Agencies noted modest decline in organic growth, but steady profitability
The four key challenges facing the insurance brokerage industry this year:
According to this year’s crop of “Best Practices” agencies, the following four issues are the main challenges facing the industry this year.
Growth: The average Best Practices firm grew organically by 6.9% in 2015, down from the recent high of 9.0% in 2012. While growth has slowed, the Best Practices agencies have found that specialization can enhance growth and create new revenue streams.
Consolidation: The consolidation pace has steadily increased since 2009, which M&A activity temporarily cooled due to the Great Recession. According to SNL Financial, 469 transactions were announced in 2015. The Best Practices agencies have been active in the acquisition market enhancing their footprint and increasing their agencies’ value.
The workforce is aging: The average age of the employees at most agencies has significantly increased. Savvy firms are placing an emphasis on early succession planning for all key leadership positions. Best Practices agency recognize that their future independence hinges on creating an environment that attracts and retains talented employees to successfully perpetuate their business.
Technology: New technologies may disrupt the traditional broker model. According to CB Insights, a firm that tracks technology investments in the insurance industry (which they call “Insurtech”), there were 82 investments in insurance start-ups during the first half of 2016 totaling more than $1 billion. These start-ups are permeating every segment of the insurance industry. Best Practices agencies are ensuring that they are well-informed on new technologies and products and continue to provide their clients with the expert advice and stellar service that consumers expect.
Ten Massachusetts agencies are participated in this year’s study
- Chase & Lunt of Newburyport
- FBInsure of Taunton
- Greylock Insurance Agency of Pittsfield
- J.K. Olivieri Insurance Agency of Middleboro
- MTM Insurance Associates of North Andover
- Mid-State Insurance Agency of Worcester
- Risman Insurance Group of Medford
- Rogers & Gray Insurance Agency of South Dennis
- T. Edmund Garrity & Co. of Cambridge
- Tetrault Insurance Agency of New Bedford