Merger and acquisition activity among major international brokers –such as last week’s $18 billion merger deal between Willis Group and professional services firm Towers Watson – should send an important message to smaller independent agencies on how to survive in an environment of heavy consolidation, says one industry leader.
According to John Tiene – chief executive with the East Coast-based Agency Network Exchange – banding together through networks and alliances is the best approach for independents hoping to compete with broker operations that are growing increasingly larger.
“The Willises of the world are only going to get bigger and continue to crowd out mid-sized agencies that have historically made up the bulk of the market,” Tiene told Insurance Business America. “That really just reinforces the need for insurance agents to start thinking about joining an organization that gives them some of the similar scale and access that Willis and others have.”
The Willis/Towers Watson deal is certainly massive, valued at $18 billion and expected to bring in annual revenues of $8.2 billion. Particularly key to the transaction is the access to data analytics Willis will gain from Towers Watson, aiding the brokerage in richer consumer insights, risk management solutions and product development.
That only underscores the importance of developing technology for smaller and mid-sized agencies – again something that can be accomplished through agency networks, says Tiene.
“The analytics piece is very important – independent agents have to be as tech savvy and proficient as the bank, the investment house and the corner drugstore,” he said. “Commercial clients especially are now wanting to get insurance online, and agencies have got to get with it and start doing business in different ways.”
Agency Network Exchange recently announced an exclusive deal with Vertafore to provide members with agency management software that includes some of those business analytics solutions. Other technology providers have launched similar tools to help agencies compete with larger brokerages and carriers.
Such capabilities – including the greater market access afforded by membership in a network or alliance – will only grow in importance as 2015 shapes up to be one of the biggest years for insurance consolidation in recent memory.
With the right tools, however, Tiene sees this trend eventually favoring smaller independents.
“The challenge with the bigger, conglomerate brokers is that they haven’t taken time to become efficient organizations,” he said. “Many of their clients feel lost within the labyrinth of a mega broker, and that affords a great opportunity for smaller agencies to take their business by being nimble and providing the kind of service clients want, with the access and influence of a larger organization.”