The majority of independent insurance agencies are seeing more profit, but they could be doing better.
In a recent report by the Independent Insurance Agents & Brokers of America, 60 percent of agencies reported increased revenue for 2011 from both personal lines and commercial lines, compared to 42 percent in 2010.
Jeffrey Rieder, a partner at the Ward Group, a provider of benchmarking and best practices studies for insurers, said premium volume is increasing after some challenging years.
Fewer agencies were eligible for contingency commission payments in 2011, because they did not meet the premium volume, loss ratio or growth targets, or any combination thereof, according to Ward Group's report, Selecting Agencies for the Future.
About the same number of agencies met the eligibility criteria but hit a lower target and thus received a lower contingency payment.
More effective agency management would allow P&C carriers to improve their combined ratio by 3 to 5 points, Rieder said, and drive sustainable long-term value for both the company and their agencies.
"Typically," he said, "the worst 2 to 3 percent of a company's agency force has a very detrimental impact on the overall results of the company. They have very poor loss ratios.
"They have a tendency to put bad business on their books or not provide enough information to the company to underwrite the risks," he said.
The number of independent agencies has grown to 38,500, an increase of about 3 percent over the past few years, according to the IIABA study, which has been completed biennially since 2002.
The number had been flat between 2006 and 2010, after declining from 44,000 in 1996.
--By Anne Freedman
March 1, 2013
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