In late January, Reagan hosted approximately 250 industry leaders from high-performing agencies in Savannah, GA for the Best Practices Symposium, a once every three year event designed exclusively for Best Practices firms. During the meeting, several predictions were made about the future of the industry. Agency leaders in attendance were asked to weigh in on some of the trends and dynamics that they anticipate over the next few years. Here are some of the results:
- Insurtech is not going away. There has been a lot of chatter about the difficulties of Insurtech firms, but Best Practices firms believe their investment in Insurtech will increase. Two-thirds of the agents and brokers predicted that their embrace of technology-driven insurance start-ups will rise, with only 4% anticipating a decline. The expected investment increase may have as much to do with Insurtech firms getting better as it does with agents and brokers more readily embracing technology. As Insurtechs evolve, the firms that emerge as victors are likely to be better run and more easily accessible by the broker universe.
- Private equity is not going away, either. We asked the Best Practices firms whether the impact and influence of private equity investors would rise or fall and 70% of respondents anticipated a steady or even increased level of influence from these investors. Given the current impact of private equity – 70% of all M&A transactions are done by PE-backed firms, 12 of the top 20 brokers are PE-backed – a higher level of PE influence is almost difficult to imagine. But whether PE increases or just maintains its current impact, it has solidified its influence on insurance distribution.
- We’ve only seen the beginning of producer mobility. The prevalence of the producer lift out strategy has grown recently, but potential changes to restrictive covenant rules via the FTC and the economics associated with lift-outs are driving this activity higher still. 80% of Best Practices firms are forecasting greater adoption of the lift-out model and augmented levels of producer mobility. Agents and brokers will need to concentrate their efforts on equity and other talent retention initiatives in order to preserve agency value in this environment.
- Have valuations peaked? Interest rate changes have created a few questions about an otherwise astoundingly healthy M&A and valuation environment. Agents and brokers, though, are split on whether we’re at the peak. 45% of Best Practices leaders anticipate that valuations, when we gather for the next Symposium in three years, will be equal to or higher than current multiples. The other 55% anticipate a decline, though the majority of these respondents predict only a modest decrease.
Time will provide the definitive answers, but these outlooks do cast light on where the insurance industry is headed. And as 2023 gets fully underway, it is helpful to understand how some of our industry’s most accomplished leaders are thinking about – and preparing for – the future.