Personal vs. commercial: Which line of business should an agent pursue?
It's an important question for agents who want to excel in property and casualty insurance.
Property and casualty insurance in the U.S. is a significant market. Per a report by Deloitte, the net income of the sector soared to $60 billion in 2019, an increase of 66% from last year.
The numbers look very promising for agents selling both commercial and personal insurance policies. However, an important question arises for agents who want to excel as a property and casualty insurance agent.
Personal insurance vs. commercial insurance
Personal insurance has been the poster child for agents for some time now. And why shouldn’t it? Insurance Information Institute claims that the personal lines collected $329.8 billion of new premiums in 2018. That’s a massive market for agents to explore. Therefore, agents can always find more rooms to sell additional policies and offer endorsements as well.
However, it’s commercial lines where the real potential is hiding.
For independent agents to compete, they can’t solely focus on selling policies from personal lines anymore.
According to the IIABA, independent agents wrote 83% of commercial lines premiums compared to one-third of personal lines. Hence, the premiums and commissions in this line are higher than those of personal lines.
Sure, personal insurance does have plenty of fishes, and agents can sell insurance according to the varying needs of different generations. But the bigger ones are swimming in the commercial lines.
Why choose commercial insurance?
High commission payout
Let’s face it: businesses invest a lot in insurance. Personal insurance is an already congested market for agents. Honestly, there isn’t much diversity at all.
On the other hand, commercial insurance provides a bunch of different niches within a single niche. And these niches are immensely profitable. For instance, commercial trucking insurance can easily collect $8,000 to $12,000 in premiums per year. In the initial year, agents made 10% to 15% commission and 8% to 12% in renewals.
Don’t you want to explore this pool of potential?
Potential market
Interestingly, the wave of entrepreneurship has seen growth in a lot of small businesses. For instance, if we look at the size of small businesses, there are over 7 million from construction to home-based ones. Imagine just how many workers’ compensation policies you can sell to these businesses. And, all these businesses hence, need insurance to protect themselves from a calamity or a potential lawsuit.
Be in the business to keep others in the business.
The rise in sharing economy is quite evident since many businesses are based on this model. Similarly, there are unusual businesses in every corner, for instance, from Uber and Lyft insurance to Airbnb insurance. In addition, commercial insurance agents can better cater to such businesses working with Insurtech companies thriving in the market.
Now, why wouldn’t you want to be a part of a path-breaking business?
Additionally, the commercial market has shown some signs of hardening. The prices of auto, D&O, and umbrella insurance are increasing in double digits. Yes, that means commission rates might get high in this seller’s market cycle. Sounds amazing, right?
How easy is it to make the switch?
Personal lines have been a volume game for the industry. On the other hand, commercial insurance requires more expertise. However, for agents who want to expand their book to the commercial line and attract insurance leads, the same methods to target personal line clients might not give the desired results. And generating leads for insurance has never been easy.
Business owners need advisors — experts who can work with their business portfolio. The portfolio includes specific details like products, customers, working conditions, and employees.
Dealing with personal lines is straightforward, right? Firstly, you maintain a good relationship with your clients, connect them with a reputed carrier, and get them a reasonable price. Hence, if you’re good at it, you might end up with heaps of referrals too. Meanwhile, commercial lines are a lot more complicated than that.
Cold calling and prospecting will take longer than a few days. You need to know about the business in detail. You must understand the risks and exposures on a deeper level. Similarly, building referrals might not come as quickly too.
Does it feel like you’re up for it? Don’t worry!
Once you get a hold of your niche in the market, the rest will come easy. Likewise, there are tons for you to choose from as well!
However, commercial lines are still a field dominated by independent agents.
But all in all, it is important to understand the business and your interests. Always keep up with the industry’s trends and technology. You need to assess your business’s strengths and weaknesses. Only pursue this line in property and casualty insurance if you know your business is ready.
This article was originally published on Agency Height’s blog and is republished here with permission.
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