2017 Best Practices Study

What has contributed to this surprising 1:1 regeneration rate? Why is a mature industry like this ripe for new entrants? In our view, there are a number reasons for this:

1) Young, entrepreneurially-minded insurance professionals from acquired agencies are setting out on their own rather than working for PE or publicly-traded brokers.

2) The well-documented aging of the industry continues to create opportunities for younger, aggressive agents to enter the space, bringing with them newer, better and faster ways of doing business.

3) The economics of agency ownership are attractive. The PE world understands this and it explains their growing interest in the space. Savvy young investor-owners see the same opportunity.

4) Former captive agents and direct writers (Allstate, Liberty Mutual and others), have become independent agents.

In a 1995 Wall Street Journal cover story ominously titled “Under the Gun – Insurance Agents Fight An Intrusion by Banks, But Other Perils Loom,” a Conning & Company analyst was quoted as saying the independent insurance agent “may be headed the way of the milkman.” In that same article, no less than a former Texas Insurance Commissioner quipped that the harsh competitive and technological realities faced by the industry made insurance agents “the buggy whip makers of today’s economy.” Twenty-two years later, not only did the independent insurance industry survive, it flourished. So much for the experts. To be fair, these two were not the only forecasters predicting doom and gloom for intermediary industries in the mid- 1990’s. With the advent of the Internet, with its seemingly unlimited supply of information and its ability to facilitate convenient and low-cost transactions, many pundits put whole industries on notice that their best days were behind them (think stock brokers and travel agents). And many of these dire predictions were right. Insurance industry leaders were also feeling the heat in the mid-1990’s. The CEO of one of the largest brokers in the world spoke openly of his concern that his company would be disintermediated from between insurance carriers and customers by the resources the burgeoning Internet promised to deliver. Fee & commission-based intermediaries who were unable to adapt to the technological and competitive realities of these past two decades are long gone. Consumers, as it turns out, are largely agnostic as to who they will purchase goods and services from – the provider who delivers the highest overall value wins. And this is what independent insurance agents have proven to be able to deliver, time and time again – the highest overall value in providing the sophisticated risk mitigation products, tools and resources the US economy requires. Despite the seemingly never-ending challenges the environment throws at it, the insurance brokerage industry, led by Best Practices agencies, continues to adapt, innovate and prosper. We view the unprecedented influx of investment capital pouring into the industry and the steady agency regeneration rate as confirmation of what we already knew: this is a great industry with a very bright future. Far from joining the milkman and the buggy whip maker in the museum as a relic of a former time, the independent insurance agent continues to play an integral role in the marketplace and will likely do so for a very long time to come.