UNLESS you happen to be writing a lot of wind coverage in coastal areas, the hard market is little more than a memory. Increasingly, business is becoming more competitive, and this was reflected in the results of our 2006 American Agent & Broker Readership Survey. One of the more notable findings in this year's survey was a 10-point drop in the percentage of respondents who indicated their premium volume increased in the previous year. Other results indicated that agencies are trimming their staffs and making more use of automation in an effort to preserve the bottom line.
Forms for the 2006 survey were sent to 750 randomly selected readers; 342 returned the forms, a 46% response rate. Most of the readers (45%) are in areas they describe as "urban/suburban," while 23% characterize them as "suburban/rural" and 12% as "rural." Ten percent of the respondents called their territories simply "suburban," and another 10% labeled them as "urban."
Production
Last year, rates continued to soften for many insurance products, a fact strongly reflected in this year's survey results. The percentage of respondents who reported that their volume increased in the prior year was 69%, down a full 10 points from last year's figures and off 14 points from our 2004 survey. Also, while the percentage of respondents with premium volume greater than $20 million rose 3 points in this year's survey, to 21%, it was offset by a 3-point decline, to 11%, of those with volume of $10 million to $20 million.
The shift toward commercial-lines business that we've seen over the past two years continued. In this year's survey, 57% of the respondents report that they get the majority of their business from commercial lines, up 5 points from last year and 7 points from the year before.
Of course, property-casualty insurance is not the only product agents and brokers sell, as reflected by the fact that 41% of the respondents to this year's survey have one or more full-time life or health insurance producers. In all, 71% of the respondents said they sold life insurance, down 2 points from last year. Of those respondents, 43% said their volume increased last year while 40% said it stayed the same. This year, we asked readers for the first time if they sold group health or employee benefits products. About half of the respondents reported that they did.
Technology
In regard to technology, agents continue to show a growing interest in "going paperless." In this year's survey, 56% of the respondents indicated they have document management systems, which was up from 42% in 2005.
Agents also seem to be making more use of the Internet to transact business with carriers. In this year's survey, 92% of the respondents reported doing so, up from 89% in 2005. In this year's survey, 87% of the respondents said they had submitted personal-lines business via a company's Web site, while 80% used such facilities to submit small-business insurance apps and 46% used them for other commercial-lines products. The figures were little changed from last year.
Increasingly, insurers are allowing agents to conduct "real time" transactions–checking claim and billing status, rating coverage, etc.–with them via such services as the IVANS Transformation Station or AMS's TransactNOW. This year, we asked readers for the first time if they conduct such real-time transactions with their insurers, and a majority of the survey respondents, 54%, reported that they do.
In this year's survey, 59% of the respondents said their agencies have a Web site, up 2 points from last year. The great majority of respondents continue to use them primarily as "online brochures" for their agencies. Fewer than 20% of the respondents with Web sites permit clients to use them for such purposes as obtaining quotes, issuing certificates of insurance or requesting coverage changes.
Staffing
Now that insurance rates have been softening for at least two years, there are signs that agents are tightening their belts to keep margins in line. For both our 2004 and 2005 surveys, about 30% of the respondents reported that they worked in agencies with 15 or more employees. That figure dropped in this year's survey, to 27%.
In last year's survey the mean average of employees in respondents' agencies was 20, while the median was seven. Both those figures were down by one in this year's survey. (The mean average is the total number of employees divided by the total number of respondents, while the median represents the staff size of the agency that would be exactly in the middle of the range, if you lined up all the respondents according to the size of their workforces.)
Markets
In this year's survey, 37% of the respondents said they represent 10 or more carriers, while 32% contract with six to nine insurers and 27% with two to five. All of the figures are little changed from last year. A majority of respondents, 84%, turn to MGAs, program administrators and surplus-lines brokers to supplement the products available from their carriers. About 10% of the respondents function as MGAs or program administrators themselves for at least one product line.
As always, we thank the readers who were willing to share their information with us. We hope this presentation provides a useful shapshot of the American Agency System as it exists in 2006.
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