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10 Findings from the 2020 Agency Universe Study

The number of independent insurance agencies has remained stable and business conditions continue to improve, although at a slower rate than 2018, according to the 2020 Agency Universe Study.
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10 findings from the 2020 agency universe study

The number of independent insurance agencies has remained stable and business conditions continue to improve, although at a slower rate than 2018, according to the 2020 Agency Universe Study.

Future One, a collaboration of the Big “I" and leading independent agency companies, released key findings from the recently completed Agency Universe Study. The biennial report is hailed as the most comprehensive look at the independent agency system. The 2020 study also includes a special report on COVID-19's impact on independent agencies. 

“The 2020 Agency Universe Study reveals good news for the independent agency system, including continued adaption to the digital solutions and innovations that enable independent agents and brokers across the country to serve their clients and communities most efficiently," says Bob Rusbuldt, Big “I" president & CEO. “The study also offers a pulse read on key areas agencies should focus on to better prepare for the future. Women and people of color continue to be underrepresented as agency principals, and the Big 'I' is committed to continuing its outreach efforts to address this issue so agencies can serve all insurance consumers better." 

The study looks at many statistics about independent agencies operating in the U.S., including their numbers, revenue base and sources, number of employees, ownership, mix of business, diversification of products, technology uses, non-insurance income sources and marketing methods. 

For 2020, the study continued to examine those trends, focusing on agency perpetuation challenges and the impact of emerging purchase channels and trends. Due to the coronavirus pandemic and related shutdown orders in 2020, the study was halted in its traditional fielding time in March and re-started in September.

“The study provides independent agency principals and managers with insights into how their peers operate, as well as business strategies that may be helpful to them," says Madelyn Flannagan, Big “I" vice president of agent development, education and research. “In particular, as agencies express concern over emerging purchase channels threatening their consumer segment, the study revealed how crucial adaptation to social media and digital marketing strategies are key to agency success. Overall, though, the channel has fared well during the economic upheaval of the last year."

Key findings from the 2020 Agency Universe Study include:

1) The number of independent agencies remains stable. In 2020, the estimated total number of independent property/casualty agents and brokers in the United States stands at 36,000. This is consistent with 2018 number of 36,500.

2) Business conditions remain favorable but growth slows. Business conditions continue to improve, as they have for the past several waves, but at a slower rate. The majority of agencies (70%) report increases in total revenue between 2018 and 2019, with an average increase of 20%. However, this is slightly lower than in 2018 when 76% reported an increase, with average increases of 25%. Agencies are slightly more likely to report increases in personal lines revenue (67%) than commercial lines (63%).

3) Principal aging remains consistent. The aging of the independent agency universe is consistent with 2018 findings as the average age of agency principals is 55 years old, with 17% age 66 or older. Agencies may be starting to consider perpetuation planning. Nine in 10 have a perpetuation plan (on par with 2018), though it often centers around children and family. Four in 10 anticipate some ownership change in the next five years.

4) Social media and digital marketing strategies are key. All the top marketing strategies cited in 2020 are digital: social media and digital marketing (58%), creating and maintaining the agency website (49%), portal technology on the agency site (30%), search engine optimization (30%), and e-marketing activities (20%).

5) Emerging purchase channels remain a concern. The impact of emerging purchase channels remains a concern, particularly for personal lines, with 35% of agencies believing personal lines direct purchase through the insurance company will have a significant impact on their agency over the next two years—and 27% believing the same issue will emerge with non-insurance website purchases. Approximately 1 in 4 express similar concerns about small commercial direct purchase or purchase through emerging online providers.

6) Inclusion continues to be a challenge. Women and people of color continue to be underrepresented in the independent agency universe. Forty-two percent of agency principals are women. Nearly 9 in 10 of agency principals are white. Larger agencies are especially likely to have male principal or senior managers. However, newer agencies are more likely to have at least one African American principal (12% versus 5% of established agencies).

The COVID-19-focused section of the study looks at the pandemic's impact on operations, revenue, staffing, strategies and carrier relationships. 

Key findings regarding COVID-19's impact include:

7) Small and newer agencies took the brunt of COVID-19's impact. About one in four agencies report COVID-19 had a significant impact on their operations, revenue and commercial lines customer base. The pandemic was more likely to impact the revenue of small agencies (34%) and newer agencies (32%).

8) Absence of disaster recovery plans belies preparedness perception. Nearly half of respondents believe their agency was well-prepared to deal with COVID-19's impact on their business—despite only 1 in 20 having a disaster recovery plan that included pandemics. Smaller agencies were least prepared to deal with the pandemic at 33%. Nearly half of those with a plan will modify it, but only 1 in 5 without a plan expect to create one. Newer agencies are less likely to have had a disaster recovery plan (22%).

9) Building an online presence is crucial. Going forward, building an online presence for marketing and implementing or improving online business tools are the most important factors in succeeding in 2021. Building a digital presence is more important for small (65%) and medium-small (61%) agencies. Jumbo agencies cite implementing or improving home-based tech for remote workers (46%) and developing strategies for opening the office safely (29%) as important. Newer agencies are more likely to cite building an online marketing presence as important (80%).

10) Independent agencies need support with business opportunities and digital tools. Top areas needing support because of the pandemic are finding new business opportunities and offering digital tools and support with digital servicing. Small agencies are more likely to need support with handling personal lines clients' calls and service requests at 23%, while jumbo agencies are more likely to need support leveraging risk control services to identify new areas of exposure due to the pandemic (23%) and providing guidance about the crisis and coverage (28%). Newer agencies are more likely to need support with finding new business opportunities at 56%.

The 2020 Agency Universe Study is the 14th in a series that was first conducted in 1983. Since 2002, the study has been completed biennially. Since 2004, the Agency Universe Study has relied on internet data collection. In total, 1,437 respondents were included in the 2020 study, conducted by Zeldis Research in cooperation with Future One.

To order a copy of the 2020 Agency Universe Study Management Summary or the COVID-19 Impact Summary, providing an overview of the highlights from the complete study, visit the Big “I" Agency Universe Study webpage.

In addition to the Big “I," the Future One coalition includes the following company partners: Allstate/Encompass, Amerisure, Central Insurance Companies, Chubb, CNA, Foremost, Grange Insurance, Hartford Steam Boiler (HSB), Liberty Mutual Insurance/Safeco, Nationwide, Progressive, Selective, The Hanover Insurance Group, The Hartford, Travelers and Westfield Group.

AnneMarie McPherson is IA news editor.

In response to the coronavirus pandemic, the Trusted Choice® COVID-19 Relief Fund provides critical relief to independent insurance agencies and brokerages, owners and employees experiencing significant economic disruption or financial distress as a result of the COVID-19 pandemic. Since April 2020, the fund has assisted approximately over 750 agencies. Grant applications are currently being accepted. 

Friday, September 23, 2022
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