Insurance: Agent Organic Growth Declines For 1st Time in 2 Years

Despite loss of momentum, 2022 may yet be their best year, says Reagan Consulting

For the first time in two years, agent and broker organic growth declined during the third quarter of 2022, dropping from a double-digit “high-water mark” of 10.2% in Q2-2022 down to 9.5%. That is the key take-away from Reagan Consulting’s Quarterly Growth and Profitability Survey with respect to Q3-2022.

The following chart provided by Reagan Consulting tracks the results from the last quarter of 2008 through the present:

Insurance: Agent Organic Growth Declines For 1st Time in 2 Years

The “deceleration could be a sign of the economic realities beginning to impact the industry,” observes Mark Crites, partner of Reagan Consulting, which has conducted the quarterly Growth & Profitability Survey (GPS) since 2008.

Despite this marked decline, however, Mr. Crites notes that the industry’s organic growth is still setting a “blistering pace.” In Q3-2022, he explains, nearly half (45+%) of respondents posted double-digit organic growth. Furthermore, Mr. Crites says, “only 1.6% of respondents published negative organic growth results, which is the lowest percent of respondents of any quarter in GPS history. This result is particularly impressive in light of current market uncertainty.”

The organic growth of public brokers has been decelerating at a faster pace, the GPS indicates. In Q3-2022, their average organic growth rate was 8.3%, down from 10.8% in the same quarter of 2021. “The public broker performance trend could be a precursor of what is to come for GPS firms,” Crites says.

Performance by lines

As stated in the report, personal property-casualty insurance continues performing better than it has historically, posting median organic growth of 5.9% in Q3-2022, an all-time high, up from 4.2% in the same quarter of 2021. Personal insurance has “become a differentiator for many agents and brokers seeking to round out accounts and create a stickier client relationship,” says Mr. Crites.

Group benefits insurance “has bounced back in a big way,” says Crites, increasing its median organic growth of 3.9% in Q3-2020 to 5.8% in Q3-2022. Commercial property-casualty insurance continues to outperform both personal and group benefits lines. GPS agents and brokers posted a Q3-2022 median organic growth of 11.8%, the highest rate ever recorded by Reagan in the third quarter. That rate, however, was down from its peak of 12.2% in Q2 of this year.

Operating margins (which exclude contingent and bonus income from carriers) for GPS participants reached 17.6% in Q3-2022, a Q3 record, showing that “agents and brokers are watching expenses carefully even as travel and entertainment spending approaches pre-pandemic levels,” concludes Mr. Crites.

Formerly known as the Organic Growth & Profitability Survey

The quarterly Reagan GPS (Growth & Profitability Survey), formerly known as the Organic Growth & Profitability Survey, was launched in 2008 and is the industry’s premier source of real-time data for mid-size and large insurance brokers. Many of the industry’s leading firms rely on the data each quarter to benchmark their results and assess their performance.

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