Compared to larger agencies, small agencies are particularly concerned about the impact of emerging purchase channels over the next two years, according to the 2016 Future One Agency Universe Study.

At a time when the number of mergers & acquisitions continues to break records year after year, small agencies are feeling the squeeze from competitors both old and new—including direct insurers, non-insurance websites like Google and retail stores like Wal-Mart, according to the study.

“Follow the money, or lack of money, from a small agency standpoint,” says Barry Rabkin, founder and president of Market Insight Group, which analyzes the current and future impact of technology on insurance customers, channels and markets. “Smaller agencies are being pressured by both those larger agencies and the midsize agencies, which have to find other lines of business to sell to survive themselves.”

“The big agencies can buy others,” agrees Ellen Carney, principal analyst, insurance e-business and channel strategy at Forrester Research, Inc. “For some of these smaller agencies, they have the choice of being bought. But with a few exceptions, most of them don’t have the option of being the buyer.”

With the scale of a large agency comes the ability to invest in more technology that keeps them relevant, says Greg Galeaz, U.S. insurance practice leader at PricewaterhouseCoopers. “Agencies that are able to execute rollup strategies and create more scale have a better opportunity to create an infrastructure to support consumers in the way they want to be supported,” he explains.

In an era of consolidation and disruption, that means smaller agencies need to get creative if they want to stay relevant with their customers. Here are two strategies to keep in mind in order to accomplish that goal.

Do what you do best. Rabkin recommends a down-home approach. “If I’m going to go direct to an insurance company, why do I need a small agency? I think it’s existential,” he says. “When you’re talking about insurance, it’s like politics—it’s all local. You have to find those coverages that make the most sense for your local territory that you’re licensed for.”

Jay Sarzen, senior analyst on the insurance team at Aite Group, a financial research and advisory firm, agrees—and actually believes that the firms in real danger are the larger ones that don’t deliver the kind of “high-touch, white-glove service” smaller independent agencies are known for.

“Smaller agencies tend to be very localized—they know their client base and they cultivate those relationships,” Sarzen explains. “There’s a greater likelihood that a client of that larger agency will say, ‘I get a letter once a year from my agent. I’m not getting a tremendous amount of service, so why not just take my business to Google?’”

While countries like the U.K. are already experiencing commoditization of insurance products like auto, in the U.S., “we see there still being a real need for the independent agent in the system,” Galeaz agrees. “There’s still a great number of people in certain demographics where if I were to ask who they get their insurance from, I would get the name of the agency more than the company. They don’t know necessarily whose paper it’s on, and they don’t necessarily care.”

Partner smart. Carney encourages small agencies to dive deep into the InsurTech movement. “Maybe as an agent, you won’t just be selling Travelers, Hartford, Erie and Selective. Maybe you will be selling Lemonade or Slice,” she suggests. “Why not?”

For these startups and their siblings, “it’s a whole lot easier to write a press release about your business and write a term sheet to get venture capitalist money than it is to get customers,” Carney points out. “They need agents who can sell this.”

Most InsurTech startups are small, with no infrastructure to be able to support a distribution market. “These guys aren’t going to turn into Amazon tomorrow,” Carney says. “You could imagine a really smart small agency saying, ‘I’m going to do something completely different—I’m going to be the distribution channel of all these cool InsurTech startups that aren’t going to be able to do anything because they don’t create any peace of mind with consumers.’”

Of course, that strategy relies on cooperation from the startups themselves—and even then, there’s no guarantee that they could be trusted to value their relationships with agents in the long run. But remember: Technology is just as much a partner as it is a threat. Galeaz points out that thanks to mountains of data, quantitative simulation analysis and other technological advances, insurance is becoming “one of the cool sectors to work in.”

“The distribution force in insurance has historically been older, more suburban,” Galeaz says. “They’re going to need to continue to evolve and become savvy with technology to be able to be more digital, which will enable them to work with companies to create a customer experience that’s more with the times.”

Jacquelyn Connelly is IA senior editor.