2018 Best Practices Study

As evidenced by the remarkable improvement achieved by our industry over the past 25 years and the incredible valuations enjoyed by high-quality insurance agencies today, the independent insurance agent and broker system has never been healthier. Despite the numerous challenges faced today, the future of our industry has never been brighter. Perhaps it is simply human nature, but it seems we tend to focus far more on our challenges rather than our strengths. This is true in our industry as well. In times defined by increased competition, massive consolidation, technological disruption, and the need for a material infusion of young talent, it is instructive to remind ourselves of the challenges we have faced as an industry since the first Best Practices Study was published in 1993. • In 1993, during the first Clinton administration, the industry faced the specter of a move to a universal health care system in the form of “Hillarycare,” a health care reform package closely associated with the chair of the task force devising the plan, First Lady Hillary Clinton.

• In the mid-1990s, the Internet emerged as a sizeable threat to the independent insurance agent and broker, who feared being “amazoned” out to its role as a trusted advisor to insurance consumers.

• In the late 1990s, regulatory changes opened the gates to allow banks to compete head-to-head with insurance agents to deliver products and services to insurance consumers.

• In the early 2000s, Eliot Spitzer, the Attorney General of New York, launched a full-scale attack on contingent compensation, which serves as the single largest contributor to insurance agency profitability.

• In 2010, President Barack Obama successfully passed the Patient Protection and Affordable Care Act, also known as Obamacare, representing yet another direct threat to the independent insurance agent and broker’s role as a trusted advisor intermediary between insurance providers and consumers. • More recently, the independent insurance agent has faced a new potential adversary in the form of “insurtech,” technology-based insurance delivery providers, some of whom hope to unseat the independent agent from its advisory role with consumers. • Today, industry consolidation continues at a pace never before experienced. Insurance agency sales to well- capitalized private equity investors and publicly-traded insurance brokers have increased to all-time highs and some are questioning the long-term viability of small to mid-sized independent insurance agencies. Despite these challenges, and many more, Best Practices agencies have not only survived, but thrived over the past 25 years. The industry is, if nothing else, incredibly resilient and adaptive to the environment in which it operates. This speaks in large part to the entrepreneurial and creative natures of the men and women who dominate the independent insurance agency and brokerage ownership ranks in the United States.

In our estimation, independent insurance industry leaders will continue to adapt and thrive. To do so, they will require many resources, including the Best Practices Study .

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