Vertafore announces the results of its survey, “How Independent P&C Insurance Agencies Are Thriving in Today’s Competitive Marketplace.” The key takeaway reveals a widening gap among agencies, with 70 percent of large agencies “very optimistic” about future growth, compared to only 25 percent of small agencies. The survey was conducted in partnership with analyst firm, Aite Group.

Primary contributors to the findings included increasing commoditization and reliance on personal lines, such as auto insurance, and limited technology adoption among smaller agencies. In fact, although personal auto insurance sales represent a majority of small agency revenues, 39 percent of respondents noted their businesses have not made or do not expect to make any changes to combat the direct-to-carrier shift.

Despite these challenges, the survey identified multiple growth opportunities as nearly 50 percent of fast growing agencies invest in advanced technologies, diversify into fast-growing lines such as cyber-liability insurance, and expand strategic partnerships with carriers.  

“Our primary goal for conducting this survey was to delve deeper into the current state of the independent agency market and get a better understanding of what factors are driving or inhibiting growth,” says Todd Eyler, research director at Aite Group. “What we found is that the agencies that are thriving are those that recognize the profitability, scalability, and agility that technology can bring to the table. Findings from the survey can be used as a playbook for agencies working to bridge the growth gap by finding profitable solutions to counteract disruptive industry changes.”

Aite conducted the survey among 194 U.S.-based property & casualty independent insurance agencies between August and September 2014. The research was conducted independently with no influence from Vertafore on the findings. The following strategies identified by the survey have been consistently adopted by fast-growing agencies to overcome industry challenges in an increasingly competitive insurance landscape.  

Diverse Product Lines, New Markets Key to Growth

According to recent McKinsey research, 28 percent of consumers purchase auto insurance directly from carriers, compared to 13 percent who purchase directly from agents. This increase in commoditization of personal auto insurance has placed a heavy burden on agencies (particularly smaller ones with less than $1 million in revenue), where personal lines often account for 80 percent or more of their sales.  

To help offset the decrease in sales of personal insurance, 44 percent of all agencies have diversified into new coverage and product types including, homeowners insurance, commercial lines, and emerging markets such as, cyber liability, identity theft protection, and worksite insurance products. These strategic product lines are providing agents with more opportunity to deliver value in poorly understood product areas. Findings supporting the trend of diversification include:        

• Large agencies often utilize a higher percentage of commercial package and property insurance than small agencies. Large and mid-sized agencies often comprise at least 41 percent of total annual sales. Small agencies utilized less, according to the report. 

• Homeowners insurance is helping drive growth in agencies of all sizes. 58 percent of agencies of all sizes have experienced growth in homeowner’s insurance sales over the last 24 months.

• Among the new product lines, cyber liability insurance is emerging as a fast growth offering, with 50 percent of large agencies reporting an increase in sales for this type of coverage over the last 24 months. 

Customer Engagement, Self-Service Technology

Despite the slowdown in commoditized product lines, fast-growing agencies that invested in customer service initiatives are experiencing positive results. Agencies of all sizes cited better customer service (50 percent) and improved cross selling (49 percent) as important drivers of growth in personal lines insurance. Similarly, nearly half of all agencies reporting fast growth (47 percent) have deployed advanced customer self-service capabilities on their websites including, chat, video conferencing, and mobile. 

Strategic Partnerships with Carriers for Analytics, Marketing

In addition to product line diversification and customer self-service capabilities, Aite found an increasing number of large agencies forging partnerships with carriers as a means of gaining access to their marketing and technology capabilities.  Nearly two- thirds (63 percent) of large agencies have partnered with insurance companies to access their full range of marketing management tools, while 56 percent are partnering to leverage their predictive analytics capabilities and build more targeted prospect lists.

The benefits are twofold: Insurance companies are able to market new, valued-added products in a more localized and personal manner, while agencies increase efficiency and engagement with customers as a result of access to advanced technology.