Riding the Commercial Lines Price Wave

There’s no question that commercial lines premiums have accelerated growth in independent agencies during the past two years.

Insurance Journal’s Top 100 agencies in total reported generating nearly $8 billion more in commercial lines premium in 2020 over 2019. And for Insurance Journal’s Top 50 Commercial Lines Leaders, agencies and brokerages in total reported generating $1.8 billion more in commercial lines revenue in 2020 over 2019.

Buoyed by the hard market and rebounding economy, independent insurance agents and brokers grew overall by 7.1% in the second quarter, surpassing the 6.9% organic growth reported eight years ago in the second quarter of 2013, according to Reagan Consulting’s Growth & Profitability Survey (GPS).

Reagan says that commercial lines posted an organic growth rate of 9.2%, while the previous Q2 high was 8.2% in 2013. The quarter saw was the highest organic growth rate in the 13-year history of Reagan’s survey.

With an organic growth rate of 9.2%, commercial lines continued to lead growth, building on a trend from this year’s first quarter. Reagan cited significant premium price increases for several products as helping to push the growth — including a 19.7% increase in umbrella prices followed by an 18.0% increase in cyber prices. Premium hikes for commercial auto, employment practices, commercial property, and directors and offices insurance are also at 9.0% or higher.

Personal lines posted a decline in Q1 2021, but are now rallying with a Q2 2021 organic growth rate of 2.1%, the historical Q2 average, according to Reagan. Group benefits still trail behind their historical averages, but did increase from 2.1% organic growth in Q1 2021 to 3.1% in Q2 2021.

As for public brokers, for the second time in Reagan’s survey history, public brokers surpassed the performance of independent brokers and agents by 2.9 percentage points in Q2 2021, posting an organic growth rate of 10%. Additionally, public brokers usually write larger accounts, and some of the specialty coverages they sell have seen “dramatic price increases” in early 2021, the consulting firm said.

Reagan analysts said they anticipate the momentum to continue and they predict a full-year organic growth rate of 7.0% in 2021.

“The hard market in the property/casualty business and the favorable economic environment are expected to continue for the remainder of the year,” said Brian McNeely, Reagan Consulting partner. “There are still some lingering cost savings from the pandemic, but they are waning,” McNeely added. Pandemic-related cost savings — for example, reduced travel, entertainment, advertising and auto expenses –contributed to higher margins this year. But he believes these selling expenses should return soon to pre-pandemic levels.

Reagan collects survey results from about 200 mid-size and large agencies.