As in past recessions, spending cuts are not being distributed equally: Spending on wants is being cut dramatically in order to preserve cash to spend on needs.

For those who make their living providing goods or services to satisfy consumer wants, the immediate future looks grim. On the other hand, since insurance brokers provide something their clients need, their future appears far brighter.

As in the past, insurance buyers will demand an ever-increasing level of value from their broker. They will also expect brokers to justify every dollar they are paid.

But this has been happening already. The most professional brokers have been winning market share by excelling in these areas, and will further distance themselves competitively as this trend accelerates due to economic pressure.

o Insurance broker stocks are continuing to dramatically outperform the overall market.

After years of beating the S&P 500, one might expect insurance brokers to finally begin to stagger. After all, for the 10 years leading up to 2008, the publicly traded brokers more than tripled the returns of the S&P 500, growing at a compound annual growth rate of 13.7 percent versus the S&P 500's 4.2 percent.

But that was prior to October's stock market swoon. For the first 10 months of 2008, the S&P 500 was down a staggering 34 percent, while the publicly traded commercial insurance brokers were down only 8.7 percent, as can be seen in the accompanying graph.

What does this mean? Investors remain bullish on public broker stocks because they believe brokers will weather economic storms better than most other industries. One analyst recently added two of the major brokers to its “top picks” list due to a belief that the soft market is beginning to show signs of abating.

For privately held agency owners, the story is also a good one. We are projecting that the firms comprising our Reagan Value Index–a proprietary database of approximately 30 large agencies we appraise each year–will grow by 2-to-3 percent in 2008, which is the lowest return for the RVI recorded since it was established in 1994.

But as low as that is, don't lose sight of the fact that it is an increase! As bad as a 2-to-3 percent increase looks by historical standards, it will still be the highest performing investment owned by most agency principals in 2008.

o Talent flows are shifting toward the insurance industry.

Let's face it, for years the insurance industry has suffered from a perception that other segments of the economy are more exciting and lucrative. As a result, the tide of talent has flowed away from insurance.

Today, the landscape is shifting dramatically. The relative stability and the honest professionalism of our industry are attracting the attention of many who wouldn't have considered it in the past.

Today a real opportunity exists to affordably attract some extremely talented professionals from industries such as real estate, financial services, telecommunications and technology.

To capitalize on this, agency principals will need to step up their recruiting efforts in the coming months. The winners will be those brokerages with leadership capable of articulating a career vision to potential impact players from outside of our industry.

o Acquisitions are returning as a means of growth for private brokers.

For years, local privately held agencies have been priced out of acquisitions by well-capitalized public brokers and banks.

However, with a shrinking number of publicly traded insurance brokers, and with many banks on the sidelines struggling with their own capital constraints, the number of hungry, premium-paying buyers is contracting.

At the same time, the demographics of our industry remain largely as they were–there are thousands of agencies owned by baby boomers that will need to find a buyer or strategic partner over the coming decade.

So who will fill the gap? Privately-held agencies will emerge as a serious competitor for acquisitions over the next few years.

As public brokers become more selective and direct their efforts toward a smaller number of key targets, privately-held agencies will find themselves able to compete by offering sellers a compelling combination of an attractive private company culture, along with a competitive (but not necessarily a premium) valuation.

o Many agency principals are up to the task of managing through difficult times.

You may have heard the quote making the rounds today that “a downturn is a terrible thing to waste.” The concept behind this quote is that an economic downturn can open doors to change that remain firmly shut when times are good.

When times are tough, changes that are naturally resisted by employees, carriers, vendors or owners–or perhaps all four–become much easier to make.

Have you been holding out on fixing some element of your brokerage operation? Perhaps you've been waiting for an easier time to implement changes. In reality, for many agency principals, these difficult economic conditions may have created the perfect opportunity to act decisively.

Today the future looks more uncertain–and in many ways, more ominous–than at any time in recent memory.

The good news for insurance brokers is that despite the scary economy, there are plenty of reasons to be encouraged.

For those brokers that continue to steadily invest in growth opportunities–both by hiring as well as opportunistically acquiring–the future remains bright.

As has always been the case, tomorrow's most successful brokers will be those that confidently and effectively capitalize on the opportunities–disguised as challenges–presented by the marketplace.

How will you respond?