Rocky 2009 Leaves P/C Agents Hoping for a Better 2010

Once again, agents and brokers are wishing for a harder insurance market in the New Year. But while most agents hope for firmer insurance pricing in 2010, just slightly more than a quarter (26.9 percent) predict a harder market will actually come, according to a new Insurance Journal survey.

Better economic conditions and overall market stability also top the list of wishes agents and brokers hope to see come true next year. Whether or not such wishes will be granted is anyone’s guess.

Despite tough economic conditions and soft market pricing, the vast majority of agents and brokers feel somewhat confident (60.8 percent) or very confident (19.8 percent) they will fare better in 2010 than in 2009. Even so, nearly a fifth of all those responding to the survey say they are not very confident 2010 will be better for their agency’s business.

One agency owner responding to the survey said 2010 will be better than 2009, “because 2009 was horrible, worst in my 21 years in the business; (2010) must get better or there will be agents going out of business.”

Another agent said: 2010 “can’t get much worse” than 2009.

While most agents wish for a slightly harder insurance market in 2010, some 66.7 percent of those responding to the survey say they expect the market to remain soft through next year. Most don’t expect the commercial lines market to show price increases until 2011 (52.3 percent).

One respondent described current conditions as “a perpetual soft market in the average to above average risk segment,” adding that “there will always be someone ready to cash-flow underwrite these segments!”

Both agents and companies need a better market, said one agent, adding that “premiums should be based on exposure, risk management and losses, not the market.”

Better Marketing, Expense Relief

A number of respondents to IJ’s annual “Wishes & Predictions” survey said they believed 2010 would fare better for their agencies because of revamped marketing plans put into place in 2009 as well as cost-cutting measures enacted this year.

“Because 2009 was not a good year, we did a lot of expense reduction and management changes to become more efficient,” one agent wrote.

Another agent said: “We’re realigning our expenses, adjusting our compensation plans and getting lean.”

Many also cited that refocused marketing and targeting new business as well as cross-selling to existing clients will deliver better results in 2010.

“Increased marketing efforts should help us grow revenues, while improving efficiency and productivity,” one agent wrote.

Another agent said his firm is “implementing practices to communicate more closely with our clients and aggressively write new business.”

Staying Afloat in 2009

Many agencies went into survival mode in 2009. The bad economy meant a loss of commercial accounts. The soft market meant reduced commissions. The end result for many meant lower agency revenues.

“Maintaining our renewals and trying to write new business to offset the premium reductions due to competition” was the biggest challenge in 2009 for one agent. Also, the same agency owner cited many of his insureds had gone out of business, or lost premium (lower payroll, lower sales) due to the economy.

Another agency owner said: “The economy has had a big impact on many of our clients’ ability to pay premiums on time. There have also been some closures of businesses that have been hard hit by these economic times.”

While agencies across the nation saw premiums continue to decline for their insureds, the work to service those clients remained the same, or even increased. One agency said their biggest challenge this year was “premium reductions with greater work requirements.”

Rising expenses, including the cost of health care for agency employees, also posed a challenge for many agencies in 2009.

Agencies also faced trouble maintaining adequate staff with declining agency revenues this year.

What’s to Come in 2010?

Most agencies responding to IJ’s survey said they expect the greatest challenges for their agencies in 2010 to be much the same as 2009. Agencies will continue to be challenged by tough economic conditions and the prolonged soft market.

One agent foresees “continued premium declines coupled with increased medical premiums and possible staffing layoffs” as the biggest challenge in 2010.

“My fear is that the current trends will carry over at least into the first six months of 2010,” one agent wrote.

The gloomy economic and insurance market conditions will also force many agencies to confront staff morale issues, according to some.

Another agency owner wrote that he sees his biggest challenge in 2010 to “just survive in the insurance business.”

Survival could be helped or hindered by increased federal intervention into the business of insurance. Some agents worry what effect federal involvement will have on their agencies next year.

Federal health insurance reform efforts also concern many agency owners. “As 50 percent of our business in is in employee benefits, we imagine some type of struggle with what the government will lead us into,” one owner wrote.