most ideal vehicle for delivery of insurance products, while stressing the importance of sound business practices, long range planning, and financial efficiency of operations. These are all good things. MB exists to enhance agency value, and the bigger the agency, the more room for improvement. Still, for the “average” agency, independence is why the agency system is again growing – most customers prefer a “close” relationship with a professional agent that cares as much about their financial security as they do the premium dollars the customer brings into the agency.
It talks about the VALUE of agents that is hanging by a thread. This has more to do with an agent with a solid business plan versus those without. The large agents are getting bigger and the smaller ones that don’t grow are getting eaten up or acquired. It talks about profit and it just goes to show how much of an impact catastrophes are now having on rates lately. However, much of the numbers have been referenced in the soft market that has lasted for what seems to be a decade. Now, AM Best shows that Agencies still have 57% of the premium and has been steady. Let these guys throw around EBITDA numbers and then tell them to translate to English – Agencies are still King.
Let me clarify. Specifically look at page 11 of the MB report – chart 13. It predicts continued and heavy M&A activity thru 2015. That’s what I was referencing being contradictory to the Big I’s report and statement of this trend.
Very nice, though, in fantasy land.
Marsh lays off a couple of thousand employees and as a result finds cash to consider buying up a slew of smaller agencies to feed their need to have a small business division. Sure, some independent agencies are marginally surviving on $150,000 revenue or less with one or two CSR’s and 5-10% commission, but is that really living? The independent agency system is dying, and has been for a very long time. Our own companies are selling directly to the public. We are competing against direct writers and captive agents…and we are also competing against our own contracted carriers! Where will it end?
Before long, all the smaller, family held firms will have to sell to the big 100 in one form or another. All the old timers are out there trying to convince young brokers with no markets to place clients with them in return for a nice commission split so they can feed their companies…translation? They have no more clients!
I don’t wish to be the harbinger of doom as I am in this Insurance industry like the rest of you, but let’s be frank. There is no new blood entering the industry because there is no appeal.
My vision of the future of the independent agency system is clear. All (or most) insurance companies will be selling either through the big 100 firms in the country, or directly to the public. The future of the insurance industry is to evolve into a fee based society of insurance and risk professionals providing consultative advice for clients and managing their self-purchased and/or self funded insurance portfolios.
Look…not really a bad future, but we need to embrace this, and fast…and we need to attract fresh blood into this industry to help us evolve that much faster.
We need to be considered part of the same team of advisors that everyone has – CPA, Attorney, Banker, Financial Planner, Insurance Advisor.
Has anyone read the Marsh Berry report that came out this year – called Hanging by a Thread? IIABA’s report seems to completely contradict what MB reported was and will occur to independent agents. It can be accessed here:
http://www.marshberry.com/Spring2008StateofIndustry/
I read the MB report, and do not see a contradiction with the IIABA article. Independent agencies are again growing because technology, while a valuable tool, is cold and impersonal. MB is in the business of consolidating independent insurance agencies to build “agency” value, not necessarily “value” to the customer. MB will target and approach the “biggest and best” in order to grow their bottom line, and to enrich acquired agency principals and owners. “It’s business!” MB still promotes the independent agency as the most ideal vehicle for delivery of insurance products, while stressing the importance of sound business practices, long range planning, and financial efficiency of operations. These are all good things. MB exists to enhance agency value, and the bigger the agency, the more room for improvement. Still, for the “average” agency, independence is why the agency system is again growing – most customers prefer a “close” relationship with a professional agent that cares as much about their financial security as they do the premium dollars the customer brings into the agency.
It talks about the VALUE of agents that is hanging by a thread. This has more to do with an agent with a solid business plan versus those without. The large agents are getting bigger and the smaller ones that don’t grow are getting eaten up or acquired. It talks about profit and it just goes to show how much of an impact catastrophes are now having on rates lately. However, much of the numbers have been referenced in the soft market that has lasted for what seems to be a decade. Now, AM Best shows that Agencies still have 57% of the premium and has been steady. Let these guys throw around EBITDA numbers and then tell them to translate to English – Agencies are still King.
Let me clarify. Specifically look at page 11 of the MB report – chart 13. It predicts continued and heavy M&A activity thru 2015. That’s what I was referencing being contradictory to the Big I’s report and statement of this trend.