Insights into the 2022 Insurance Networks Study

Independent agents are all too familiar with how challenging it can be to find success. Over the years, insurance networks have emerged as a prime way to help independent insurance agencies find their footing, connect with carriers and achieve their goals. The 2022 Insurance Networks Study from the Insurance Networks Alliance offers a snapshot of the current influence of networks in the insurance industry, and it includes many vital insights for insurance professionals. Here are five key takeaways from the study.

Takeaway #1: Networks Are Huge and Growing

The Insurance Networks Alliance includes more than 30 membership networks and this still only represents a fraction of the total networks in existence. Throughout the United States, there are more than 150 insurance networks, and more than 22,000 agencies belong to them. The networks vary significantly, with major differences in everything from size and structure to location and what they’re looking for, but they share the fundamental purpose of helping independent agencies connect with carriers. 

The fact that there are so many networks is telling. Networks are thriving, so clearly, something is working. Independent agents love how networks can help them meet carrier production requirements. Importantly, carrier partners are also seeing value in networks. Carriers want to find agencies that are a good fit and that can drive organic growth, and networks are ideal at matching agencies with carrier partners to achieve these goals.

Takeaway #2: The Insurance Industry Is in Flux

Change can bring threats as well as opportunities. Right now, we’re seeing a lot of changes in the insurance industry. For independent agencies, these changes can be overwhelming, but networks can provide guidance, and that’s part of the appeal. 

Consolidation is one area in particular where transformation is occurring. Independent agencies are being sold and acquired every day. For small agencies, this can lead to fears of having to compete with agencies that keep getting larger and larger, but it also makes it possible for agencies to grow through acquisition. Networks can help facilitate these acquisitions. 

Carriers are also consolidating. Right now, we’re seeing many carriers buy each other, and these mergers and acquisitions lead to questions for agencies. It can be confusing for agents trying to navigate the changes, but networks provide a buffer by being a steady source of information and education.

Ultimately, many of these changes are about growth – both for the carrier and for the agency. A network serves both parties to help fuel growth. With the support of networks, agencies can add new markets, and carriers can grow their distribution networks. Perhaps this is why the 2022 Insurance Networks Study found that members of agency networks are thriving and positioned for additional growth in the coming years.

Takeaway #3: Technology Is Driving Change

Many of the changes we’re seeing now stem from advancements in technology. New startups are disrupting the insurance carrier landscape, and new tools are changing the ways agents track and communicate with clients.

Agencies used to be limited by their agency management systems. Not anymore. Now, they can easily adopt technology provided by their network or carrier partners to manage and communicate with clients. There’s also a growing pressure to maintain a strong online presence with active social media participation. It’s an exciting time filled with opportunity, and networks can provide the insights and education needed to leverage key opportunities.

Data is becoming another huge issue for agents and carriers, and a network partner can play a key role in leveraging data to determine how consumer demands are changing and how modern customers want to be serviced. For example, do consumers want to meet remotely or do they prefer in-person interactions? Should agencies be leveraging Zoom meetings? Many things have changed in the last few years, and networks can help insurance agencies keep up with the ongoing evolution of preferences.

Takeaway #4: Not All Networks Are the Same

Networks are thriving right now and for good reason. If they want to keep thriving and growing, however, they’ll need to continue to prove their value and to make wise investments.

Networks must be professional, demonstrate ongoing value and differentiate their offerings from those of other networks and other agent solutions. The study revealed three key differentiators for agencies:

• Ownership. From the agent’s perspective, ownership is a key issue. Independent agents often want to retain their independence. That is, they want to maintain control over their agency and maintain ownership of their book of business. Some networks allow this, but some networks and clusters do not.

• Cost. The cost of doing business is another key differentiator for networks. The first thing many agents look at is the commission split, but it’s important to consider other costs, too. Is there a cap on the commission split? Are there fees? Profit sharing can vary, too. 
• Training & Services. There are also key differences in what networks offer. Some networks are large and offer robust services and training opportunities, while others are basically just a clustering of agencies together. The networks that fall into the former category need to show independent agencies what they have to offer.

Carriers need to vet their network partners carefully, too. Carriers have a lot of choices for distribution, and they need to select the ones that will drive new business growth, deliver a lower loss ratio and boost profitability. There is a lot of variation between how networks perform.

Takeaway #5: Going It Alone Is Getting Tougher

As more and more independent agencies join networks, some might be asking whether it’s possible to succeed without a network partnership. The truth is that it’s getting harder and harder. 

Independent agencies face fierce competition. At the same time, carriers want to see good ratios, and they’re increasingly reluctant to take chances on new appointments that won’t deliver considerable premium. 

For small to middle-sized independent agencies, it might be possible to secure appointments with two or three carrier partners. It’s much harder to work with five or six carriers. This limits the options that the agency can offer clients, making it a challenge to find the right fit to drive customer satisfaction and retention. 

A network can solve this problem. Agencies still need to have goals, of course. They still need to deliver premium growth, but the network can remove some of the barriers, allowing agencies to get the appointments needed to start working toward those goals. 

Looking Forward: The Future of Networks

The future of networks looks bright. In fact, pretty much all of the INA members polled were bullish about the future of networks. Network leaders see a continued need for their services, an assessment that’s supported by the fact that many networks have been hitting record numbers for new agency recruitment year after year.

That said, consolidation is impacting networks just as it’s impacting carriers and agencies. This means that even though new networks may continue to form, the total number of networks might not increase. At the same time, some networks will become larger as they acquire smaller networks.

For networks that can prove their value and continue to grow and acquire smaller networks, the level of opportunity is impressive. However, networks cannot afford to become stagnant or complacent. Both carriers and agencies have options, so networks need to show that they’re the best option. 

Two or three years after a carrier or agency partner signs on, will they still be happy with their decision? Hopefully, the answer will be yes. Networks need to provide continual value – month after month and day after day. They need to justify what they’re taking in terms of fees or commission splits. Agents should feel that they’re getting the good end of the deal, or they’ll start looking for something better. 

As with most business relationships, both the everyday experience and the financial results matter. The networks that make it easiest for their partners to provide value to their customers, while boosting profitable growth will continue to attract more partners and thrive.