ALEXANDRIA, Va. – The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) has released its 2016 Best Practices Study (BPS) benchmarking analysis which found modest declines in organic growth but steady profitability across the group of 260 Best Practices Agencies studied.
“The 2016 Best Practices Study provides important information to help identify the business practices and methods that propel the top firms to the performance levels others seek to match,” says Madelyn Flannagan, Big “I” vice president of agent development, research and education. “These are challenging times for the independent agency system as slow growth, record consolidation, an aging workforce and threats from technology upstarts impact even the top performing agencies. The Best Practices Study is poised to help all agencies address these challenges.”
The 2016 Best Practices Study benchmarking analysis includes in-depth discussion on four key challenges facing the insurance brokerage industry:
- Growth:The average Best Practices firm grew organically by 6.9% in 2015, down from the recent high of 9.0% in 2012. While growth has slowed, the Best Practices agencies have found that specialization can enhance growth and create new revenue streams.
- Consolidation:The consolidation pace has steadily increased since 2009, which M&A activity temporarily cooled due to the Great Recession. According to SNL Financial, 469 transactions were announced in 2015. The Best Practices agencies have been active in the acquisition market enhancing their footprint and increasing their agencies’ value.
- The workforce is aging:The average age of the employees at most agencies has significantly increased. Savvy firms are placing an emphasis on early succession planning for all key leadership positions. Best Practices agency recognize that their future independence hinges on creating an environment that attracts and retains talented employees to successfully perpetuate their business.
- Technology:New technologies may disrupt the traditional broker model. According to CB Insights, a firm that tracks technology investments in the insurance industry (which they call “Insurtech”), there were 82 investments in insurance startups during the first half of 2016 totaling more than $1 billion. These startups are permeating every segment of the insurance industry. Best Practices agencies are ensuring that they are well informed on new technologies and products and continue to provide their clients with the expert advice and stellar service that consumers expect.
“The 2016 results indicate that Best Practices agencies continue to show that over the past 23 years that the study has tracked these benchmarks, agencies continue to adapt and lead the way to a brighter future, regardless of the challenges they face,” says Robert Rusbuldt, Big “I” president & CEO. “The independent insurance agency system remains stable and strong, despite various challenges.”
Every three years, the Big “I” collaborates with Reagan Consulting to select “Best Practices” firms throughout the nation for outstanding management and financial achievement in six revenue categories (less than $1,250,000; $1,250,000 to $2,500,000; $2,500,000 to $5,000,000; $5,000,000 to $10,000,000; $10,000,000 to $25,000,000; and more than $25,000,000). Agencies are nominated by either a Big “I”-affiliated state association or an insurance company and qualified based on operational excellence. Financial and benchmarking information for the participating agencies are also reviewed and updated for the following two years.
This is the 24th edition of the annual benchmarking analysis and the first year of the current three-year study cycle.
The Best Practices Study was initiated by the Big “I” in 1993 as the foundation for efforts to improve agency performance and create higher valued agencies. The survey and study of leading independent insurance agencies documents the business practices of these “best” agencies and urges others to adopt similar practices.
Eighteen insurance companies and three industry vendors provide financial support for the research and development of the Best Practices study: Agency Business Solutions/Amerisure Insurance, Applied Systems, Beyond Insurance, Central Insurance Cos., Chubb, CNA, EMC Insurance Companies, Encompass Insurance, Erie Insurance, The Hartford, The Hanover Insurance Group, Imperial PFS, InsurBanc, Kemper, Liberty Mutual Agency Corporation, The Main Street America Group, MetLife Auto and Home, Nationwide, Travelers, Vertafore and Westfield Insurance.
Reagan Consultingis a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s services for publicly owned and privately held independent insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Organic Growth & Profitability benchmark survey.
The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), founded in 1896,is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of approximately a quarter of a million agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—as well as employee benefit plans and retirement products. For more information visit www.independentagent.com.