Independent Agents Are Hiring Despite Recession

NU Online News Service, Oct. 1, 3:13 p.m. EDT

Despite the current soft market and economic challenges, the best-run larger insurance agencies are hiring new personnel and increasing their staff size, a trade group report said.

The Independent Insurance Agents & Brokers of America released its "2009 Best Practices Study" late yesterday saying that at larger agencies with revenue of over $5 million, the number of employees increased by four people. For agencies with revenue under $5 million, the total number of employees remained steady, the report said.

"This year's study indicates that the Best Practices Agencies, overall, continue to perform well despite facing some challenges in soft market conditions," Madelyn Flannagan, IIABA's vice president of agent development, education and research, said in a statement.

"As expected, overall organic growth was down significantly again this year, but was buoyed by positive growth in both personal [property and casualty] and Group [Life and Health]. This trend continues from 2007 when we began to study the current group of Best Practices Agencies," she added.

In an interview, Ms. Flannagan said that while the number of people may have increased or held steady from last year's survey, the work loads have increased tremendously. Producers are working harder to keep accounts by doing more research and becoming creative in finding risk management solutions for their clients.

Competition among agencies has also increased as the pool of commercial clients in some places has shrunk because they have gone out of business in the face of the economic crisis, she noted.

"They are doing more in these troubled times," said Ms. Flannagan.

The study, conducted by Atlanta-based agency consulting firm Reagan Consulting in cooperation with the IIABA, originated in 1993. It is a three-year analysis of agencies deemed qualified to be designated as Best Practices Agencies.

A total of 195 agencies participate and must complete a detailed survey each year. This is the last year for the current group and a new three-year study will begin next year.

The analysis also calculates returns to shareholders. A score of 20 translates into a shareholder return of 15-16 percent, the expected rate of return for a well-run agency.

The score has fallen significantly from 2007. Agencies with less than $5 million in revenue saw their score drop from 25.6 to 14.4. For agencies with revenue of more than $5 million, the score dropped from 24.2 to 13.4.

Ms. Flannagan said that while a drop in the score was expected because of the economic turmoil, the degree of fall-off was surprising. However, it does indicate that well-run agencies are continuing to be profitable despite the economic fall-out, she said.

She also noted that despite the economic fall-out, no Best Practices agency has gone out of business, but about 12 are no longer around because they were either acquired or merged with others.

"It's a very positive study to see that well-run agencies are maintaining their status," said Ms. Flannagan.

The purpose of the study, Ms. Flannagan emphasized, is to give independent agents a benchmark to strive for in improving themselves.

IIABA, she said, supplies resources on its Web page for agents to use both to make comparisons and find tools to make their agencies better. Ms. Flanagan also suggested agents contact their carrier partners who can help an agency become more efficient.

The study and listing of the 2009 Best Practice Agencies can be accessed at www.independentagent.com and www.reaganconsulting.com or directly at bp.reaganconsulting.com.