More independent brokers developing specializations, investing in tech: report

Independent agencies and brokerages in the United States are increasing their specializations and planning to make more investments in technology for the coming year, according to a recent report from a major industry association.

The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) 2013 Best Practices Study found that specialization has increased across agencies of all sizes.

“Developing an expertise or proficiency in a certain industry or product has shown to facilitate targeted leads and referrals, improve retention and provide a competitive edge for an agency,” the association noted in a statement on its findings.

Many of the agencies included in the report are also planning to invest in different technologies over the coming year.

For smaller agencies (revenue under $5 million), Internet marketing and social media were the top investment plans, while among agencies with revenue over $5 million, agency management systems were the priority, according to the report.

“Internet marketing and social media investments ranked fourth for the larger agencies, perhaps because many of these firms have already ventured into these fields,” the IIABA noted. “Across all revenue groups, the average number of agency staff members who devote time to social media activities is 1.3 employees and that accounts for approximately 10% of their time.”

Since last year’s study, average growth rate in total commission and fee revenue was 9.4% (up from 2.1%) for agencies with net revenue of less than $5 million, and 9.8% (up from 4.5%) for agencies with net revenue of more than $5 million, according to the report.

“Between 2007 and 2010, when the soft market and an extremely weak economy made positive growth nearly impossible, Best Practices agencies continued to invest in growth strategies that would allow them to achieve organic growth and obtain a competitive edge as conditions improved,” the IIABA’s statement noted.

“The results of those strategies—which include hiring new producers and equipping them with new tools and resources, enforcing more producer accountability, focusing on specialty/niche areas and expanding marketing/advertising activities—has paid off.”

In terms of profitability,contingent income has grown an average of 21.8% for agencies with revenue of less than $5 million, and an average of 10.7% for those with revenue of more than $5 million, according to the study.

The IIABA report, created in collaboration with Reagan Consulting, selects “best practices” firms for outstanding management and financial achievement,

Agencies are nominated by either an IIABA-affiliated state association or an insurance company and qualified based on operational excellence. Financial and benchmarking information for the participating agencies are also reviewed and updated.