LOOKING AHEAD What Will 2030 be Like for the Insurance Industry?

By Daniel Smith

Flying cars? Time machines? We’re not talking about science fiction and the impacts of a new world of risks on insurance. The article will take a look at the trends we already see happening in the marketplace, and how they may affect the independent agency system.

We’re in an interesting time for the insurance industry, and as we look ahead to the rest of this decade, the impacts of change are likely to leave us with a landscape that looks different than today:

• The robust economy we had the luxury of operating in for several years is now being impacted by inflation, supply chain issues, and global crises

• The “Silver Tsunami” that was talked about for years is finally here, with many agents over 65 retiring and leadership transitioning

• The impacts of generational change are also impacting service personnel, leaving a large talent gap for our agencies

• Remote work is impacting the workforce more than ever, with some employees even taking smaller salaries and lesser benefits in order to get more flexible work options

• Insurance capacity is changing, with appetites being lowered, rates being raised, and reinsurance impacting carrier decisions across many markets

• M&A in our industry has slowed slightly, but we’re still seeing record activity and multiples

How will all this impact independent agencies? Let’s take a look at some potential directions our industry could take by the time we reach 2030.

Economic Impacts

We will cite the 2022 Big I Agency Universe Study for data in this article (unless otherwise noted), and their report showed that the majority of agencies – 62% – report increases in total revenue between 2020 and 2021, but this proportion is lower than the 70% in 2020. Twentyfive percent report a decline in revenue, with an average decrease of 22%. In particular, fewer agencies report personal lines revenue increases in 2022, 60% compared to 67% in 2020. More than 1 in 5 say the pandemic has impacted their operations and revenue.

However, independent insurance agencies are traditionally resilient to economic impacts, and we feel this will be the case through this market. While the pace of growth may slow, there is still growth to be had, especially for agency that plan and prepare for change.

A New Wave of Leadership

There is no doubt we will miss the knowledge of those leaving for retirement, but new ideas will also be ushered in with new leaders. This may include new use of technology, new workforce innovations, updated workflow and processes, and likely new views on agency-carrier relationships.

In addition, some changes in inclusion are occurring in the industry. 2022 saw a gain of five percentage points in the number of female agency principals – from 42% to 47%. Non-white agency principals saw an increase in their numbers as well, from 12% in 2020 to 17% in 2022.

New Solutions for Service

Many agencies have already begun to embrace virtual assistants, remote work, and other less traditional support staff solutions. It is likely this will continue, as will automation solutions and workflow improvements that are likely to change the “duties” of account executives and CSRs.

The Agency Universe Study showed that most agencies would be comfortable allowing clients to self-serve for policy documents and identification cards, at 77%, while 2 in 3 are open to self-service for billing inquiries and claims filings.

Whatever staffing changes are accepted in agencies, talent continues to be a key concern of the industry. Agencies that develop systems for training and redundancy are likely to be better positioned for the impacts this will continue to have on the marketplace.

Independent Agencies Win with Choice

As market capacity tightens on auto, professional liability, and other verticals, independent agents will have even more opportunity to win business with choice. Direct writers will be heavily impacted with limited options and unhappy customers wanting to compare coverage and rates. The new “competition” that most agents claim to be watching is non-traditional channels, especially on personal lines. Direct to consumer auto insurance, as well as work comp and small business to a lesser extent, will be an area to monitor for the remainder of the decade.

Carrier and Marketplace Specialization

As many agencies already do, carriers are likely to begin providing more niche focus. Wholesale brokers, E&S markets, and specialty carriers will need to find ways to take the lead in their markets with improved underwriting, risk management support, and rating processes. Their knowledge of specific markets and risks can give them the advantages to do this, and agents whose targets align will lean on them to facilitate those advantages for their clients.

Merger & Acquisition Cycles

M&A in our industry has almost always been cyclical, but we appear to be rounding the top of a very large Bell curve now. All the activity has led to consolidation as well as the forming of new agencies, and the amount of U.S. independent agencies actually increased in 2022 for the first time in three years. The Agency Universe Study found that there are 40,000 independent property-casualty agents and brokers in the U.S., an increase from 36,000 in 2020.

So, where will that leave agencies that haven’t sold? Likely in a position for growth. Where will it take agencies that did sell. Likely in a position for growth. How can both be well suited? Agencies that didn’t sell may be able to win business through a “smaller is better” approach, possibly luring business from larger brokers. A commitment to more personal service and interaction can be enticing to insureds. Agencies that sold to larger firms may be improving through new efficiencies of scale, allowing them to increase revenue. Agencies that merged or sold to firms of similar size may have new markets and capabilities that will allow them to win more business. There doesn’t to be a “losing” scenario for any of these agencies.

As we look ahead to 2030, we certainly may face a different landscape in the insurance industry. But, as they have been for decades, independent insurance agencies have every opportunity to succeed in it.

Daniel Smith, CAE, is the Chief Marketing Officer and co-founder of Market Retrievers, a digital marketing firm focused on building and implementing strategies for independent insurance agencies. He previously worked for the independent agents association in Tennessee for over 14 years and served as the CMO and COO. He is also a licensed P&C agent. He may be reached at dsmith@ marketretrievers.com.