In today's challenging marketplace, it is easy to blame all the problems of insurance intermediaries on the soft cycle or the underlying economic uncertainty, from unemployment to the mortgage crisis. But I have been in the business long enough to know that something more is afoot here than simple economic fallout.

If you go back 20 years and think about all the household names that are no longer with us–Dinner Levison, Fred S. James, Alexander & Alexander, Johnson & Higgins, just to name a few – you see clearly that there is nothing new about mergers and acquisitions. But unlike the past, the mergers and acquisitions of the current marketplace are dramatically recasting the business landscape.
MarshBerry, one of the most insightful market prognosticators out there, has projected that by 2015, the number of small agencies – those with less than $500,000 in commission revenue – will drop to 3,500, at least 15,000 fewer than in 2005. The number of firms in the $2.5 million to $5 million revenue range will stay about the same, but there will be an explosion in the firms earning more than $5 million, $10 million and even $100 million or more in revenue annually.

Given those trend lines, what's a small or midsized insurance agency or brokerage to do? First, decide whether it makes sense to remain in the business at all. If your answer is yes, then get busy coming up with a sound and solid business plan to make that happen.
Such a plan does not mean answering the increased competition with protectionism. Hunkering down behind artificial barriers no longer works in either a market or a business sense. In an era of increased competition, successful businesses will find a way to offer higher levels of service to their customers and seamlessly meet their needs in an increasingly global marketplace. When a customer can just as easily start doing business in another country as in another state, insurance agents and brokers need to be ready to follow their clients across state and national borders without losing efficiency or service standards. And to do that, they need to not only adopt new technologies and business processes that make them more efficient, they need a more efficient regulatory system. Our industry has been guilty of talking big when it comes to regulatory reform and modernization, but not following that talk with action, especially if it starts to bite a little. You've heard it, I'm sure. Free and open markets are just great as long as they work to my advantage, but don't do anything that might give my competitor a leg up.
If you think your competitors have an advantage over you because they offer some services that you don't, then find another, better way to distinguish yourself instead of trying to stifle competitive ingenuity. If you are honestly afraid that your competitor will gain an advantage over you if placing business becomes simpler or if the industry adopts more efficient business practices, you might want to rethink the answer to that first question: Does it make sense to stay in the business at all?
Chances are, if industry modernization makes you really nervous, you already may be too far behind the times to catch up. Protectionism in the form of resisting change is not an answer for the future, and it does not give you a better chance of survival in an era of market consolidation.
It may sound harsh, but if you can't get on board, get out of the way. Because one way or the other, voluntarily or involuntarily, I'm betting you won't be around much longer.