Insurance Brokers Industry Trends

Fewer Life Insurance Agents

The number of life insurance agents is quickly diminishing in the US, partly due to stagnant new premium revenue. The Bureau of Labor Statistics predicts that by 2010 the number of life insurance agents will have dropped 30 percent from the 2000 level.

Reduced Importance of Contingent Commissions

The practice of insurance brokers receiving contingent commissions from insurers has been severely limited by legal challenges. In many cases, brokers historically received a large amount of their revenue from commissions related to the volume or profitability of business they placed with individual insurers. To compensate for the loss of such commissions, many brokers will raise client fees or enter into other compensation agreements.

Consolidation

Consolidation has continued among agencies and among insurance carriers, largely in response to the wider insurance needs of business customers. While the overall number of independent agencies has dropped, the average agency size in terms of revenue has grown. Some agencies like Gallagher have historically grown through acquisitions, but may shift to a strategy of organic growth as the possibilities for new acquisitions dwindle.

Consumers Research Policies Online

Studies show that consumers use the Internet more for research than for purchasing. Although online insurance sales amount to billions of dollars annually, they are still a small percentage of overall insurance revenue. Consumers use the Internet to comparison shop, but most still prefer to ask a person questions and close the deal with an agent.

Telemarketing and Call Centers

The importance of the contact center, along with other service technologies, is growing. Some insurance agents who want to reduce the cost of customer service are replacing live telephone assistance with interactive voice response (IVR) systems, Web queries, or online transactions. However, many agents create brand recognition based on personal service and must be able to deal with many customers who demand to speak to a live customer service rep.