“We have to be in front of the retailers more than we have in the past,” he said. “There will have to be change among those who have held the attitude You need me. I dont need you.”

Bill Russell, president of Bill Russell Insurance Agency Inc., in Austin, Texas, and president of Combined Agents of America, a closed wholesale agency group, said challenges in Texas this year will involve placements of construction and habitation risks.

Insurers are leaving the state, he said, primarily because of losses related to mold claims and construction defect claims. He predicted the problem would grow nationwide this year as property owner claims grow.

For 2004, he said he can turn to the excess and surplus lines market, but in the years after that, he is not so sure if that solution will continue to be there, no matter what the price.

Doug Mahany, president of W.L. Putnam Agency in Dunkirk, N.Y., told National Underwriter, “The hard market has been a great challenge to me and other small agencies in small towns. Agencies, he said, continue to face problems meeting growing carrier volume requirements in what are, for many smaller agencies, limited geographical markets.

Mr. Mahany is also a member of the Iroquois Group, an agency cluster based in Olean, N.Y., which helps find markets despite volume demands. But, he noted, “there is no coasting going on here. We put a full day in and find ourselves doing more with fewer people and [with] more reliance on automation technology to maintain the business.”

“Rate increases brought us more business, and we had to work harder on retentions,” he said. “We expect to be working quite hard in 2004. If we put our guard down, we can lose business. There is competition out there from larger brokers, but we are holding our own.”

Several agents said a growing number of carrier consolidations has left agents with fewer markets available to turn to. While this is not so much an issue on the personal lines side, it is a growing concern in the commercial arena, Mr. Mahany said, noting that one answer is for agents to move away from being generalists in the future and to begin to focus on niche businesses.

Brian McSherry, owner of Huxabile Insurance Agency in Flannigan, Ill., and president of the Professional Independent Insurance Agents of Illinois, also said that consolidations are burdening small agencies with additional work they are not prepared for as they have to move books of business either caused by the consolidation or by loss of a line.

The hard market, Mr. McSherry added, means tighter underwriting, and in turn, greater demands for information on each account. In the southern region of the state, primarily farm land, he said he can find himself spending two days out of the office collecting the information required by carriers for one account.

It is a huge undertaking for a small firm, and the strain on the agencys services is compounded when carriers reject the business and begin leaving the line, said Mr. McSherry, an owner-producer who is assisted by two customer service representatives. “Farm placements are a very difficult line.”

On the personal lines side, carriers are continually changing terms and conditions, keeping agents on their toes guarding against errors and omissions exposures, he said.

And, in Illinois, companies want more volume, he said. “For the smaller agencies, it is tougher and tougher. We do not have the demographics to keep up.”

In order to help meet carrier volume demands, agents will have to depend more and more on technology, updating their systems where they can. Carriers are making advances, demanding that agents do more business over the Web. But to utilize the technology effectively, they need high-speed Internet access. It is still unavailable in southern Illinois, hindering agency technology improvements, Mr. McSherry noted.

He has assembled a committee to find answers to agent technology needs. Technology “is out [there], but we have got to figure out how to use it.”

“In 2004, agents may gain on finding solutions, but Im not sure they can be solved during that period,” he said.

Agents also worry about the overall health of carriers. Mr. Russell said that without tort reform for claims such as asbestos, companies will continue to see drains on their reserves that could eventually undermine the business.

Mr. Crouse speculated that one trend agents may begin to see, on the standard side, is a chase taking place between carriers for preferred risks to replace the tougher risks they lost during their re-underwriting. This, he said, could mean broader guidelines, more competition or increase in commission and contingency fees, or a combination of all three, to attract the business.

“It will be interesting to see how they write the business without giving up the rate they gained,” he said.

Generally, he said, insurers will have to once again begin to pay “adequate commissions” as competition begins to heat up, or face losing business. During the hard market, commissions have been cut, in some cases as much as half for wholesalers, he reported.

For retailers, this has meant smaller commission returns, if any, or the need to rely on fees charged to clients. If there is not an improvement in the commission rate, he said, retailers will begin to look at placing their business with other wholesalers who are willing to share in adequate commissions.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, January 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.