Independent Agents Grew Market Share by $12 Billion in 2004

In 2004, the property-casualty market grew to $457.68 billion in direct written premium, with the overall market increasing by $20.69 billion. During this time, the independent agency system amassed a nearly $12 billion increase in production, accounting for almost 60 percent of the national increase, according to the Independent Insurance Agents & Brokers of America’s (IIABA) 2004 market share study.

“The results of this report clearly show that the independent agency system is flourishing,” says IIABA CEO Robert A. Rusbuldt. The results of the 2004 market share study reinforces the consumer and business acceptance of the independent agency and broker distribution model, and emphasizes the very real opportunities for growth that are present for independent agencies and brokers, IIABA stated.

The 2004 market share study marks the 10th year that the IIABA has contracted with A.M. Best Company to supply it with year-end industry market share and company expense data. IIABA analyzes this data annually to assess the state of the independent agency system.

“Independent agents and brokers continue to build on their market share, and if they keep working towards adopting new, efficient technology, strong marketing and branding strategies, and use their commitment and knowledge of their communities to their advantage, they will continue to build upon their present success. Independent agents and brokers have proven time and time again that they are innovative, resilient, and diligent in serving their customers and growing their businesses,” Rusbuldt said.

Following recent trends, research revealed that there are efficient companies using each type of distribution system. The IIABA study contends that efficient independent agency writers are able to deliver insurance just as cost effectively as the captive agent writers and many of the direct companies, and in some cases, even more so.

Personal lines
Independent agents and brokers and their carriers were again able to increase their personal lines market share slightly in 2004, according the the market share report. However, they continue to control only slightly more than one-third of the market.

“The direct companies will remain aggressive competitors for both the captive agent writers and the independent agency companies, but independent agencies should experience their best opportunity in decades to continue to gain a larger market share,” according to the report.

“Independent agencies have the advantage of their community connections to counter this competition, especially if they focus on personal lines as a separate profit center, and not merely as an accommodation,” said Madelyn Flannagan, IIABA vice president of education and research. “Growth can be achieved with focus, marketing strategies, improved technology, and new innovations.”

Commercial lines
The independent agency system continues to have a dominant position in commercial lines in many states and has done a good job maintaining this position for much of the past decade. The big variances among the states, however, indicate that there are many opportunities for independent agents and brokers to continue to grow their commercial lines share in wide variety of commercial markets.

Even though growth in both commercial lines and personal lines has slowed from the growth of the past three years, independent agents and brokers are reaping a significant dividend from this growth. The larger the market share they have in a particular market, the larger the dividend they accrue.

The growth in commercial and personal lines premium and market share in 2003 and 2004 resulted in $39.52 billion of new premium written by the independent agency distribution system.

All of the data in IIABA’s report comes from A.M. Best and is printed with its permission.