What Does $20 Billion Mean For You: The Personal Lines Shift to Independent Agencies

Independent agents just scored a major win! The personal lines market share for the IA channel has grown nearly $20 billion in the last four years. Shane and Tonya break down what this momentum means for agency owners, why consumers are choosing local advisors over call centers, and why personal lines are creating stability and resilience for independent agencies. 

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Transcript

Announcer: [00:00:00] This is IA Forward your Playbook for Success as an independent insurance agent. Here to help you knock it outta the ballpark are your host, Shane Tatum and Tonya Lied. 

Tonya: Welcome to IA Forward and welcome to an episode filled with really good news. 

New market trend we have had. An independent agency market share shift, that is huge. From a personal alliance perspective, we have gone from 35.7% in 2022 to a 39% market share in 2024.

That is nearly $20 billion in premium. That has shifted into the independent channel in just four years. 

Shane: That is a. Drastic number to put this in perspective. I remember 20 to 25 years ago, being young in the industry and we were talking 23 to [00:05:00] 24% of the market in personal lines. What's really crazy about this number isn't just the roughly four point jump, which is huge over two years, but the fact that we are talking almost between 15 and 16% market share jump in 25 years.

In personal lines. Okay. The independent agency space has always dominated commercial lines. You go back to the mid to late nineties. Even before that, the independent agency channel is gonna be dead. For personal lines, insurance for sure. They were having our funerals. It was the end of it. And just over this two and a half, three decade time period to see us move.

From the low 20% to almost 40% of the industry. Personal lines, market share is staggering. Exciting. I can play on our Monday morning quarterback and say, I told you so because I've always been an independent agency [00:06:00] advocate. Obviously I didn't know this type of swing. We were hoping for five point gains over a decade or something like that.

The fact that we've seen this shift is so exciting and it's also just more validation in case anyone needs it, that the consumer wants choice and an advocate, the consumer wants an advisor. I think that's really the exciting thing about this news. 

Tonya: I think you really hit the nail on the head with the reason behind this personalized momentum within the independent agency channel, people are wanting that local, trusted advisor.

They're frustrated with call centers. They're frustrated with digital only models. They wanna talk to somebody. And understand with the economy being what it is, they need somebody to help them through. Why are my [00:07:00] rates going up? Where do I need to be putting my money? What do I really need to protect? And we can do that.

Shane: This is happening in the era of private equity, of consolidation of agencies and. Seeing this advisor concept continue to grow, people have said for a while that we were going to be obsolete. Every innovation that comes out talks about the independent agency death nail. Well, this is gonna really hurt agents.

At no point has that actually happened. It's not anything that's actually to fruition. And so either we're gonna have cry wolf scenario and you know something's really gonna happen one day and we're not gonna recognize it. Or people are just dead raw. What people want versus what people say that people want.

Are not connected [00:08:00] whatsoever, and we've talked about, hey, observe with your eyes. Observe the news with what you see. Observe what you know is happening through your personal lens, versus just taking what somebody else is saying as the gospel truth. This is not what's actually happening. You need to actually pay attention for what, what you see and what we, what I see.

Biasly selfishly, if you wanna say that, is within our agency network, I see our partner agents thriving, and they're mostly personal lines agents. We have many that do a good bit of commercial lines business, but we're very personal lines heavy right now because of where our agents came from. Our agents came from personal lines experiences, so that was their natural shift.

It was not hard for them to move from an exclusive agency environment. To a choice model within the independent agency environment. And so I [00:09:00] just see this as a continued validation that what we're doing in the space, what we're doing in the IA channel is working and will continue to work. AI doesn't matter, right?

It's just another tool. It's just another tool in the tool belt. As long as we keep that client as our focus, then we're gonna continue to. Gobble up that market share over the next several decade, et cetera. 

Tonya: I believe that tools are part of this expansion, though 20 years ago, we did not have the comparative raters.

We didn't have the CRMs, things that are making us faster and more competitive. We weren't able to get the information as fast as we are now. And I believe that's giving us a best of both worlds situation, allowing us to be more competitive. 

Shane: One of my favorite books, good to Great talks about [00:10:00] technology as an accelerator, not an end all, be all.

Tools, as you say, have never been a changing of the guard type of thing. The ones that embrace the tools correctly accelerate their business. The ones that don't embrace the tools, it doesn't necessarily mean they're demise. That's where I see the conversations going and repeating themselves. AI is going to cost people jobs, not necessarily, right?

