Insurance Journal released a list of the top 10 insurers in the country based on size last month. You’ll recognize the names.
State Farm leads the way, with $36.5 billion in DWP. Berkshire Hathaway (including Geico) is second at $22.8 billion. Allstate rounds out the top 3 with a respectable $20 billion.
Of the top ten companies, only three grew their market share – Berkshire, Progressive, and USAA. The companies with the steepest decline were State Farm, Farmers and Nationwide. Everyone else maintained their market share.
What does it mean? Here are 3 lessons you can learn:
1. Captive companies are still strong - but trending down
State Farm has been the top dog my whole life, and they are still on top. However, they, along with other captive companies are starting to dwindle a little bit. While other companies are growing their market share, State Farm, Farmers, and Nationwide lost market share while American Family, and Allstate are simply treading water.
The sky is not falling – those companies have billions upon billions in premium and many happy customers. However, you can see that the game is changing.
Which brings us to point number two…
2. Customer loyalty to brand vs value
Many insurance companies dump serious money into creating strong brands - we're talking billions of dollars – and to develop their name recognition.
Most of the companies that promote the idea of knowledge and protection aren’t seeing market share growth. The exception is USAA, which, even as a captive company, is growing.
The other growers – Berkshire and Progressive, clearly push the idea that saving money is where it’s at. Today, whether we agents like it or not, the consumer is taught to view insurance as a commodity, and they just want the best price.
In a debate of brand loyalty vs value, it looks like the tables are tipping towards value, as two of the three growing companies are price-centric. As an agent, you need to figure out what market you’re competitive in, and combine competitive pricing with excellent customer experience. Then you'll grow.
3. The ideal insurance agency setup
You may already provide a great experience for your customers, so how can you be competitive almost all the time? The answer is by being an independent agent. I do not mean to be unkind to captive or exclusive agents - my dad was a captive agent for years, and I’m grateful for his career as it put food on the table when I was a kid!
However, I also saw firsthand that despite excellent customer service and product knowledge, there were too many times – sometimes over periods of years - when it was very difficult to write a prospect or retain a client because there were no additional options.
Some captive carriers are combating this by offering brokerage services to agents, increasing their market breadth. That still doesn’t compare to having direct appointments with lots of companies.
For one thing, these agents can usually only broker their customers when they are ineligible for coverage with their captive carrier. If the price is bad with that captive, you just have to refer them to your independent agent friend and move on to the next prospect. Also, these brokered commissions are usually much lower.
We at IHT work with six of the ten companies mentioned in this article! Sometimes it feels a bit unfair when we compete for business, but we absolutely love it, and I’d imagine that most agents, if given the choice, would rather work with multiple companies than be tied down to just one.
Imagine your agency with just one carrier as compared to a dozen. (And without production requirements!) How would that change your agency?
IHT is a multi-state insurance agency with dozens of branches across the eastern and central United States.