Independent Agents Show Market Share Mettle

Despite the onslaught of advertising dollars from the direct and captive channels, independent agents are still holding their own.

Independent agents still control a majority of the entire p-c market, writing 57% of all premiums, including a third of all personal lines premiums. And according to the latest data from A.M. Best, independent agents grew premiums and/or market share in 25 of the 50 states.

The research is outlined in a new Big “I” report, “2012 Property-Casualty Insurance Market: Opportunities & Competitive Challenges for Independent Agents & Brokers.” This is the 18th year the Big “I” has reviewed the property-casualty insurance market using premium data provided by A.M. Best Company and the study provides analysis on the most recent year of data available.

The report is encouraging regarding how well the independent agency system is performing in the face of an evolving and challenging marketplace. For the second year in a row, all p-c insurance premium lines grew, building on the market rebound that began in 2011. After two years of solid growth, both personal and commercial lines are approaching their pre-recession volumes, and combined are again generating annual premiums of more than $500 billion.

Independent agents were well positioned to capture a larger piece of the market. Overall, their share grew significantly in several states—once again, regional independent agency carriers outpaced market growth in many business lines nationwide. Furthermore, several independent agency carriers increased their market share by substantial amounts.

In personal lines, independent agents grew personal auto premiums nine times more in 2012 than they did in 2011. Agents increased premiums $1.8 billion in 2012, compared to a mere $200 million the previous year. And independent agents still dominate commercial insurance sales, which have grown by more than $10 billion two years in a row, controlling 79% of these markets.

In examining personal p-c lines since 1995, several key shifts in market share emerge:

  • Direct-response writers have doubled their market share, climbing steadily from 7.1% in 1995 to 14.4% in 2012.
  • While captive agency carriers continue to control half of the personal lines market, this is down 8.3 percentage points from their market share in 1995 of just below 60%. But most of this decrease occurred in the 15-year period between 1995 and 2010, and captive market share has bounced between 50% and 52% since—perhaps retaining business due to more appealing and effective consumer advertising.
  • Regional independent agency carriers now enjoy 7.5 percentage points more market share than in 1995, but this shift also occurred primarily between 1995 and 2010. Since then, regional carrier share has hovered between 25 and 26%.
  • The market share of national independent agency carriers has dropped more than 6 percentage points since 1995, although that decrease appears to have slowed since 2010.

Capturing a significant number of drivers apparently isn’t helping direct-response carriers cross-sell other policies. While direct insurers capture 18% of personal auto premiums, they generate only 5%, or $4.4 billion, of the $77 billion homeowners market. And they’re nearly invisible in the commercial space.

Madelyn Flannagan is Big “I” vice president of agent development, education and research.