The insurance landscape is continuously changing. My dad started his agency with Farmers Insurance back in the early 1980's. Through the 80's and 90's, captive agents really made a killing in personal lines, and commercial lines was dominated by the independent channel. Commissions were high, products were more company specific, and the brand of an insurance company truly mattered.
Over time, I’ve seen that the brand matters, but really only on two fronts: claims service, and price. If a company has those two items going for them, they are likely to succeed. There is a lot of administrative and “behind-the-scenes” action from the carrier to make that happen (ie: customer-friendly policy language and appointing good agents ensures smooth claims. Profitable books help maintain solid prices), though if a company can make those two things happen, a consumer will likely give them a serious look.
These changes have caused insurance companies to begin a bidding war of sorts. Commissions have been slashed, both by independent and captive carriers. This allows companies to advertise more, and also, in theory, to maintain competitive pricing. One of the problems is that it also contributes to the cyclical nature of insurance.
Tell me if you’ve heard this before: An insurance company promises excellent rates. Agents write policies like crazy. The insurance company loses its shirt, and within three years either has a huge rate increase, or non-renews the entire book because it was unprofitable.
Insurance companies all go through cycles of profitability -> growth mode -> more losses -> tighten underwriting and slow growth -> become profitable and prepare for growth.
Any agent in personal lines has seen this conundrum, and either spends a lot of time re-writing business, or worse, watching business go out the door.
Throw in online quoting systems like Compare, direct sellers like Geico and Lemonade, and it’s apparent that the personal lines sector is becoming more volatile.
We recently had a lunch with our Nationwide/Allied reps, and they mentioned that books of business in personal lines are valuating for significantly less than they were 15 years ago because it’s no longer a safe bet. People aren't paying as much. (Not even sharks.)
How can you bring stability to your agency?
IHT is a multi-state insurance agency with dozens of branches across the eastern and central United States.