What does the future hold for independent agencies?
Agencies will need to continually evolve their selling and service models in order to respond to the future climate of competition.
When I walked into my first insurance carrier meeting ten years ago, you would have thought I was in the wrong place. The average age of the other participants was at least 20 years older myself. Now, when I go to a carrier event or conference, I’m the one with a little grey in his hair, and there are droves of mid-to-late 20-year-olds all over the place. Where were all these people ten years ago?
The independent agency channel is evolving more rapidly than ever before. Consolidators and private equity firms are expanding into new markets, fresh young talent is filling all sectors of the industry, technology has finally arrived at the agency level, the market is insanely soft and customers expect to save 15% percent in 15 minutes.
With so much happening in the independent agency space, where is the agency of tomorrow heading?
The agencies of tomorrow
Over the past ten to fifteen years, private equity players and national brokerages have increased their number of acquisitions year after year, and you can expect them to continue their pace in 2020 as the market continues to flourish.
These players are not just looking at large to mid-size shops anymore. Agencies of all sizes are partnering, which is changing the current landscape of the independent channel. While the scale and resources of the national and large regional brokerages have many advantages, it also offers challenges to producers in all stages of their careers.
Compensation models become standardized, opportunities for ownership become more limited, and the ability to feel like you are truly “moving the needle” for your company diminishes. In other words, some of the entrepreneurial fun of what’s so great about the business can become lost. The businesses that remain independent, embrace technology, and the fast-paced, ever-changing environment we live in are uniquely poised to offer an alternative to those who desire the flexibility and freedom a well-run independent agency offers.
In the same time frame that consolidation has been occurring the gap between principals and the next generation of leaders has grown. Remember my experience ten years ago when I was the youngest in the room? For ten years, very few people got into the insurance industry. Today, there is an influx entering all segments of the industry, particularly in independent agencies.
Bridging the gap
As colleges and universities add risk management programs, more and more students are recognizing the many opportunities to build a long term carrier in insurance. This is tremendous news as agencies planning for the future now have the next generation to take the reins. Independents are now stepping up their game to recruit top individuals by building out or partnering with sales and account management programs to cultivate this new talent because without them there is no agency of the future.
Greater accessibility to technology is also playing a part in the evolution, as it has historically when it becomes available to the masses. It’s much easier today for a small-to-mid-size agency to provide top-level resources such as risk management programs, service portals, online application tracking and more for its customers. As these platforms become available, businesses are embracing technology on a larger scale than ever before and will continue to incorporate into the agency model.
On the marketing side of technology, most agencies have been reluctant to make Facebook, LinkedIn and Instagram a top priority. The agency of tomorrow has to come to grasps with how necessary this form of marketing and community engagement is to their business. Whether managed in-house or by a vendor, agencies of all sizes will continue to see how sharing, liking, posting, and commenting can expand their reach further than ever before.
In the current state of ‘holy cow, the workers’ comp market is soft,’ independent agencies will continue to diversify, round out accounts and expand their offerings. They say out West: If you don’t like the weather, wait five minutes; well five minutes have passed, and there is no sign of things hardening up.
Independent agencies are resilient. They are entrepreneurs, and when things slow down, they find another way to grow. and one way to do that is to focus on the current client base. Direct-to-consumer companies are doubling down on every platform, wavelength and form of telepathy to sell their products. Agencies will need to continue to evolve their selling and service models in order to respond to the current and future climate of competition. Having good service is not enough anymore; you’ve got to have top-notch carrier partners, team members and salesforce to attract and retain that which you worked so hard to earn.
The independent agency model is strong and will continue to strengthen because it’s what we’ve had to do for generations. Change is inevitable, but it’s how independents respond to that change that will show who the real winners are. So if you see a young producer or account manager sitting by themselves at the next conference, go over and say ‘hi.’ You never know if they might be the next principal of your agency.
Ramsey Brock (RamseyB@brockins.com) is a vice president at Brock Insurance Agency. Opinions expressed here are the author’s own.
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