Future One, a partnership between the Big "I" and leading independent agency firms, has released key findings from the recently completed Agency Universe Study, which has been hailed as the most comprehensive look at the independent agency system.
“The 2022 Agency Universe Study shows the resiliency of the independent agency system as it continues to grow and adapt through the challenges of the last couple of years," says Bob Rusbuldt, Big “I" president & CEO. “It is amazing that during the pandemic the independent agency system added nearly 4,000 new agencies. The study also offers insights on how agencies can better prepare themselves for the future. Staffing and marketing are issues for agencies, and the Big 'I' continues its support of independent agencies through resources, programs and guidance to face these challenges head-on."
The study examines numerous statistics about independent agencies in the United States, including their numbers, revenue base and sources, number of employees, ownership, business mix, product diversification, technology used, non-insurance income sources, and marketing methods.
“As the independent agency channel recovers from the coronavirus pandemic and weathers economic uncertainties, technology adoption continues to prove itself critical to continued success," says Chris Boggs, Big “I" vice president of agent development, education and research. “Agencies are demonstrating flexibility and progress in digitalization as the insurance industry works together to incorporate tech solutions that support agents' roles as trusted advisors."
Key findings from the 2022 Agency Universe Study include:
1) The number of independent agencies has increased. In 2022, the estimated total number of independent property-casualty agents and brokers in the U.S. stands at 40,000, an increase from 36,000 in 2020. While mergers & acquisitions activity continues to impact the agency channel, the increase in the number of agencies is driven by small agencies, as agents continue to establish their own agencies or move from the captive to independent space.
2) Business conditions continue to be generally favorable. The majority of agencies—62%—report increases in total revenue between 2020 and 2021, but this proportion is lower than the 70% in 2020. Twenty-five percent report a decline in revenue, with an average decrease of 22%. In particular, fewer agencies report personal lines revenue increases in 2022, 60% compared to 67% in 2020. More than 1 in 5 say the pandemic has impacted their operations and revenue.
3) Technology has become a crucial part of operations and customer service. Nearly half (47%) say they have offered more digital solutions to clients due to the pandemic. Usage of mobile apps from carriers has increased to 40%, up from 32% in 2020, and apps for clients has increased to 20%, up from 10%. Most agencies would be comfortable allowing clients to self-serve for policy documents and identification cards, at 77%, while 2 in 3 are open to self-service for billing inquiries and claims filings. Nearly half are planning to offer online purchase and quoting to customers in the next two years.
Challenges with technology continue, with 41% of agencies citing dealing with multiple carrier interfaces as a challenge. While only 7% currently use a commercial lines rater, 23% are planning to do so. One-third see the need for more carrier application programming interface (API) integration with agency management systems (AMS). And 51% are looking for more operating efficiencies to help service customers.
4) Principal aging remains stable. The average age of agency principals is 54 years old, with 17% age 66 or older. More than 8 in 10 agencies have a perpetuation plan, on par with 2020, but it often centers around children and family. Similar to 2020, 4 in 10 agencies anticipate some ownership change in the next five years.
5) Finding qualified staff and marketing continue to be key agency challenges. Forty-one percent find it challenging to find and screen job candidates with strong potential, the No. 1 challenge of 2022, which gained slightly from 39% in 2020. The second most challenging issue is having a significant marketing or advertising budget at 36%, up from 30% in 2020. Other key concerns include obtaining enough leads (35%); growing commercial (35%) and personal lines (32%); making the personnel, tech and other expenditures necessary to grow significantly (33%); investing in a strong online presence (32%); and remaining competitive with InsurTech direct carriers (31%).
6) Emerging purchase channels' impact on personal lines remains a concern. Agencies continue to express concern about emerging purchase channels' impact on their business, with 35% of agencies believing personal lines direct purchase through the insurance company will significantly impact their agency over the next two years, the same percentage as in 2020. Thirty-three percent of agencies are also concerned about direct purchase through non-insurance websites, and 32% are concerned about direct purchase through car manufacturers. One in 4 express similar concerns about small commercial direct purchase or purchase through emerging online providers.
7) Inclusion gains some ground. In 2022, 47% of agency principals are women, a gain from 42% in 2020, and 83% are white, compared to 88% in 2020. Medium-sized and larger agencies are especially likely to have male principals or senior managers. One in 4 agencies have added staff this year, and 19% are leveraging independent contractors, primarily producers.
The 2022 Agency Universe Study was first conducted in 1983. Since 2002, the study has been completed biennially. Since 2004, the Agency Universe Study has relied on internet data collection. In total, 1,452 respondents were included in the 2022 study, conducted by Zeldis Research in cooperation with Future One.
To order a copy of the 2022 Agency Universe Study Management Summary, which provides an overview of the highlights from the complete study, visit the Big “I" Agency Universe Study webpage.