A new study looks at the importance of independent insurance agencies to the Commonwealth’s economy
Eight years on and neither the arrival of Managed Competition nor the influx of direct writers has diminished the influence of independent insurance agents and the impact they have on the Massachusetts economy so says a recent study commissioned by the Massachusetts Association of Insurance Agents.
The study conducted earlier this year by the global professional services organization Tower Watson, and mirroring a similar one done in 2012, aimed to quantify in actual dollars the impact that independent insurance agencies and their businesses have on the Commonwealth’s economy. To do so, it surveyed approximately 15.5% of the MAIA’s total current membership of 1300 member agencies. To provide as fair a survey as possible, member agencies were chosen from around the Commonwealth and representing a variety of premium volume and mixes between personal and commercial lines businesses.
The findings confirm what many in this industry already know: Independent insurance agents are a vital part of the economy in the Commonwealth with a billion dollar impact on the economy in Massachusetts.
“The financial contribution of independent insurance agencies to the Massachusetts economy continues to be impressive evidence that the predictions of the demise of independent agents in the wake of the introduction of auto insurance competitive rating in Massachusetts were unfounded,” noted MIA President & CEO Francis A. Mancini, Esq. in commenting on the results of the economic impact study. “Massachusetts independent insurance agencies remain the distribution channel of choice for consumers in the Commonwealth for both personal and commercial lines.”
Other encouraging statistics from the study note that independent insurance agents here in Massachusetts have continued to hold their market share even with the many changes the insurance marketplace here has experienced over the last eights years. Independent agents continue to write and service the vast majority of the personal and commercial lines insurance written in the Commonwealth. They currently write 74% of all personal lines and 83% of all the commercial lines in the Commonwealth. As a result, Mass. agents lead the nation in market share as compared with other independent agencies nationally where independent agencies write an average of 35% of the personal lines and 80% of the commercial.
So just how much do independent insurance agents in Massachusetts actually contribute to the economy?
The independent insurance agency system in Massachusetts – A billion dollar industry
According to the study’s results, the financial contribution of independent agents to the local Massachusetts economy in 2014 was $1,043,247,000. It’s important to note, however, that this number only extrapolates the dollar impact of the MAIA’s member agencies. There are, however, another approximately 250 property/casualty agencies that are not members of the MAIA.
As such, Towers Watson estimates that the additional agencies outside the MAIA purview contribute at least an additional $53.3 million. The result is that a total financial contribution of all the independent insurance agencies in Massachusetts would more likely be around $1,097,547,000. The following is a breakdown of the dollar impact of MAIA members which gives a better sense of how that total figures translates into the local economy.
| Category | Dollar Impact of MAIA Members |
| Payroll | $737,099,000 |
| Benefits | $96,560,000 |
| Taxes | $73,468,000 |
| Rent | $43,122,000 |
| Charitable Contributions | $8,474,000 |
| Other Expenditures | $84,523,000 |
| Total | $1,043,247,000 |
The importance of promoting the independent insurance agency system in Massachusetts
If anything, the MAIA impact study further demonstrates the integral role that many agents have in not only the overall Massachusetts economy but within the economies of each of the 14 counties and 351 cities and towns within the Commonwealth.
As the study noted, the overwhelming majority of agencies still remain family-owned companies with less than ten employees. The number of full time employees agencies employ as of 2014 was 9,809, with the average independent agency employing 7.8 employees the epitome of a “small Main Street business”.
These agencies rent or own office spaces in their communities, do community service and basically participate in all levels of the Massachusetts economy.
More importantly, these agencies employ residents of Massachusetts rather than another state. In turn, these Mass. agency employees then reinvest their earnings back into the state through buying houses, paying taxes, buying cars, buying lunch and using other services in the city and towns of Massachusetts where they live and work.
As we have said before, the independent insurance agents of Massachusetts are similar to the farm-to-table movement promoting local farms. Our industry too, should be promoting the benefits of our 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 that further drive home this point:
- Thirteen percent (13%) of all independent insurance agencies in Massachusetts are over 100 years old;
- Sixteen percent (16%) are between 76-100 years old; and
- Twenty-four percent (24%) of the agencies are between 51-75 years old.
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 whom you buy your 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.
MAIA members should be very proud of the role they play in both the economy and the insurance marketplace of the state and for being a vital part of the communities where they operate,” adds Mancini. “Massachusetts independent insurance agencies have proven that expert knowledge, superior products and personal service will always make a market leader.”