I don't know a lot of agency owners who are like so calloused about their people that they're looking to replace their people with ai. Now, will they be able to be more efficient? Through attrition, retirement, whatever. Maybe they don't replace one for one. I don't really call that replacing people's jobs.

I call that becoming more efficient. I've seen that through the years with various technology and [00:11:00] agents using those tools to make their business more efficient. I think the VA model, the virtual assistant model has been. A contributor to that. We've had these licensed CSR account managers for decades that the systems created processors out of.

They saw themselves as processors instead of what they really are, which is licensed experts, which is coverage managers, which is retention. Specialist. And so I think there's gonna be a shift because of things like AI and mooring automation, but I think we're also at risk of over automating and disenfranchising the client.

Technology's always gonna be a tool, an accelerator. I don't think it's gonna be a replacement function. The AI gurus laugh at me when I say that, but so did the guys in the eighties and nineties and two thousands. And again, here [00:12:00] we are. And we're still growing market share, and we're not necessarily losing people.

We actually need people in our industry. We need more people coming into the industry. 

Tonya: In the eight years that I have been in the independent insurance channel, I have seen carrier strategies change that have made this happen too. We're seeing more carriers opening access to independence. We are being able to expand reach in so many ways that eight years ago it was an absolute no.

Shane: Yeah. I'm gonna take you back to another origin point. I'm gonna call it the protectionism of the eighties and nineties carriers got into playing king makers. I called them the country club agents, the multi-generational, they're a member of the local country club. They're the largest agency. They're still a small business, anywhere from 15 to [00:13:00] 25 employees at the time.

They're a nice agency. They're very successful. They had the pretty offices. Carriers would come in and not allow the startup agents an appointment carrier appointments became a moat, right? A moat. It was created by someone that wasn't the actual. Business themselves. It was their partner, their carrier partner created the moat for their agency distribution.

What they didn't have the forethought on and agency networks came in and solved that problem. A few forward-thinking carriers got on that bandwagon and helped you had this protectionism going on. A lot of these agencies were eventually gobbled up by private equity. Or rollup strategies. Now, global brokers, they started pulling all of these [00:14:00] efficiencies back to centralized locations, and guess what happened at the carrier level?

The carriers started going whole crap. We're losing distribution points and we don't have enough new agencies coming in to replace this consolidation, which is really. How agency networks were birthed, you know, that's how they were born. They solved a problem in the market cycle because a lot of independent agency carriers had no infrastructure to deal with a startup.

The exclusive agent companies built a ton of infrastructure to get an agent from scratch to successful production. Independent agency carriers were just protecting their distribution. But weren't creating the future. When that consolidation happened, they didn't have the internal infrastructure to support a startup.

It just didn't work. And so the networks were [00:15:00] born, startups started happening again in the independent agency space. And here we are 20, 25 years later at a 15 point market share increase on a. Rapidly expanding market size in comparable compared to the last three decades. I think there's a lot of that to attribute to this personal line's growth, is they sort of did it to themselves in a way, recognize that agency networks would come in and be valuable in solving this problem, in getting this problem moved forward, so to speak.

Because now there's very few of those multi-generational agencies left. They're out there. But they're continued to be gobbled up by private equity, by roll-up strategies of large brokerages who are now no longer worried about organic growth at all. They're just growing through acquisition, which then leaves this startup culture, which is [00:16:00] phenomenal and so exciting.

We say it openly. Yes, we are a network that benefits from this concept and has benefited from this. For the last 15 years, very exciting times. You can probably tell it in my voice and I can talk about this for eight hours straight. We're not an eight hour podcast, so don't freak out if you're listening for the first time.

It's just one of those areas that gets me going because I get so excited about our future, and so it's now this open market strategy, and that's what I love about the choice model because it aligns with consumers desires about how they want to purchase insurance. 

Tonya: When you talk about this, you always refer to agency networks as they and what they did, because you have this humility.

You never really tell your story. 

Shane: Well, we were the first in a region. There was an unnamed national, [00:17:00] extremely large predecessor from the early eighties in the northeast. Who is now owned by private equity, which is fine. They had to figure out how to take chips off the table. I got no problem with that.

