Brokers

Increasingly Tough Market for Brokers

Growth for independent insurance agencies is slowing.
By: | December 10, 2014 • 2 min read

Brokers are facing an increasingly tough market, according to the latest best practices study by the Independent Insurance Agents & Brokers of America (IIABA).

The study, which the IIABA — or Big “I” — has been carrying out over the past 22 years, looked at the results of America’s top performing independent insurance agencies in six revenue categories, ranging from less than $1.25 million to more than $25 million.

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The study showed that growth is continuing, but has slowed across the board in all sectors — especially compared to last year, when the review found some of the highest growth rates since 2008.

Madelyn Flannagan, vice president of agent development, research and education at the organization, said the “challenging environment” is affecting all agents.

“The CL [commercial lines] P&C market has softened again and the economy in many parts of the country remains sluggish, making it hard to achieve organic growth,” she said.

“New and different competitors entering the industry will always be a challenge, especially those with huge advertising budgets and the technology platforms to support their competitive edge.

“Independent agents have to be able to bridge that resource gap by offering significant value, which is harder to do for the more traditional, independent agencies. The world is changing rapidly but those that adapt are doing very well,” she said.

The IIABA study found that brokers earning less than $1.25 million saw increased net revenue organic growth of 4.6 percent in 2014, a decrease of 2.3 percent, from 6.9 percent in 2013. Similarly, agents in the $2.5 million to $5 million category saw 7.8 percent growth in 2014, which was a decrease of 1.7 percent, from 9.5 percent growth in 2013.

Brokers in the $10 million to $25 million category saw slight year-over-year growth, from 10.4 percent in 2013 to 10.8 percent in 2014.

“The independent brokerage market is being affected by several factors,” said Jeffrey Rieder, partner at Ward Group, which provides benchmarking and best practices studies for insurance companies.

“Price increases have slowed down and the rate of growth itself has slowed — brokers have been seeing price increases of 3 to 4 percent, where they’d previously seen 5 to 6 percent or more in some sectors.

“There’s also been a lot of mergers and acquisitions activity and this has led to a lot of consolidation that has seen the core force [of brokers] dwindling.

“The consolidation,” he said, “has been driven by the retirement of agency principals, agencies trying to maximize contingent commission payments and also trying to achieve economies of scale in the back offices.

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“The low interest rate environment has also had an impact, with much more focus on underwriting profits, as opposed to 15 to 20 years ago, when there was an emphasis on cash flow to be used for investment purposes.

“While the cost of reinsurance is more affordable at the moment, many companies are able to keep more of the risks on their books due to very strong surplus positions,” he said.

Marc Jones is a freelance writer based in London. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]