Recent statements contending that personal lines are a thing of the past for independent agencies aren’t in tune with reality, a new industry report contends. According to the insurance market research firm Conning, the most successful personal-lines insurers still rely heavily on independent agents and brokers to sell their products.
The report, “Growth and Profit Leaders in Personal Lines Insurance,” looks at 18 of the most successful carriers and analyzes their business practices to identify patterns of success. Of those 18 carriers, 12 who outperformed their peers in terms of both growth and profitability use the independent agency channel in whole or in part.
While Conning found that the strongest growth for personal lines did lie in the direct channel, the independent-agency channel is the best choice for small- and mid-sized insurers who wish to grow without investing in a direct-response organization.
“The flexibility of the independent-agency channel is well suited to the rapid growth of these companies,” Conning said.
Dr. Robert Hartwig, an economist and president of the Insurance Information Institute, told Insurance Business he expects these trends will continue.
“There’s a considerable amount of space [in the personal lines market] for independent agencies and there will continue to be for the foreseeable future,” Hartwig said. “There’s value added services provided by independent agents, particularly as an individual goes through life and adds more family members and needs multiple auto policies and multiple homeowners policies. I think that many people will see the agent as an integral component of their financial planning that they go through on a regular basis.”
Hartwig did add that he sees commercial lines as the more profitable revenue source for producers in 2014, but that “the value of the agent is immediately obvious” as individuals age and their insurance needs evolve.
He particularly believes that producers will be necessary to ensure clients don’t experience the “gaps in [persona lines] coverage” common as people go through significant life changes.
The Conning report and Hartwig’s statements directly contrast with recent reports from Nomura and McKinsey & Co., which argue that the personal touch of independent agents is becoming less valued and that “agents have neither the scale nor the operational efficiency to profitably sell a commodity.”