In 1997, Jon Pappas was working for an independent agency in Washington, D.C., when he was contacted by the Strategic Independent Agents Alliance with an opportunity to bring its network to the mid-Atlantic region.
Through joining the alliance, he could remain independent, but also gain access to the national organization’s combined experience and presence with carriers to benefit his customers and other independent agents.
Jon Pappas
“The value was the whole premise of being part of a larger group that gave us strength in the marketplace and an opportunity to help other agencies struggling to get new markets,” Pappas told IFAwebnews.com. “It was a soft market then as it is now, so it intrigued us in terms of opportunity.”
Today, Pappas’ Potomac Insurance Network, an SIAA master agency, has more than 75 member agencies in Washington, D.C., Maryland, Virginia, and Delaware, providing others strength in numbers.
“[This network] provides our agents with access to markets and companies they otherwise don’t have access to – it enables them to do business as though they were a larger agency and a lot more options for their clients,” he said. “It’s largely about support and access. It’s also about getting a much larger organization to advocate on your behalf – that’s a significant increase in market strength.”
Different names, common concept
Call them cooperatives, aggregators, networks or alliances, the concept of agencies banding together for better business dates back decades, but the practice seems to be picking up steam these days.
“We are seeing it more,” Madelyn Flannagan, vice president of agent development, education, and research for the Independent Insurance Agents & Brokers of America said. “A lot of it comes down to combining efficiencies and smaller books of business, and aiding in perpetuation planning, or ‘dating before marrying.’”
Last year, the Big I published a guidebook for its members on the various names and make-ups of agent networks through its Council for Best Practices.
“We are seeing ‘loosely formed’ groups in huddles not as defined, but agencies coming together, sharing an office and company appointments, and even an office,” Flannagan said. “They are coming together as a huddle and getting more by working together. There are certain agreements and we definitely recommend a legal agreement, but some are just more informal.”
Economy just one factor
In fact, Flannagan said the Big I supports “anything that can keep [independent agencies] as viable and vibrant businesses, as long as owners are aware of the choices made by signing up” to join a network.
As far as motivation to join networks, Flannagan said the current economic climate can be a factor, as businesses strive to stay in business with commercial and personal lines business declining nationwide. Another factor may be perpetuation of the agency.
“You may find you’ve made a great arrangement and a good fit [to continue in the business], or both agencies may both want to get out and together, as a bigger entity, they are a more attractive offering,” she said.
Networks vary
In Maryland, several network opportunities exist, including those through PIN, Smart Choice and The Iroquois Group, each with characteristics that make them unique while all utilizing the strength in numbers concept.
Pappas said there is a difference between agency networks and said it is “important to understand what you’re getting and what you may be giving up when you join a network.”
At PIN, selection into the network involves a vetting process where he estimates one of every 10 applications becomes members of the alliance based on characteristics including insurance experience and high ethical standards.
Pappas said the current economy may be one factor driving agencies to join a larger alliance or network, but he is seeing more direct or captive agents move to the independent agent approach.
“Some of that is the result of what has happened to a lot of the larger companies in our industry, some of it is simply a desire to have the ability to place business where it is best suited, as opposed to having minimal options associated with representing one company,” he said. “Agents don’t have to sell and get out of the business in order to improve their situation and I believe as more of them investigate alliances, they’ll realize that for themselves.”
‘A win-win solution’
Doug Witcher
In 1994, Doug Witcher was faced with the decision of either selling his agency or merging it with another. After being dropped by one of his major carriers for not meeting its mandated growth objectives, he realized other independent agents could suffer the same fate.
Today, Witcher’s Smart Choice is comprised of almost 3,000 agents in 29 states, including 113 new agents appointed in the first two months of this year. Last year, the agents were responsible for writing $320 million in personal and commercial insurance.
Witcher said in today’s hard market, agents are finding that insurers are requiring higher minimum production requirements, and even canceling the appointments of agents who aren’t producing at certain levels.
For young agents new to the industry or veteran professionals changing carriers, networks can provide access, special discounted coverage, support and service from peers, and other benefits, he said.
“Networks can provide a win-win-win solution to all parties – agents, companies and the network itself,” Witcher said.
At Iroquois Mid-Atlantic, Matt Ward serves as managing partner, overseeing more than 500 agencies, including about 100 in Pennsylvania and Maryland. As part of New York-based The Iroquois Group, comprised of 1,700 member agents nationwide, Ward’s agencies alone distributed $6 million in contingency income.
“The goal is to help agencies help increase their value and profit in a way that doesn’t sacrifice quality,” he said. “If the objective is to partner with an organization that will help the agency grow revenues, profit and agency value without losing independence, Iroquois is the answer.”
This story originally appeared in the July 2009 print edition of Insurance & Financial Advisor.
No related posts.