People start a business, put the sweat in. Those guys deserve everything that's come their way, but they were more of the first that took it from us. This concept of clustering. Clustering has been going on for long time, probably sixties and seventies, and on an informal basis. And then this national group took it to a whole nother level.

They started national expansion about the time we were starting in the late nineties. Regionally, south Central, we would be considered one of the first, 

Tonya: one of the major independent carriers said no to everybody but 

Shane: you and 

Tonya: you were the one that figured out how to get the Yes. 

Shane: We were definitely playing some salesmanship with a major [00:18:00] carrier.

Safeco now part of Liberty Mutual about to be rebranded. Liberty Mutual, Safeco said no to everybody. We were the first. To get the nod from Safeco. Thank you Myrna Estrada, for taking our torch and running with it. And we did a lot of selling to them on the concept. And at the time there needed to be somewhat of a regime change because there needed to be some folks retire and that's exactly what happened and they couldn't see it.

I hope I'm never that way, but I think that happens to us. We can't see over the horizon. We can't see what's coming. There were some folks running the Safeco organization in the eighties and nineties that just couldn't see that level of where things were going. They were actually the big protectionist at the end of the day, and many other carriers were a part of what they were doing as well.

I love history, so I think this is fascinating. We're talking history at the same time. We're talking market share [00:19:00] gain. That's what makes this industry so wonderful and I can kind of nerd out around this. We were early adopters early on. We were one of the first, yes, but there had to be some carriers jump on that acceptance of this new idea, this new model, because how were we going to start all of these new agencies that we were needing to replace the consolidated agencies with the carrier infrastructure just wasn't there.

The major independent agency carrier brands are not startups supporting. Carriers, they might decide to get into that game. Eventually, some of them tried it and said, why are we doing this? Our capital can be deployed in different ways that are better for the distribution. Those that have embraced that idea are the ones that are winning.

We have carriers that have embraced the idea of agency networks that completely turned their nose up to the agency network model 15 years [00:20:00] ago. That has been such a dynamic shift. In what's happened that's contributed to a lot of this market share gain has been just understanding that this is a business model that works to redeploy new agencies that are going to always be needed, right?

Because there's always going to be some attrition through retirement consolidation failure. Some agencies are gonna fail. And not be as strong. And so that book of business has gotta go somewhere and, and especially in a lot of our local communities across the country, I still just believe that this model is how we're gonna replenish our distribution points across the channel.

Tonya: Let's talk what this huge increase in market share means for independent agencies. We know that it confirms. Customer recognition of choice, advocacy, relationships, [00:21:00] building something with someone, but it also means revenue diversification On our agency balance sheets, it adds recurring revenue, and we are seeing how agencies are balancing commercial and personal, becoming more resilient.

Shane: I immediately go to the story of Cedar Oak Insurance. One of our partners just celebrated six years. I saw a post by Rudolph Garrison, the CEO. There. He was talking passionately about where he started, how he got here, and how he made it to this six year mark. Very successful growing and I just really, it just kind of struck me because struck that story repeated tens of thousands of times across the country.

Rudolph's story with Cedar Oak. Is the same thing that's going on over and over again. I think at the core of this, the consumer is [00:22:00] finally understanding what an independent agency is like. We've spent a long time as an industry trying to figure out how to help the consumer understand us battling through all the tens of billions of dollars combined, big brand ad spend.

Social media as much as it drives me crazy, has created a bit of a leveling of the playing field. People can do things a lot less expensively on a local basis. Google's geo search has really helped here, and just the idea of local reading, Rudolph's Post kind of brought me full circle to, wow, we as an industry are actually starting.

To break through that consumer understanding, and we've spent decades trying to figure this out. And the truth of it is, as a collective group, independent agencies, we were never [00:23:00] going to agree on an advertising strategy. We were never going to agree on a brand strategy. I mean, we tried trusted choice. We wouldn't let go of independent agent and move to trusted choice agent.

It was the closest thing we've ever had to getting under some type of consumer facing branding concept. And it's all but gone for the most part. We can't because it's our individual nature that makes us so great. That's what actually social media geo search, that's what things have created to bring it back to the community and in an ironic way, kind of break through consumer understanding about who we are.

And so as I think about that, I think that's what's great because people are fully embracing the local agent and not just the local exclusive agency company agent, right? They're [00:24:00] embracing who that individual is. They're embracing that local business, small business. We recently had a podcast with our Gen Z.

