Massachusetts Agents Have Over $1B Financial Impact on State

Eight years after the introduction of managed competition for private passenger auto insurance and the influx of direct writers and direct response companies into Massachusetts, a new study commissioned by the Massachusetts Association of Insurance Agents (MAIA) says independent agencies continue to have a significant impact on the state’s economy and continue to control both the personal and commercial lines markets by wide margins.

Earlier this year, MAIA commissioned a study to measure the impact of independent agencies on the economy of Massachusetts. The study, conducted by professional services organization Towers Watson, revealed that the 1,300 member agencies of MAIA play a significant role in Massachusetts as employers, taxpayers, consumer spenders and charitable contributors. MAIA said its member agencies represent 84 percent of the total number of property/casualty agencies in the state.

Towers Watson surveyed 15.5 percent of MAIA’s membership. The agencies surveyed represented all areas of the state, were of various sizes based on employees and premium volume, and wrote different mixes of personal and commercial lines business. Towers Watson then extrapolated the survey results for all MAIA member agencies to reach the conclusion included in the study. All study results are for the year 2014.

The study found the financial contribution of MAIA’s P/C member agencies in Massachusetts during 2014 was $1,043,247,000.

The $1,043,247,000 figure relates only to the financial contribution of MAIA’s member agencies, the study said, adding that there are some 250 P/C agencies in Massachusetts that are not members of MAIA. Based on the locations of these agencies, Towers Watson estimates that these non-member agencies produce an additional financial contribution in Massachusetts of at least $53.3 million. Combining this amount with the MAIA members estimates leads to a total contribution of $1,097,547,000.

MAIA said the total number of full time equivalent employees of MAIA member agencies is 9,809. The average independent agency employs 7.8 employees, with 86 percent of the agencies having 10 or fewer employees. Thus, independent agencies can be characterized as the traditional “small business,” MAIA said.

According to the study, MAIA member agencies provided the state’s economy with a payroll of more than $737 million and expended over $96 million for employee benefits, including health insurance, pension and profit sharing, and training costs in 2014. In addition to more than $800 million in wages and benefits paid to their almost 10,000 employees, MAIA members contributed over $73 million in state and local taxes during 2014.

The study also said 71 percent of MAIA members rented, rather than owned, property for at least one agency location. During 2014, these agencies paid rent totaling in excess of $43 million, providing additional income to local communities.

Massachusetts independent agencies are also significant spenders for technology, office furnishings, supplies, equipment, advertising, legal and accounting services, repairs/maintenance/security, and remodeling and construction. In 2014, more than $84 million was spent by MAIA members in these areas.

MAIA also added that, traditionally, independent agencies have been very involved in their communities, volunteering their time, talent and dollars to numerous charitable, religious, civic and cultural activities. In 2014, MAIA members contributed over $8.4 million to charities, an average of over $6,700 per agency.

The study found that the majority of agencies are well-established businesses. Thirteen percent of the MAIA agencies are over 100 years old. Sixteen percent are between 76 – 100 years old and 24 percent are between 51-75 years old.

In addition to their economic impact, independent agencies also write and service the great majority of personal and commercial lines insurance written in the state. The Independent Insurance Agents and Brokers of America’s (IIABA) most recent P/C insurance market study from 2013 shows that Massachusetts independent agencies write 74 percent of the personal lines (first in the nation) and 83 percent of the commercial lines (fifth in the nation) in the state.

MAIA said these percentages reveal that Massachusetts independent agencies lead the nation in market share when compared with independent agencies in other states. Nationally, independent agencies write an average of 35 percent of the personal lines, and 80 percent of the commercial lines.

“The financial contribution of independent insurance agencies to the Massachusetts economy continues to be impressive evidence that the predictions of the demise of independent agents in the wake of the introduction of auto insurance competitive rating in Massachusetts were unfounded,” MAIA President and CEO Francis A. Mancini said.