If you go to any insurance convention these days, you're almost sure to hear agents, companies or both calling for greater use of the Internet for processing business. Judging from the results of the 2005 American Agent & Broker Readership Survey, those calls are leading to action. While the percentage of respondents using the Internet to transact business with their insurers was unchanged at 89%, the percentage using the Net to submit small-business applications rose to 85% from 73% last year, while the percentage submitting other commercial-lines business electronically rose 10 points, to 46%. Other survey results indicate agents and brokers are getting more interested in having their own Web sites too.

Forms for the 2005 survey were sent to 750 randomly selected readers; 384 returned the forms, a 51.2% response rate. Most of the readers (43%) are located in areas they describe as “urban/suburban,” while 22% characterize them as “suburban” and 20% as “suburban/rural.” Eight percent said their territories were “rural,” and 7% called them “urban.”

Technology

Readers' growing interest in Internet technology was reflected in more than just the question about business submissions. In this year's survey, the percentage of respondents who have a Web site rose 2 points to 58%. More significantly, the percentage of respondents who don't have a Web site now but plan to get one in the year ahead rose 10 points, to 43%.

The interest in application service providers, which hit the market nearly a decade ago, appears to have peaked. Today most agency-management system vendors give agents the option of having their programs and data hosted by an off-site ASP. In this year's survey, 24% of the respondents said they've chosen that option. The figure was unchanged from our last two surveys.

This year, we asked readers for the first time if they have document imaging/management systems, another relatively new technology for most agents and brokers. Forty-two percent of the respondents said they have such systems.

Production

The survey results appear to confirm that the hard market is indeed over. The percentage of respondents who reported their volume increased last year was down 4 points, to 79%, from the 2004 survey. Furthermore, the percentage of respondents with more than $20 million in volume was unchanged at 18%, after increasing 7 points in last year's survey.

The shift toward commercial-lines business that we've seen during the recent hard market continued, however. In this year's survey, a majority of the respondents, 52%, for the first time indicated such business makes up 50% or more of their premium volume. Reflecting the growth in commercial-lines premiums during the hard market, that figure was up from 49% in the 2004 survey, 46% in 2003 and 39% in 2002. Now that commercial-lines premiums are beginning to fall for some products, it will be interesting to see what happens to that figure in next year's survey.

Contingent commissions have been in the news a lot lately–so much in fact that even many people in the insurance business must think all agents and brokers get them. That's never been the case, however. In this year's survey, 69% of the respondents said they qualified for a contingency bonus last year. That was unchanged from the 2004 survey and up 3 points from 2003.

Staffing

With volume showing little change last year, it was not surprising that staff size didn't either. As in last year's survey, 30% of the respondents work in agencies with 15 or more employees. In contrast, the figure was 20% in the 2003 survey and 13% in 2002. Twenty-six percent of the respondents work in shops with four or fewer employees. That was down a point from last year and 10 points from the 2003 survey. The median average staff size was seven, with three of those employees active in sales. Both figures are unchanged from last year.

Markets

In this year's survey, 38% of the respondents represent 10 or more insurers. That was up 2 points from last year and up 9 points from the 2003 survey. Meanwhile the percentage representing five or fewer carriers dropped 3 points to 33%. The percentage of respondents who access additional markets through MGAs, surplus-lines brokers or program administrators was unchanged at 85%.

Miscellaneous

Insurers have been getting more selective in granting claim draft authority. In this year's survey, 46% of the respondents said they have such authority. That figure has fallen steadily since 2000, when it was 63%. Last year, it was 52%. Forty-two percent of the respondents, down 3 points from last year, work in agencies with one or more full-time life or health producers. Twenty percent of the respondents said their agencies were member of clusters or networks, compared with 22% in last year's survey and 17% in the 2003 survey. Four percent of the respondents said they work in bank-owned agencies or sell insurance for banks under the terms of a joint venture. That was down from 8% last year and 6% in 2003.

As always, we thank the readers who were willing to share their information with us. We hope this presentation of it provides a useful snapshot of the American Agency System as it exists in 2005.

Special Reports /

What's Going On: AA&B survey finds agents getting more out of the Net

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