Expert. Our intern of this past summer Campbell Bag Shaw, she said it like, we need, we want believe, like, and trust, like we want transparency. And I think that's the big deal. Small businesses, independent agencies, all of whom are mostly small businesses, that belief, lack and trust. Function just automatically exist.

That transparency function exists because they gotta see you at the ball game. They gotta see you at the grocery store. These individuals can't afford to be shysters. They just can't because they're in their community. Their kids go to school with your kids. This is just what's so beautiful about our business model.

That's what I love about it. It's the truth. We live where you live. I'm sure [00:25:00] somebody's using that. As a tagline, but that's the truth of the model. 

Tonya: The recruitment and retention perspective of this. Younger producers, new agencies see personal lines as an entry point where 20 years ago, this was all about commercial and people are building successful agencies fast by selling personal lines for the first time.

Shane: They're allowing themselves to create a sustainable model. I think that's. Why I always lean personal lines first. I know there are people, commercial lines, experts who can start a commercial lines agency and be a hundred percent commercial lines. The thing that you have to understand about that though, is the larger agencies are mostly focused on commercial lines.

They have infrastructure, CS, R, account managers, risk managers on staff, loss control specialists on staff. There's a lot of little [00:26:00] things there. That make those large agencies work when it comes to more of that middle market business, which leaves mostly a small to midsize type of of account, which I love personally, I don't have a problem with that.

That's what we do for the most part in terms of our retail operation here in East Texas. And so I think that the building of a book of business around personal lines, then. Being able to either hire or create the expertise yourself and bring on some people to take care of the personal lines accounts and continue growing it, and you becoming the long-term commercial lines expert.

I just think it's a really good formula that I've seen work over and over again for a lot of our partner agents. I'm an advocate there. It's really hard when you lose an account that drives. 50% of your revenue. That's really risky. I had a [00:27:00] conversation with an agent several years ago who was in this situation, 50% of their revenue was from one account.

It was so stressful every year at renewal for this account because of how much it drove of their bottom line of their gross revenue. Right. It was just an, an incredible scenario. We had a conversation and my suggestion was to treat that, that account like. Profit sharing, like contingency dollars to not include that account in the operating of the business, which was painful to think about it first, like that was extremely painful for that agent to think about it first, and I still believe that was the right advice to give that agent.

This was an established agency. They were successful, but they were one renewal away from letting. Multiple people go in the office and having to restructure everything about their day and their [00:28:00] week. They were going to have to get back into personal lines because they had this one really large account driving.

So much of them personal lines don't have that risk and okay, that's great. If you can get 10 of those really large accounts, like 15 of those really large accounts. If you can, great. Do that. Then that loss of one account, it doesn't feel as bad, but when you're in that situation where you've got so much writing on one or two accounts, it's painful.

I'm speaking from a place of experience. We have a book of school districts in East Texas in our retail operation, and those accounts were large have continued to grow larger. Just reality of of that space. It's a very niche oriented space. It's a very specialized coverage risk pools like it's complicated all the way [00:29:00] around in the late nineties.

Our profit depended on the renewals of those accounts. Every year, our ability to turn a profit depending on that, and it was stressful. Very stressful. And we would go to board meetings and deal with this stress for two or three months every year trying to hold onto these accounts. It was not until we started thinking about those accounts as bonus dollars and building more consistent revenue around personal lines that we started relieving some of that stress.

This is just from history, and that is one of the reasons why I struggle with. An agent starting from scratch and going to commercial lines first. The incumbent hangs on to 92% of the accounts, so you're really only after 8% of the accounts in the marketplace. When it comes to commercial lines, totally different perspective with just what's going on in [00:30:00] personal lines.

You can go after the exclusive agent carrier book of business. They are way more vulnerable. To growing your new startup independent agency than going and attacking the third or fourth generation large metro based commercial lines focused risk management firm. That's a different space. And so I think that's really just important for us to always remember.

Tonya: Congratulations. If you are in the independent world and you are listening to us

Shane: 4%, like that's huge on this marketplace, like 35 to 39% market share, I would've told you you were crazy 20 years ago. There's no way that's gonna happen and. I just think is phenomenal. You're right. 

Tonya: I'm gonna leave us today with this quote from Mia Ham. Celebrate what you've accomplished, but raise the bar a [00:31:00] little higher each time you succeed.

Shane: Attitude's a choice. Make a great one. 

Tonya: Bye y'all.

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