NU Online News Service

The independent agency system is showing signs of continuedstabilization in numbers and increased diversification inownership, a study from the Independent Insurance Agents &Brokers of America (IIABA) found.

The bi-annual 2010 Agency Universe Study, a collaborationbetween IIABA and Future One, a coalition of insurance companypartners, was released yesterday and indicated that the number ofindependent agencies remains stable at approximately 37,500 after a steadydecade-long decline that ended in 2006.

When the decline began in 1996, there were 44,000 agencies, thestudy said.

"The 2010 Agency Universe Study reflected the combined effect ofthe recession which began just as the 2008 study was underway, aprolonged soft insurance market and declining revenues," saidRobert Rusbuldt, IIABA president and chief executive officer, in astatement. "Despite all of these challenges, many new agencies areforming, typically with a more diverse and younger leadership,demonstrating the strength of the independent agency system and thepotential for growth."

Madelyn Flannagan, IIABA vice president of agent development,education and research, said, "As the [IIABA] continues to increaseits diversity efforts, the 2010 Agency Universe Study found someprogress with an increase in the number of new small and mediumsmall agencies with minority principals.

"In addition to the increasing ethnic diversity of agencyownership, albeit from a very low base, these agencies are alsosolidifying the position of women as principals in over a third ofagencies. Most strikingly, the proportion of independent agencieswith African-American principals grew from 1 percent in 2008 tojust over 4 percent in 2010."

Among other findings the IIABA shared:

o Of the 37,500 agencies that exist today, 11 percent, or around4,000, were founded between 2008-2010. That figure is equal to thenumber of agencies lost through mergers and acquisition.

o Since 2005, 50 percent of new agencies were located in theSouth; 24 percent were founded in the South Atlantic states--whichincludes Florida--and 19 percent in the West South Central portionof the country that includes Louisiana and Texas. By contrast, only8 percent of new agencies were located in the Northeast, comparedto 18 percent of older independent agencies. IIABA said the resultmay reflect the flexibility of the agency system that allows it toserve markets that captive agency companies have abandoned.

o The combination of the soft market and Great Recession of 2008caused a decrease in revenue overall for independent agencies,particularly in commercial lines, hurting larger agencies the mostthat are more dependent on commercial lines business. However, 55percent of small agencies saw increases in revenue from 2008 to2009, while 25 percent suffered decreases in revenue.

o The cost of technology is a less important issue than in thepast. Marketing the agency effectively over the Internet, securityand ease of use of new real-time functionality have become the topthree technology issues for owners. Carrier websites have alsogained ground as the preferred method for agencies and companies todo business.

This report is the 10^th in a series of studies onindependent agencies that dates back to 1983.

Approximately 2,100 agencies were included in the study, whichwas conducted over the Internet.

Copies of the study can be ordered by visiting the IIABA'swebsite or going directlyto the ordering website. The 23 page book is available as ane-book for $99.95