A new study sheds light on the often overlooked role that independent insurance agencies have in our state’s economy
The insurance landscape in Massachusetts has radically changed over the last five years since managed competition for auto insurance was introduced. In response, the Massachusetts Association of Insurance Agents (MAIA) has published a study they commissioned earlier this year, that reminds agents, carriers, and consumers alike of the important role that independent agents continue to play in this marketplace.
The MAIA commissioned Towers Watson, a well-know insurance consulting firm, to survey the current system in order to find out how these local, independent, and more often than not, family-owned insurance agencies affect the Massachusetts economy. The study surveyed 15 percent of the MAIA’s current membership, equaling approximately 212 independent agencies. In selecting the group, all geographic areas of the Commonwealth were represented and agencies of varies sizes and scope were included. The results were then extrapolated in order to achieve the most accurate account of the independent insurance agency system’s contribution to the Massachusetts economy.
“MAIA is extremely proud of the role its member agencies play in both the economy and the insurance marketplace of the state.” says Francis A. Mancini, Esq., MAIA’s President & CEO. “The most recent death knell for independent agencies came with the introduction of auto insurance competitive rating. But after five years and the arrival of GEICO, Progressive and Allstate, with their websites, 800 numbers and few jobs, independent insurance agencies remain the market leader in the state in all lines of insurance. Independent insurance agencies are “survivors” in an economy and marketplace that acknowledges and appreciates those who are a vital part of the communities where they operate. Massachusetts independent insurance agents have proven that expert knowledge, superior products and personal service will always make a market leader.”
The independent insurance agency system in Massachusetts – A billion dollar industry
Based on the results of the study, Towers Watson determined that independent agents here contribute over $1.077 billion to the local economy. It’s important to note, however, that this number does not include approximately 200 property/casualty agencies that are not members of their association. As such, Towers Watson estimates that in combining these other agencies’ financial contribution with the MAIA member’s amount, the financial contribution of independent insurance agents in Massachusetts would be approximately $1.123 billion.
The following is a break-down of agents’ dollar impact.
|Category||Dollar Impact of MAIA Members|
The importance of promoting the independent insurance agency system in Massachusetts
If anything, this study demonstrates that while independent agents have an important financial impact upon the Commonwealth’s economy, even more apparent is the immeasurable impact agencies have upon the local communities in which they operate. While the financial contributions local insurance agencies make are important, even more so is the contribution these small businesses make as part of the economic and social fabric of the cities and towns in which they operate. As the study reveals, the overwhelming majority of agencies still remain family-owned companies with less than ten employees. In turn, they employ people who work in Massachusetts rather than in a phone bank in Iowa or South Dakota. Their employees buy houses, pay taxes, buy cars, and educate their children, in essence reinvest their earnings in the Massachusetts economy. These agencies know their customers, neighbors and patronize the shops and services in their neighborhoods.
Similar to the farm-to-table movement promoting local farms, our industry too, should be promoting the benefits of local insurance distribution systems, one that not only provides high-quality service and benefits to their local customers but also supports, contributes and participates in the local economies where they live and work.
Some highlights from the study which further drive home this point:
- Thirteen percent of all independent insurance agencies in Massachusetts are over 100 years old;
- Thirty-four percent of the agencies are 51-100 years old and eight percent are between 41-50 years old;
- Massachusetts agents lead the nation in market share versus other independent agency systems in the nation; Unlike the rest of the country where independent agencies write on-average 35 percent of personal lines and 80 percent of commercial lines, Massachusetts independent agents write 79 percent of all personal lines in the Commonwealth and 84 percent of commercial lines;
- In 2011, independent agencies contributed over $9.6 million to charities, an average of over $6,900 per agency;
- The average charitable contribution by MAIA’s 184 largest agencies (more than 10 employees) was almost $17,000;
- MAIA member agencies employ some 10,951 employees, with the average agency employing 7.8 employees;
- 87 percent of independent agencies here consist of ten or fewer employers;
- Agencies contributed $747 million in payroll to the state’s economy in 2011;
- Agents and their agencies spent over $100 million in the same year for employee benefits;
- The agency system contributed over $76 million in state and local taxes;
- In addition, agencies also spend a significant amount in rent, office furnishings, supplies, equipment, legal and accounting services each year while operating their businesses in the Commonwealth.
Simply put, measuring the financial impact of MAIA’s property/casualty member agencies does not nearly approximate the importance of the role that independent insurance agencies play as the backbone of many towns and cities within the state. As such, for the system to survive we must also do our part to educate everyone that it does matter from who you buy insurance, and that by choosing to buy insurance through independent agents, one is choosing to support your community and the local, family-owned businesses who are an integral part of it.