Independent Agencies Are Gaining Market Share – Are You?

December 1, 2022

Captive agencies are losing ground to independent agents.

A recent report from the Independent Insurance Agents & Brokers of America (aka the Big “I”) shows independent agents are gaining market share. This signals a major opportunity for agents – and the right partnership can help you take advantage of this growing marketplace.

The Independent Agency Model Is Far from Dead

The 2022 Market Share Report from the Big "I" analyzes the direct written premiums for all 32 lines of business that property and casualty insurers reported in 2021. The report includes all distribution styles. 

The results are eye-opening. The Big "I" says the independent agency channel placed 62% of all property and casualty insurance written in the U.S. In commercial lines, independent agencies placed nearly 88% of written premiums. Independent agents aren’t dominating personal lines as they are commercial lines, but they still managed to claim a respectable 37% of all personal lines premiums.

These numbers should dispel any rumors that the independent agency model is dying as other channels gain traction. As Chris Boggs, Big “I" vice president of agent development, education and research, says, “The demise of the independent agency channel has been predicted by various sources for many years, but the Market Share Report affirms the reality that independent agents have and continue to place the majority of all P&C business."

It’s a good time to go independent. Get started with Smart Choice.

Captives Can’t Keep Up

While it’s clear that independent agencies are earning a large piece of the market share, it is especially impressive when you consider how much competition they‘re facing – not just from captive agencies, but also from online sales.

As Agency Equity points out, the 2022 Market Share Report shows that insurance carriers who use captive and online distribution models have been pouring hundreds of millions of dollars into advertising, but carriers who use independent agency distribution have still succeeded in gaining market share. 

Between 2017 and 2021, independent agency carriers grew their personal auto market share from 30.7% to 32.5%. This happened even though direct carriers provided increased competition, growing their market share from 23.5 to 32.4%. Meanwhile, captive carriers saw their market share fall from 46.0% to 34.7%. 

Agency Equity also notes that the growth direct carriers have enjoyed may have long-term costs in terms of advertising spending and underwriting results. Interestingly, Geico spent $2.07 billion on advertising in 2021 and its three leading companies in 2021 had a personal auto loss ratio of 72% to 73%. This is higher than the loss ratios of the five largest independent agency carriers.

Independent Agencies Provide Critical Choice and Guidance

An independent insurance agent reviewing policies with a customer.

There’s a reason why the independent agency model has staying power – it provides two things people need: choice and guidance.

When insurance shoppers go to a captive agency, they only receive coverage options from a single carrier. But what if that carrier isn’t the best fit for them? Limiting yourself to one carrier often doesn’t provide the best results, and in the current hard market, consumers may be facing significant rate hikes, and/or coverage termination due to tightened risk guidelines.

The direct model can make it easy for insurance shoppers to receive quotes from carriers. In fact, shoppers may feel that they’re capable of researching and comparing insurance options on their own. The reality, however, is that insurance is complicated. There are many factors to consider – differences that go well beyond monthly premium costs. Many insurance shoppers need guidance from trusted insurance advisors – and independent agents are in the best position to provide independent, unbiased advice.

Guidance is especially important for commercial insurance, which tends to be more complicated than personal lines, and likely explains why independent agents are dominating this market. However, even in personal lines, guidance can be valuable – and this is increasingly true in areas with troubled markets. 

In Florida, for example, WUSF says homeowners’ insurance premiums are three times the national average and a dozen insurance companies have gone out of business since January 2020, with many more on a watchlist due to financial instability. 

On the other side of the country, California homeowners and insurance companies are experiencing their own set of problems due to rising wildfire losses. The California Department of Insurance has issued one-year moratoriums to protect some homeowners from cancellation, but these moratoriums don’t protect everyone.

Homeowners dealing with rising rates, canceled policies, and insolvent insurance carriers likely need help navigating their insurance options – and independent agents can provide that assistance.

It’s a Good Time to Go Independent

Captive agencies are losing market share while independent agents are gaining, clearly indicating it's a good time to go independent.

By making the switch to the independent model, agents can ensure they’re in a good position to help their clients, and retain clients while increasing market share. Instead of being restricted to just one carrier – which may not have the best coverage options for some clients – they can offer products from multiple carriers at once, which is especially important as some carriers pull out of markets or tighten their underwriting, making it harder to find good coverage. Independent agents also have the option of turning to excess and surplus lines for particularly hard-to-place accounts, when standard carrier options fail.

Going independent is also a good way to take control of your own career in a challenging industry. 

How Individual Agents Can Find Success

A female independent insurance agent shows customers policy options on a tablet.

As a whole, the independent agency model is thriving. However, succeeding as an independent agent is not always easy. The rewards can be substantial, but there’s a lot of competition. Building a book of business and growing your agency requires hard work. 

The primary concern of most independent agents is carrier access.

If the primary advantage independents have over their captive counterparts, is the ability to quote and access multiple solutions, they’ll need to make sure their product suite is up to the challenge.

Unfortunately, securing carrier access isn’t as easy as simply reaching out to the carrier and completing some paperwork. Most carriers have production requirements that can make it nearly impossible for new independent agents to gain a foothold – even if agents have years of insurance industry experience. To secure carrier appointments, you need a big book of business – but to grow a big book of business, you need to secure carrier appointments.

Agency alliance and networks offer a solution to that challenge by negotiating on the agent’s behalf.

Not All Networks Are the Same

Some insurance alliances, clusters or aggregators promise carrier access but require expensive entry and/or monthly fees. Others lock agents into unfavorable contracts and may even take an ownership stake in the business, making it extremely challenging to leave. 

Smart Choice is different. When agents join Smart Choice, they receive carrier access (including excess and surplus carriers) without fees or unfair contracts. They also receive the support they need to navigate a changing insurance industry and grow their business. 

Independent agencies are finding success and gaining a larger market share. As an independent agent, you should seize the opportunity. Smart Choice can help.

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