What’s Behind the Decline in Growth and Profitability of Independent Agents and Brokers? | Insurance business America
The growth rate is the slowest since 2021
Insurance News
By Terry Gangcuangco
After record highs, 2024 began with the slowest growth rate for independent insurance agents and brokers since 2021.
According to Reagan Consulting’s Quarterly Growth and Profitability Survey (GPS), the independent insurance agent and broker channel reported an organic growth rate of 8.4% for the first quarter of 2024 – the lowest growth rate in 11 consecutive quarters.
Despite expectations of continued high growth after a strong 2023, recent results suggest a shift.
“While growth and profitability are still strong by historical standards, we may be seeing early signs that our industry, red-hot since 2021, is beginning to cool,” said Reagan partner Tom Doran.
Recent downward pressure on property and casualty insurance rates has contributed to the slowing growth. Commercial P&C, which generates the highest revenue for many agencies, saw its organic growth rate decline to 8.5% in the first quarter, compared to 11.7% in the fourth quarter last year.
Notably, for the first time in GPS history, private P&C benefits growth exceeded both commercial P&C and employee benefits growth. Typically, brokerage firms struggle to achieve 3% organic growth in retail banking. However, private property and casualty insurance increased 9.9% in the first quarter of 2024, down slightly from 10.3% in the fourth quarter.
Doran commented: “Although retail banking represents one of the smallest revenue categories for most brokerage firms – typically 10-12% for GPS firms – these impressive growth figures were welcome news given slowing commercial P&C growth.”
Meanwhile, employee benefits performed robustly, achieving a growth rate of 7.5% in the quarter, the second strongest Q1 result in over 10 years, driven by strong new business and rising health insurance premiums.
As growth slowed, profitability also registered a decline. Profitability, which typically peaks in the first quarter due to the timing of contingent revenue collections, was 28.7%, down more than two points from the first quarter of 2023. The decline was largely due to lower contingent/extraordinary revenue margins.
“Air carriers face increased losses due to storm activity, nuclear jury verdicts, a meteoric rise in replacement costs and the 2022-2023 supply chain fiasco,” Doran noted. Given the profitability of a brokerage firm, it is worth keeping an eye on this downward trend.”
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2024-05-23 11:43:12
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