Marketing the agency effectively over the Internet, security, and ease of use of new real-time functionality have become the top three technology issues for owners of independent agencies, according to a study conducted by the Independent Insurance Agents & Brokers of America (IIABA).
Carrier Web sites have gained ground as the preferred method for agencies to do business, according to the IIABA, while technology costs have become less important to agency owners than in the past.
The bi-annual 2010 Agency Universe Study, a collaboration between IIABA and Future One, a coalition of insurance company partners, was released last month and indicated that the number of independent agencies remains stable at approximately 37,500 after a steady, decade-long decline that ended in 2006.
When the decline began in 1996, there were 44,000 agencies, the study said.
“The 2010 Agency Universe Study reflected the combined effect of the recession which began just as the 2008 study was underway, a prolonged soft insurance market, and declining revenues,” says Robert Rusbuldt, IIABA president and CEO. “Despite all these challenges, many new agencies are forming, typically with a more diverse and younger leadership, demonstrating the strength of the independent agency system and the potential for growth.”
Madelyn Flannagan, IIABA vice president of agent development, education, and research, says, “As the [IIABA] continues to increase its diversity efforts, the 2010 Agency Universe Study found some progress with an increase in the number of new small and medium small agencies with minority principals.
“In addition to the increasing ethnic diversity of agency ownership, albeit from a very low base, these agencies are also solidifying the position of women as principals in over a third of agencies.”
Among other findings the IIABA shared:
• Of the 37,500 agencies that exist today, 11 percent, or around 4,000, were founded between 2008-2010. That figure is equal to the number of agencies lost through mergers and acquisitions.
• Since 2005, 50 percent of new agencies were located in the South; 24 percent were founded in the South Atlantic states and 19 percent in the West South Central portion of the country that includes Louisiana and Texas. By contrast, only eight percent of new agencies were located in the Northeast, compared to 18 percent of older independent agencies. IIABA said the result may reflect the flexibility of the agency system that allows it to serve markets captive agencies have abandoned.
• The combination of the soft market and the recession of 2008 caused a decrease in revenue overall for independent agencies, particularly in commercial lines. This hurt larger agencies that are more dependent on commercial lines business. However, 55 percent of small agencies saw increases in revenue from 2008 to 2009, while 25 percent suffered decreases in revenue.
This report is the 10th in a series of studies on independent agencies that dates back to 1983. Approximately 2,100 agencies were included in the study, which was conducted electronically.
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