NU Online News Service, May 5, 5:30 p.m. EDT--Orlando, Fla.--Unlike soft-market cycles of the past, the leadership of a managing general agent association believes its members can hold onto marketshare and grow as the industry continues to change.
While the insurance market is seeing some price softening, which translates into growing competition for wholesalers from the standard lines market, the experience of post-9/11 placement difficulties has demonstrated the value of the MGA system to retail agents and their customers, who are not moving their business, said Bernie Heinze, executive director of the AAMGA.
"Traditionally, many people did not know the value of the managing general agency," Mr. Heinze said during a press conference last week at the 79th annual meeting of the American Association of Managing General Agents.
"Now, we are finding them not leaving. They are staying [despite] several of the standard line markets coming back into the mix," he added. "Many of the people, whose promises have been fulfilled by the prompt payment of claims, are staying with the new relationships they have made with retailers who brought their business through the managing general agent network."
He said AAMGA expects its membership's marketshare to remain the same, or even increase, as more retail producers recall their satisfaction with the experience and expertise wholesale agents exhibited during harder markets.
Joe Hutelmyer, president of Seaboard Underwriters Inc., now immediate past-president of AAMGA, said managing general agents are continuing to find niches in which to grow. One promising market is "disenfranchised small agents" who lack access to carriers because they cannot produce the volume that standard line carriers are demanding.
Besides the fact that retail agents get to fill the needs of their clients by tapping the wholesale markets, carriers also like the business setup because they get to take advantage of the cost efficiency and expertise MGAs offer.
"[Agents] have realized we are not some strange, two-headed creature they feared, but [they] can come to us as their local insurance company," said Mr. Hutelmyer.
"We have shown that we can act quicker than the behemoths of the industry," added Scott Anderson, executive vice president of Concorde General Agency in Fargo, N.D., and the new president-elect of the group. He added that the wholesale producer's expertise to fill niches will continue to help MGAs maintain their market position.
Francis Johnson, president of Johnson and Johnson in Charleston, S.C., and the new president of AAMGA, said New York Attorney General Eliot Spitzer's investigation of contingency fee abuses among the major retail brokers can further serve MGAs by demonstrating their professional conduct and ethical standards.
However, he noted, the soft market will not be easy for wholesalers. "Sure, it's going to be harder for us," he said, noting that brokers will have to write more business to keep their commission income stable. "We will find niches. We are very entrepreneurial, but I think it is our professionalism that is going to carry us through."
On the issue of what direction the market is taking, AAMGA's leadership characterized it as moderating while taking some dramatic downturns. Insurers, they noted, will face increasing pressure to reach profitable margins. For this reason, Mr. Hutelmyer said he did not believe the market would see another 12-year soft cycle as in the 1990s.
Mr. Johnson remarked that the industry needs to prevent the wide price swings it has seen in the past. "They make us look bad," he said. "The wide swings make us look like the bad guy when we are not."
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