Hard Market Challenges Spur Opportunities for Independent Agents: Study

The insurance industry is facing its toughest market conditions in a generation, with rising rates and stricter underwriting creating headaches for agents in the form of difficult renewal conversations and challenges placing new business.

The 2024 Agent-Customer Connection Study, conducted by Liberty Mutual and Safeco Insurance, examined how independent agencies and their clients are navigating this hard market environment. The research found 83% of agents say it’s the hardest market they’ve ever experienced, while 90% of consumers reported their insurance rates increased over the past year. However, despite the difficult conditions, the study also identified opportunities for savvy independent agencies to continue growing their business.

Communication Gap

A concerning gap exists between insurance agents and their customers when it comes to understanding and communicating about rising insurance rates. The survey found that only about 20% of customers say they understand the market forces driving rate increases. The vast majority, 62%, said it’s important for their agent to educate them on the changing dynamics of the insurance market.

This gap persists despite efforts by agents to address the issue. While 70% of independent agents surveyed said they proactively discuss market conditions with clients, about one in three customers still expressed dissatisfaction with their agent’s explanation of market forces and the impacts on their specific policy.

Perhaps most troubling, customers are more likely to first learn about rate increases from their bill than from their agent. The survey found that only 20% of customers first heard about their rate hike from their agent, while 58% said they noticed their bill amount change before receiving any communication about it.

So, what do customers want from their insurance agents? Overwhelmingly, they are looking for help understanding their policies and coverages, the survey found. Eighty-five percent said it’s important for agents to review policy coverages with them, and 79% want their agent’s help to better understand their policy. Additionally, one-third of customers said they want more frequent reviews of their coverages and insurance needs.

Opportunities to Show Value

Insurance agents have clear opportunities to demonstrate their value to customers, according to survey findings. To build trust, agents should focus on the traits customers value most highly: experience with insurance (cited by 79% of respondents), responsiveness to requests (77%), and making insurance options easy to understand (75%).

At the same time, the survey revealed areas where agents have room for improvement. While 67% of customers value proactivity in knowing their needs, only 31% of agents consider this a strength. Similarly, 64% of customers appreciate excellent listening skills, but just 22% of agents self-identify listening as one of their strong suits. Closing these perception gaps represents a major opportunity for agents to better meet customer expectations.

“Insurance is a relationship business. In a hard market, those relationships have become even more important,” said Luke Bills, president of independent agent distribution at Liberty Mutual.  He added that “today’s customers are turning to their agent for even more. They want their agent to educate them on changing market conditions, help them better understand policy changes and provide advice on risk mitigation.”

Growth Strategies

Our research examined agencies that reported annual revenue growth of more than 10% and found three strategies that set their agencies apart. These strategies are working to fuel success today and prepare for when market conditions improve:

  • Diversifying book of business: Higher-growth agencies were 50% more likely than lower-growth agencies (32% vs. 21%) to report that they are diversifying their book of business. This often means shifting toward markets less impacted by the hard market, such as commercial lines.
  • Investing in new retention programs: Higher-growth agencies were twice as likely (14%) as lower-growth agencies (7%) to invest in new retention programs aimed at keeping existing clients satisfied. While retention is always important for sustainable growth, it’s even more crucial during a hard market when carriers restrict new business.
  • Positioning for future success: Agencies experiencing increased retention rates and growth are continuing to invest in new client acquisition programs and hiring additional staff members. By investing today, they’ll be well-positioned for future success.

Rising to the Challenge

Independent agents maintain a strategic advantage due to the ease, choice and expertise they provide to insurance customers.

Many agencies have nimbly adapted to the changing market conditions, implementing strategies to maintain customer satisfaction and keep their businesses afloat. In fact, 65% of agents said their customer retention is stable or better than a year ago, while 69% reported acquiring new clients at the same or better rate. Agencies focused on commercial lines saw even stronger year-over-year retention and growth compared to those concentrated on personal lines or with an equal focus.

“Hard insurance markets are challenging, but they don’t last forever. It’s with a sense of optimism that I can say – and this research validates – that independent agents are well-positioned to weather this market and come out stronger, more resilient and customer-centric,” Bills said.

View the full report from Liberty Mutual and Safeco here.

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