Insurance Agency Industry Research

For all aspects of life, most people want to have some form of insurance. This includes home insurance to protect a residence against catastrophe, car insurance for the same reason, as well as ancillary insurance lines including general property & casualty, life insurance, and supplemental insurance. Given this demand, the number of underwriters and insurance agents has exploded over the past thirty years. Additionally, as many more people are now entrepreneurs – the demand among business owners to have comprehensive insurance is substantial. Almost all businesses need to carry some form of business liability insurance while concurrently having often state-mandated workman’s compensation insurance. Nearly all states require that purchases of insurance are conducted through licensed insurance agents that have production licenses.

Within the United States, there are more than one million actively engaged in the sale, marketing, and production of insurance. The aggregate revenues generated by these agencies remains around $150 billion per annum (which includes fees from the issuance of new policies as well as recurring fees). One of the strongest aspects of this business is that recurring fees are continually generated when an initial customer renews their policy on an annual basis. For established insurance agencies, this allows these businesses to remain profitable and cash flow positive in any economic market.

One of the other core trends within this market is to maintain an expansive presence online. This is due to the fact that most people now find local and regional service providers via internet searches. Most independent agencies aggressively use search engine optimization campaigns coupled with social media in order to boost traffic to their respective websites. This is a highly competitive market, and any online marketing advantage that an agent can have always provides them with a strong foothold within their respective region. Many insurance agencies often spend nearly 8% to 10% of their aggregate revenues on marketing expenditures. This includes traditional marketing costs such as sponsorships of schools and local charitable organizations. Many insurance agents maintain very strong connections with their local community.

It should be noted that the vast majority of insurance agents operate in an affiliated capacity with a major underwriter. The draw to this method of operation is that the ongoing marketing expenses are substantially reduced given that the agent can use the brand name of the underwriter in conjunction with their marketing operations. However, this does limit the types of insurance lines that can be offered given that the affiliated underwriter requires that only their products are offered to prospective and ongoing clients. By operating in an independent capacity, an insurance broker or agent can provide a much greater spectrum of choice to customers. This is one of the reasons why independent insurance agents and brokers are able to have a competitive advantage over affiliated agents. Given the complexity of insurance, the demand for agents that understand this market, how to properly insure property, and how to do this cost effectively – is substantial.

Although many people now use online based portals for specific types of general insurance (such as auto, home, and whole/term life insurance), more complex scenarios and business insurance nearly always requires the assistance of an insurance agent. This need will continue indefinitely.