Does the deceleration presage a trend for independent agents and brokers?
Possibly, according to the most recent Growth & Profitability Survey (GPS) conducted quarterly by Reagan Consulting.
The latest data shows that the independent insurance channel experienced a slight deceleration in its overall organic growth rate during the last quarter. It was 10.2%, representing a slight drop of 1.0% as compared to Q2-2023.
Despite the drop, organic growth is still at record levels, and agents and brokers are well able to “counterbalance market pressures,” says Harrison Brooks, Reagan partner. They are assisted by a positive property-casualty rate environment and “increased exposures driven by inflationary trends.”
Balance between Commercial and Personal Lines has shifted
Historically, commercial lines have been the primary driver of record growth in the independent channel, particularly since the COVID-19 pandemic subsided in 2021. However, as 2023 winds down, the balance has shifted.
“Personal lines have emerged as a major storyline,” says Brooks. Organic growth of personal lines has been strong throughout 2023: 10.6% in Q1, 9.3% in Q2 and 10.0% in Q3, which is more than 400 basis points higher than the previous Q3 record of 5.9% set in 2022. Also, personal lines recorded the highest Q3 profit margins of any other line of business. “Personal lines have outperformed historical norms and become a differentiator for many agents and brokers seeking to round out accounts and create stickier client relationships,” says Brooks.
That growth has not been problem-free in the current hard market. “Some carriers have begun exiting certain geographies or have stopped writing new business altogether,” says Brooks, adding that it has been difficult for agents who have had to remarket personal lines clients or help them cope with rising premiums.
Commercial Lines and Group Benefits
The median organic growth of commercial lines remains healthy, but is declining: Q3 growth was 11.3%, down from 11.6% in Q2 — which already had dropped from 11.7% in Q1.
At 6.4%, group and employee benefits posted “near pre-COVID growth levels,” says Brooks. Agents and brokers can expect the resurgence to continue as companies “are focused on making their workplaces desirable destinations.”
What lies ahead…
Looking ahead to 2024, agents and brokers maintain their Q2 prediction that they will finish 2023 with an organic growth rate of 10.0%. They also remain optimistic about profitability, estimating 25% for the full year. However, Brooks cautions agents and brokers to keep an eye out for decelerating growth trends as we enter 2024 but adds that they “continue to prove that they can thrive during uncertain times.”