Insurance Agencies & Brokerages
Companies in this industry act as agents to sell insurance policies and annuities underwritten by insurance carriers. Major companies include Arthur J Gallagher & Co, Brown & Brown, and Marsh & McLennan (all based in the US), as well as Aon, Lloyd's, and Willis Towers Watson (all based in the UK).
The global insurance industry, which includes carriers as well as agents and brokers, generates about $5.3 trillion in premium volume each year, according to Statista. The largest global insurance markets are the US, China, and Japan, followed by the UK, France, and Germany.
The US insurance agencies and brokerages industry includes about 140,000 establishments (single-location companies and units of multi-location companies) with annual revenue of about $140 billion.
Many companies that primarily offer insurance products to businesses function mainly as brokers. Captive agencies operate as a sales agent for a single insurer, working on its behalf; independent brokers sell products from several providers. Insurance carriers are covered in separate industry profiles.
Low interest rates, sluggish premium growth, and rising catastrophe losses are putting downward pressure on margins for insurance agencies and brokerages. Soft market conditions drive consolidation in the industry as companies look to maximize revenue growth.
While the traditional intermediation model remains dominant worldwide, direct-to-consumer digital distribution of insurance policies threatens brokerage sales in many established and emerging markets. Companies also face growing competition from banks, financial advisers, and nontraditional distributors.
To win business, agencies rely on marketing, client referrals, and customer service. Name recognition, connections with more insurers, and the ability to craft more complex insurance packages are benefits of belonging to large brokerage networks. Small agencies may compete by specializing in a specific product line or customer group.
When the economy contracts, demand for insurance falls as consumer income and commercial activity decline. During periods of economic difficulty, smaller agencies may branch into more diversified fields to build business. Despite the prominence of large companies in the commercial segment, the US industry remains highly fragmented: the largest 50 firms account for about 30% of revenue.
Growth in Emerging Markets - Insurance agencies and brokerages looking to expand internationally are targeting China, India, and other emerging markets where market saturation is low and new sales opportunities are plentiful. Insurance can contribute to economic growth by enabling trade, commerce, entrepreneurship, resource allocation, and risk mitigation. Affordability, regulatory challenges, and lack of trust in the industry can be major barriers to growth in emerging markets.
Broad Reach - Having a broad geographic reach and a diversified product portfolio helps insurance brokerages gain ground against the competition. Avoiding concentrated risk from one area of business, such as selling coverage for classic cars during an economic downturn or life insurance in a manufacturing hub where employment is on the decline, can keep agencies from relying too heavily on one revenue stream.
Strong Brand Recognition - Agencies that represent trusted insurance brands have a greater chance of attracting and retaining customers. Agencies gain contracts to promote policies from recognizable names such as Progressive or MetLife. Representing well-thought-of brands can help agents bring the best value to clients with strong policies, support tools, and referral networks.
Companies to Watch:
Marsh & McLennan (MMC) is the top global insurance broker. The company grows through continual acquisitions and organic expansion, with increased revenue over the past several years. It made more than 120 acquisitions or investments between 2013 and 2019. MMC offers brokerage, consulting, risk management, and human resource services worldwide.
Aon is the second-largest global insurance broker, with about 50,000 associates in some 120 countries. The company relocated its headquarters from Chicago to London in 2012, converting to a public limited company. Its top markets are the US and Europe. The company recently sold its benefits outsourcing business to focus on its core brokerage and consulting operations.
Lemonade is an insurance technology (insurtech) company working to disrupt the insurance underwriting and brokerage markets by replacing paperwork and brokers with machine learning and bots. The company has backing from venture capital firms including GV (formerly Google Ventures) and SoftBank Group.
Products, Operations & Technology
Major insurance products sold by agents and brokers include property and casualty (P/C), health and medical, and life. About 60% of industry revenue in
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms