5 Trends Shaping the Independent Agency System

Agency Operations, Leadership, Personal Lines, Small Commercial Lines

The word “unprecedented” has been used a lot in the past couple of years. And for good reason: customer expectations, workplace norms and market conditions have all gone through enormous disruption in a relatively short period of time.

As we begin 2024, independent agents have an opportunity to meet these disruptions head on and get ahead of a new set of emerging trends—from artificial intelligence (AI) to Generation Z in the workplace—that will continue to change the way we do business.

Here are the top trends that agencies will face this year and what they mean for the future of the independent agency system:

1. AI enters the chat

No other topic has gotten as much attention over the last year as AI has. When ChatGPT brought AI to the masses for the first time a little over a year ago, the possibilities seemed endless. Early adopters quickly embraced the technology, exploring how to leverage ChatGPT for everything from marketing to sales and customer service.

But unlocking the true business value of AI—and the hundreds of new AI-based tools that enter the market every day—is a much more challenging prospect.

Chatbots, many of which utilize conversational AI, have already become a staple for some of the more innovative agencies in recent years. In fact, the use of chatbots is strongly correlated with agency growth, according to the Liberty Mutual 2022 Agency Growth Study, meaning those agencies that are leveraging cutting-edge technologies like AI and chatbots are returning above-average profits.

Beyond chatbots, AI tools that support marketing activities like email automation and content creation are also readily available and relevant for use in an agency setting. New AI bots that help with customer service, such as scheduling directly within an agent’s email inbox, are launching every day. Larger tech vendors are even starting to build AI solutions directly into some of the software that agencies are already using, like a customer relationship management system (CRM) or an agency management system (AMS).

With AI rapidly changing the way we work, 2024 offers agencies an opportunity to move from exploring AI to strategically implementing tools that fit unique needs of their business.

Agencies that embrace AI to create efficiencies in their business will increase productivity and profitability, while those that avoid AI will risk falling further behind competitors.

2. Independent agents find a soft(er) landing in a hard market

While AI will have far-reaching, long-term impacts on the business of insurance, agencies are also facing industry headwinds that have more immediate implications.

A confluence of trends—the ongoing inflationary environment, rising weather-related losses, and increasing legal system abuse from factors such as third-party litigation funding—are driving hard market conditions the likes of which haven’t been seen in decades.

5 Trends to Watch in the Independent Agency System

Safeco-appointed agents: Check out the Hard market field guide for tools and tips to help guide your customers through the current insurance market.

Many agents are navigating market conditions like this for the first time and are learning along the way. They are balancing client education with remarketing, prioritizing retention while actively seeking new business, trying to not lose sight of working on the business while needing to spend more time working in the business.

But from my seat, having spent time leading U.S. product for Liberty Mutual and now leading our independent agency distribution organization, there’s no better time than a hard market to be an independent agent. It’s a time when consumers are more likely to seek choice and expert advice—two value propositions unique to the independent agency system.

Hard markets are also a time when many agencies can grow revenue and capture new customers. Agencies will emerge stronger and better positioned for the future if they use this time to get better at fundamentals like marketing, to build a solid technology stack that creates efficiencies for their producers, and to continue investing in the tools and training agency staff need.

While hard markets are acute, they don’t last forever. 2024 will continue to test every part of the insurance value chain, but independent agents have an advantage over other distribution channels.

3. Risk mitigation takes center stage

Risk mitigation is another area that is gaining momentum against the backdrop of evolving risks like increasing weather-related losses.

The U.S. experienced a record 25 separate weather or climate “disasters” through October 2023 that each caused losses exceeding $1 billion, according to a 2023 report from the U.S. National Oceanic and Atmospheric Administration (NOAA). And while certain states and regions will see greater impacts of these costly weather events, severe weather will continue to drive loss trends across the country.

In response, many carriers are introducing new solutions, discounts and education materials to help prevent future losses.

Risk mitigation services have historically been more common on the commercial side, especially for larger clients, but agents should expect more offerings to become available across personal and small commercial lines in the coming years. This includes new and refreshed products with risk mitigation solutions baked in.

Since agents are on the front lines with customers, they will play an increasingly important role educating customers about disaster preparedness, ensuring they consider risk mitigation solutions as part of their purchasing decisions and advising on measures they can take to proactively protect their business or property. These actions are even more important in a market where underwriting standards have tightened.

4. Small commercial gets a personal lines makeover

As the industry continues to grapple with challenging market conditions, agents also have an opportunity to rethink the makeup of their book. Those agencies weighted toward personal lines, in particular, have an opportunity to bolster their commercial lines book.

How Digitalization Is Transforming Small Commercial Insurance 4

Read our research report to learn more about how small commercial agencies are using digital tools to grow.

