LAS VEGAS, Sept. 24 - A panel of leading experts in insurance industry trends today told independent agents and brokers that they need to exercise caution in selecting insurers during the hard market, expand their agency technology capabilities, and make smart agency management decisions in order to conquer the competition.
The roundtable discussion during the closing general session of the Independent Insurance Agents & Brokers of America’s (IIABA) Convention & InfoXchange in Las Vegas focused on the industry’s economic and technology trends as well as the impact of mergers and acquisitions. The panel included Bob Hartwig III, chief economist at the Insurance Information Institute; Sharon Cunningham, president of BMG Consulting; and John Kellington, executive vice president and chief technology officer at Ohio Casualty Group. Peter van Aartrijk, managing director of the van Aartrijk Group, an insurance communications and branding firm, moderated the session.
Hartwig reported on the economic state of the property & casualty industry. “This is an industry that is in the midst of a recovery; a very powerful recovery, but a recovery that is incomplete,” Hartwig said. “The hard market is expected to continue into next year. So that means that more than ever before, the onus is going to be on you to place business with a quality insurer ... Recovery is underway and it is going to continue, but a cautious recovery.”
Consequently, Hartwig stressed that agents and brokers need to be particularly cautious in their assessment of companies.
“I don’t mean to create any mass hysteria or panic, but I think you as agents and brokers have a greater responsibility today than you did three or four or five years ago to keep your ears to the tracks, and that means more than just paying attention to what A.M. Best ratings are,” Hartwig said. “It is looking at what these companies are actually doing: What prices are they writing their business at? How fast are they growing their business? What areas are they getting into? ... It’s not just ratings; it’s more than that. It’s your responsibility to your clients and your customers to keep on top of that, because they are going to have these questions.”
Having a large number of insurers out there is healthy for the industry, Hartwig explained, but there is the downside that “there are a fair number that somehow get on the wrong side of their own finances and wind up going bankrupt.” He said the percentage of property & casualty insurers declaring bankruptcy rose last year, a trend likely to continue, and independent agents need to exercise caution. “If pricing seems like it is absolutely too good to be true, it may well be.”
Cunningham noted that banks are leading the industry as it pertains to acquisitions and mergers, but everyone is a potential buyer in the current market, she said.
“Whether it’s a tiny agency in a small town or the largest international broker out there, everybody wants to buy,” said Cunningham. “Some people believe that it is a hard market and values aren’t going to be any higher than they are today. There are perpetuation plans, but they are not workable and they can’t be carried out.
“So what does this mean for you as independent agents? Well, it means that you are going to have bigger competitors who have capital, direct access to any market they want, and they may pay better benefits or compensation or provide better training. So your best defense is to act now and make your agency as strong as you possibly can. Take some of those excess profits you have today because of the hard market and put it back into your business.”
Cunningham later suggested that one way for agency principals to invest in their businesses is to go out and hire some younger salespeople. “I see far too many agencies that have all their people in their 40s, 50s, and 60s and they are not bringing young blood into the industry,” she said. “You may have to go outside the industry (to find them), but you desperately need to bring young salespeople into your agencies.”
Kellington expressed optimism that carriers, agencies, and agency management system vendors are working together to make technology more efficient in the industry.
“We are now able to produce the notion of single-entry, multiple-company interface: SEMCI,” said Kellington. “It sounds like it should have happened a long time ago, but it is more difficult than people think, having one computer talk to another computer. (SEMCI) is happening. It is coming together and being put into place. We at Ohio Casualty think it is very, very powerful and really want to pursue that.”
Kellington urged agents and brokers to not fear change, but rather embrace it in order to establish more effective workflows and enable the entire industry to reach a higher standard of technology. “If a carrier is actively trying to use SEMCI transactions, one—do it; and two—support the carrier and help them,” Kellington said. “We do believe this is working for everybody.”
Hartwig concluded the panel discussion by telling agents and brokers that knowledge is their primary source of power. “The one common thread you can find in every one of you is the desire and thirst to learn a whole lot about credit scoring, what kind of insurers you should be doing business with, and what is going on in the marketplace. That’s the knowledge that makes you a superior agent.”
The Convention & InfoXchange is IIABA’s showcase meeting taking place in Las Vegas from Sept. 21-24. The event features a compelling company CEO roundtable; several prominent guest speakers and panelists; a variety of innovative continuing-education (CE) classes and other cutting-edge workshops; the largest exhibit hall in the insurance industry; numerous networking opportunities; and many other exciting events.
Founded in 1896, IIABA is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of more than 300,000 agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life and health—as well as employee benefit plans and retirement products. Web address: www.independentagent.com.