Outlook 2024: For independent agents, it’s not business as usual

Even in the hardest of markets, agencies can flourish in the new year by forging stronger bonds with their carrier partners and clients.

Independent agents’ biggest lesson in 2023 was that this is not “just an ordinary hard market.” And the outlook for 2024 bears this out. Photo: Dilok/AdobeStock

Let’s get the bad news out of the way first. If you’re an independent agent who’s expecting 2024 to deliver a magic cure for the hard market, you’re likely to be disappointed.

Now, the good news. There are amazing opportunities ahead for many agencies despite the current market conditions. The trick is knowing where to find them.

New year, same ol’ market

Independent agents’ biggest lesson in 2023 was that this is not “just an ordinary hard market.” And the outlook for 2024 bears this out. Market availability is expected to remain challenging. Additionally, rate adequacy will likely remain elusive, especially in personal lines, which have maintained a negative outlook from AM Best.

While inflation has lessened in recent months, existing inflation has already put considerable pressure on agencies and their carrier partners. It has also impacted every part of the supply chain, leading to higher claims costs.

Agency principals may be tempted to believe that the best path around such macro- and microeconomic challenges is to find more profitable carrier partners. However, the effects of the hard market cross our entire industry. As such, bringing in another carrier who is in the same situation as your current partners won’t be a panacea.

Instead, consider educating your clients on the current market realities. Clients are already familiar with the impact of rising prices on their business and personal lives. So, they’ll appreciate your honesty, even though they’ll be unhappy about policy increases.

Shore up your agency’s foundation

The best way to build sustainability for your agency in 2024 is to start with what you already have. Take care of your existing book of business proactively. Establish a renewal policy with clear criteria for re-shopping policies, such as only doing so when business increases by a certain percentage. By doing so, you’ll prioritize clients with the greatest needs and free your staff from busy work.

Next, keep your agency as efficient as possible. With rate adequacy difficult to achieve, carriers are curbing their expenses and reducing the size of their contingency bonuses. This will hit agencies that rely on profit sharing the hardest. By staying efficient, agencies can overcome this financial burden and maximize their fixed compensation avenues.

One area not to skimp on is employee training. Most agency staff members experienced a difficult 2023 as they navigated a hard market for the first time. Give your employees the tools they need to succeed by educating them about industry trends so they can respond to your clients’ needs better.

Additionally, agencies will need to get creative to help their clients withstand rising loss costs and longer claims tails. Look for unique ways to mitigate your clients’ losses. Start by ensuring you are writing the policies within each client’s risk profile appropriately. Then, show them how to reduce their unique risks.

For example, if a client is susceptible to numerous auto claims annually, you can help them by setting up a driver training program. In doing so, you will reduce your clients’ risks, provide them with better service, and improve their overall experience with our industry.

Expand with intention

Finding growth opportunities in 2024 starts by forming tighter agency-carrier relationships. Carrier appetites change quickly and drastically in a hard market. The better you understand which risks your carriers want to write, the more avenues you’ll find for expansion. Plus, when market conditions improve, your carrier partners will remember how you went out of your way for them in difficult times.

Adding multiple and diverse lines of business is always a smart move for independent agents. If you work only in personal lines right now, then adding one small commercial line is an achievable and likely profitable goal for 2024. If you already service one or more small commercial lines, consider adding more lines.

Which lines should you add? That answer will be based on two factors: your personal or professional interests and your carriers’ appetites. When you choose a line of business that relates to one of your passions, you will have the best chance of success. If you enjoy sports, for example, then it may be smart to build a niche underwriting amateur sports teams. Before you start, make sure your carriers want to write that particular business, so you have the support you need to make it profitable.

Targeting younger demographics offers another potential expansion route. Doing so will require some agencies to implement a few changes. If your workforce is comprised of mostly the Gen X and Baby Boomer generations, you may need to hire younger employees who understand the needs of potential Millennial and Gen Z clients.

It’s also wise to adjust your agency’s operations to reflect the younger generations’ preferences. Consider ways to extend your hours beyond the traditional 9-5. These can include enhancing your online presence, launching a mobile app, or integrating a carriers’ service center into your agency. Virtual assistants may also be a wise investment. If you’re a member of an agent alliance like SIAA, enlist their help to determine the best approach for your agency.

One fascinating trend to keep an eye on in 2024 is artificial intelligence (AI). We’re starting to see carriers use AI models to analyze and understand available risks. As carriers get more precise with targeting, it will also make it easier for agents to write the type of business their carrier partners want to cover.

Keep the faith

The new year won’t solve the hard market. But tough times bring out the best in independent agents. As agency principals and staff move forward in 2024, it will be wise to remember why we work in this industry in the first place. At its core, our role is to help our clients on their very worst days. By focusing on our industry’s greater mission, independent agents will continue to create more resilient communities, no matter the odds.

James Keane

James Keane is the vice president of national sales for SIAA, The Agent Alliance. In his role, he serves as the liaison between SIAA and its Strategic Master Agency (SMA) leadership, helping them maximize recruiting efforts, organic growth programs, agency development and member engagement. He can be reached at james.keane@siaa.com.

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