Every couple of years, the Independent Insurance Agents & Brokers of America (a/k/a, “The Big I”) conducts an “agency universe study.” The study gets into very specific detail about the state of independent insurance agencies across the country. It’s a way of taking the temperature of the distribution channel. It also indicates trends. For example, for many years the number of independent agencies shrank due to retirements, consolidations, mergers, and so forth. However, the number appears to have stabilized, according to the last few studies.
IIABNY decided it wanted to dig deep into the 2014 AUS to find out specifically what’s going on here in New York. The association hired a research consulting firm to pull out the New York data and compare it to the data from outside the state. The results were interesting – encouraging in some ways, challenging in others.
Most New York agencies saw their revenue climb from 2012 to 2013 – 67 percent. This compares to 70 percent of non-New York agencies. Like the rest of the country, New York has been slowly crawling out of the hole dug by the Great Recession. Upstate New York often seems to be in a permanent state of slow growth. Regardless, the majority of agencies are growing their businesses.
New York agencies have been around for a long time. The study looked at dates when agencies were formed. One-third of New York agencies started between 1940 and 1970. One-fifth of them were formed before 1940. That means 21 percent of New York insurance agencies are older than McDonald’s, Intel, Visa, rock music, the Peanuts comic strip, 14 Major League Baseball teams, and the last three U.S. presidents. When you consider that something like half of all businesses fail in their first five years, you have to tip your hat to that kind of staying power.
New York agencies do a big chunk of their business with New York based insurance carriers. Compared with their peers elsewhere, smaller proportions of New York agencies represent the large national carriers like The Hartford, Travelers, Progressive and Zurich. They make up the difference with New York names like NYCM, Merchants, Dryden Mutual and Utica National.
On the downside, not only are the agencies older, but so are the people running them. Almost 70 percent of agency principals are above the age of 50. That’s fine until those folks decide to hang up their spikes. Perpetuation will be an ongoing issue for New York agencies as they struggle to get people in their 20’s and 30’s into the insurance field.
On a related note, more of them report concerns about maintaining experienced producers and staff than do agencies outside the state. 40 percent find maintaining experienced producers extremely challenging (versus 21 percent in the rest of the country,) and 32 percent find maintaining experienced non-producer staff extremely challenging (15 percent elsewhere.) Industry demographics, which point to an older workforce, don’t indicate that these worries will alleviate anytime soon. Part of the reason for that may be …
They’re also not exactly training their marketing power on the younger set. Only 16 percent of New York agencies are focusing on individuals aged 39 to 49, and a slight 12 percent are going after those aged 21 to 38. Nationally, 29 percent of agencies are targeting 39 to 49 year-olds and 23 percent are targeting people in their 20’s and 30’s. Given that those are the age groups where tomorrow’s money will be, it would seem prudent for agencies to adjust their focus.
So, the report is a mixed bag, but there is no doubt that a lot of agencies have found and are finding New York a profitable place to be. I’ll be curious to see what the report two years from now will show. Will revenue keep growing, or will it plateau? What will agencies do about recruiting younger workers and selling to the electronically connected generation? The answers will say much about the insurance industry and the economy as a whole in the Empire State.
What are your thoughts on the study? Leave your two cents in the comments.