2024 will continue a trend of small commercial looking a lot more like personal lines. With a new class of commercial comparative raters entering the market, carriers incorporating more pre-fill data into underwriting and AI enabling more automation throughout the sales cycle, the quoting and submissions process will become faster and more efficient, making it easier to secure and service small commercial customers.

At the same time, the lines between traditional personal and business insurance will blur as the sharing economy and a pandemic-era surge in entrepreneurship continue. The sharing economy market is expected to grow 32% by 2028, according to 2023 research from Absolute Reports, while a September 2023 report from economists at the University of Maryland and the Federal Reserve found that applications for new businesses in mid-2023 were averaging 30% higher than in 2019.

Owners of home-based businesses or rideshare drivers, for example, bring a unique set of risks that span both personal and commercial insurance. In the past, agents could assume that a business-owner client could also become a personal lines customer. The same can now also be said about individual customers coming through your door—they may have business insurance needs in addition to personal.

Savvy agents will ask the right questions to identify personal-commercial gaps, looking for ways to insure the whole person, and will be able to grow their small commercial books more efficiently than ever before.

5. Gen Z leads the talent and culture revolution

In the face of so many emerging trends, it’s important to remember that the success of any agency really comes down to one thing: the people.

Since the early stages of the coronavirus pandemic, the way we work has been a consistent topic inside and outside the insurance industry, from debates on remote work and challenges in recruiting to impending retirements and the value of diversity, equity and inclusion (DE&I) in business.

As we look ahead to how the people element will transform agencies in the future, Gen Z is at the center. One in four recent agency hires was under 25, according to the Liberty Mutual 2022 Agency Growth Study.

This points to the fact that Gen Z is set to make their mark on this industry this year. Like generations before them, they have different skills, different ambitions and different priorities—and therefore look for different things when choosing an employer.

The good news is that many of the qualities that next gen talent looks for in a job are also things that independent agencies prioritize. For one, Gen Z job hunters tend to be more socially inclined and want to feel like they’re making a difference. The vast majority—91%—of current and recent university graduates want to make a positive social or environmental contribution through their careers, according to the CFA Institute “2023 Graduate Outlook Survey.” This is a value that is strongly aligned with independent agents, given that 96% of agents donate to charity or otherwise give back to their community, according to a 2022 Liberty Mutual and Big “I” survey.

Gen Z is interested in career growth and continuing education in addition to flexibility. These are things that independent agencies do well, as 77% of agency staff members indicate that they are satisfied with the flexibility their agency allows, according to the Liberty Mutual 2023 Agency Growth Study.

Whether or not the independent agency system is ready for Gen Z workers, they’re here, and many are actively searching for their next career opportunity. The most forward-thinking agencies are finding ways to attract and retain the best young talent by embracing this new generation and building cultures that empower them to find success.

If there was one story to tell about independent agents in recent years, it would be one of resiliency.

Through so much disruption, the independent agency system not just survived but thrived—even growing market share, with 63% of all property & casualty business now being written by agents, according to the Big “I” 2023 Market Share Report.

If history tells us anything, 2024 is likely to be yet another “unprecedented” year. And independent agents will have more opportunity than ever to show their value.

 

This article was originally posted in IA magazine. Reposted with permission.

Luke Bills

President, Independent Agent Distribution, Liberty Mutual Insurance

Insurance is simply a promise to be there when something goes wrong, and Luke has spent the past 21 years ensuring that his operations responsibly live up to that promise to Liberty Mutual policyholders. Currently, Luke is the President of Independent Agent Distribution for Liberty Mutual’s US Retail Markets business unit. In this role, Luke is responsible for the independent agency distribution channel, including $20B of DWP through the Safeco, Liberty Mutual, and State Auto brands. Prior to this role, Luke served as the Chief Product Officer for the U.S. Region of Liberty’s Global Retail Market business unit where he has responsibility for the product management function of Liberty’s $30B+ personal lines business and small commercial business. In previous roles with Liberty Mutual, Luke was SVP & General Manager of product for Liberty’s U.S. Personal Lines & A&H business and previous to that, head of Strategy and Integration for Liberty’s $4.5B Business Insurance segment, focusing on small to mid-sized commercial risk. Prior to his move to Boston in 2016, Luke was the President of Liberty’s Mountain Region (previously Colorado Casualty). Luke has held various roles of increasing responsibility for two of Liberty’s regional company brands in Dallas and Denver.

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Cynthia Lozano
1 month ago

I’d like to know more on how or if LIBERTY MUTUAL does any type of Mentor/Investment for ownership of a brokerage for HEALTH,Life, and SENIOR products LTC,MEDICARE, ANNUITIES

PETER KO
1 month ago

An Insurance Company with good long term vision for their markets & great leadership. They also need an experience & with a good track records indendent retail insurance agents to be their partners to produce excellent result. Our agency is proof to be one of them.

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