Commercial Lines driving their success, Reagan Consulting survey shows
Atlanta, GA (Aug. 13, 2021) – U.S. independent agents and brokers posted their highest organic growth rate in the 13-year history of Reagan Consulting’s Growth & Profitability Survey (GPS) in the second quarter (Q2) of 2021. Buoyed by the hard market and rebounding economy, they grew by 7.1%, surpassing their previous high of 6.9% organic growth in Q2 2013.
They anticipate no loss of momentum and predict a full-year organic growth rate of 7.0% in 2021. “The hard market in the property-casualty business and the favorable economic environment are expected to continue for the remainder of the year,” says Brian McNeely, Reagan Consulting partner.
“There are still some lingering cost savings from the pandemic, but they are waning,” says McNeely. Pandemic-related cost savings — for example, reduced travel, entertainment, advertising, and auto expenses —contributed to higher margins this year. But these selling expenses should return soon to pre-pandemic levels, he says.
Individual lines
Commercial lines continued to lead growth, building on a trend from Q1 2021. Commercial lines posted an all-time-high organic growth rate of 9.2%, while the previous Q2 high was 8.2% in 2013. Significant premium price increases for several products are helping to push the growth — including a 19.7% increase in umbrella prices followed by an 18.0% increase in cyber prices. Other products with premium hikes at 9.0% or higher are commercial auto, employment practices, commercial property, and directors and offices insurance.
Personal lines posted a decline in Q1 2021, but are now rallying with a Q2 2021 organic growth rate of 2.1%, the historical Q2 average.
Group benefits still trail behind their historical averages, but did increase from 2.1% organic growth in Q1 2021 to 3.1% in Q2 2021 — tying “with Q2 2010 for the most anemic Q2 result ever,” says McNeely.
Public brokers
For the second time in GPS history, public brokers surpassed the performance of independent brokers and agents by 2.9 percentage points in Q2 2021, posting an organic growth rate of 10%. In explaining that growth, McNeely observes that public brokers operate in both national and international arenas, and their broader geographies better capture the benefits of market hardening and economic recovery. Additionally, public brokers usually write larger accounts, and some of the specialty coverages they sell have seen “dramatic price increases in early 2021,” he says.
Potential depressors
Four factors have the potential to impede agent and broker growth this year, says McNeely: significant tax increases; higher-than-anticipated inflation; continuing supply chain and labor market issues resulting from the pandemic; and COVID-19, which may see even stronger variations than the Delta variant now sweeping the nation.
For further observations and commentary on the Q2 2021 results, contact Brian McNeely at Reagan Consulting, 404.869.2523 or [email protected].
The Reagan GPS was formerly known as the Organic Growth & Profitability (OGP) Survey. Each participating agency in the GPS receives a customized, confidential report of its performance compared with the overall survey results, along with Reagan’s quarterly commentary of industry trends affecting agents and brokers. For information on participating in the survey, contact Michelle Appelbaum at 404.869.2541 or [email protected].
About Reagan Consulting
Reagan Consulting is a management consulting firm providing strategic consulting, valuation, capital raising, and merger-and-acquisition (M&A) services to the independent insurance distribution system. The firm’s services for insurance agents and brokers, bank-owned agencies and other participants in the insurance distribution marketplace include: appraisals of fair market value, capital raise advisory, mergers and acquisitions advisory, ownership perpetuation planning, strategic planning facilitation, key employee compensation and equity plan design, and agency performance benchmarking. Reagan Consulting co-developed the well-known Best Practices Study and produces the quarterly Growth & Profitability Survey. For more information, visit ReaganConsulting.com.
Source: Reagan Consulting
Tags: Brokers, growth, independent agents, Reagan Consulting, survey, United States (USA)
