Carrier relationships have shifted from access to alignment. In today’s hard market, carriers are no longer easily persuaded by interest alone – they’re setting the terms.
“Carriers want certain types of agencies that are going to meet their requirements,” said Joseph Totah (pictured), president of Strategic Agencies, which is the parent of AgencyEquity. “You can’t go out there and say, ‘Hey, I want this carrier. I want that carrier.’ They’re going to want you. You’re going to have to sell them on wanting you.”
As the market tightens, smaller and mid-sized agencies are finding it harder to secure direct appointments. Many have turned to agency networks to stay competitive. These networks act as intermediaries, offering access to a carrier portfolio the individual agency might not qualify for alone. “The insurance carrier appoints the network, so the network’s kind of a middleman,” said Totah.
“Don’t go out there and get five to 10 carriers,” he said. “You want to get two or three at the most for personal lines. For commercial lines, you want a little more.”
This shift is directly tied to carriers’ current appetite. “Each carrier is going to have expectations, and they’re going to want you to submit a certain volume. They want you to be dedicated to them,” he said. That level of commitment requires agencies to be selective and deliberate.
Forget about trying to build leverage through spread. “Don’t focus so much on winning business on bottom line price because that doesn’t work anymore,” Totah said. “Carriers are losing money and they’re not going to put up with that.”
Totah cautioned smaller agencies against overestimating their bargaining power when approaching carriers directly. “If it’s a smaller agency, they get a carrier appointment, they have to be fortunate,” he said. “They cannot pick and choose, because when you say pick and choose, they will likely say no.”
This is where agency networks come in again – providing a way around size-based barriers. However, the network itself must prove its worth. “Many carriers only want to work with mid- to large-size agencies or an agency network... that has maybe like a hundred agencies,” he said.
Not all networks offer the same level of support. Some only provide appointments, while others offer full operational infrastructure, including E&O coverage and technology tools. “Some agencies just want carrier appointments, some agencies want a little more than that, and some agencies want the full package,” Totah said.
“Carrier service centers cost the agencies money,” said Totah. “The carriers take away some commission from them.”
Agencies with a hands-on service model, especially those serving higher-end clients, may find the tradeoff unacceptable. “If the agency wants to provide personalized service and they’re hands-on... they should do it themselves inside the agency,” he said. But for others, outsourcing support in exchange for slightly lower commissions might be worth the operational simplicity.
“We’ve seen for the longest time, many agencies have started out in the captive world,” he said. “Their hands are tied. They can’t do as much as they want to do because the captive has very limited options.”
While some agents remain satisfied within the captive model, others outgrow it and look for independence to expand their product offerings. “I think it will come around in the next year or so,” he said of the trend.
“There’s a lot of technology that’s being thrown out at the agencies right now, and it’s overwhelming,” Totah said. “Some of them may not be cutting it.”
He described AI’s reception among agency owners as lukewarm at best. “The agencies are not biting on the AI very fast,” he said. “I think the AI needs to be tied in with some other technology that does something else.”
