The End Of The Independents?
Despite managed competition, solo insurance agents are hanging on
"I did it just in time because it was before this whole thing happened," she said. "Now it's his problem not mine."
In fact, Cormier said, Woodcome is much better equipped to handle the new car insurance landscape than she was, largely because his agency is three times the size of hers.
With the advent of managed competition, insurance agencies of all sizes are rushing to add more carriers and provide their customers with more plan options. But that can be particularly difficult for solo and small agencies, and some of them now seem to be looking at the same path Cormier followed. But others say it's too soon to decide what the new system will mean to small agencies.
Michael Ryan, a partner at Donovan Sullivan and Ryan, a Westwood CPA firm that specializes in working with insurance agencies, said he's seeing a few more agents coming to the firm with questions about what their business would be worth should they decide to sell.
"I'd say there's, at this point, a little more activity," he said. "I think most of the small insurance agents are kind of waiting to see what's going to happen."
Economies Of Scale
Before closing her doors, Cormier said, she offered her customers policies from only one carrier. That wasn't really a problem, though, since under the old auto insurance system rates were set by the state and didn't vary from company to company. Now, with different carriers using different calculations to set the rates that will take effect in April, customers are looking for agencies that can shop around and find them the best deals. But Cormier and Ryan said some carriers don't want anything to do with tiny agencies.
"They want volumes of business," Cormier said. "If you're a small agency you're not producing the volumes they're looking for."
Chris McCall, a solo agent in Worcester, said it's possible to get a variety of carriers as a small agent, but it's not easy. He said he sells policies with 11 of the 19 carriers in the state and his business is doing very well. One key, he said, is being part of insurance agent networks like New Hampshire-based Satellite Agency Network and Renaissance Group of Wellesley, which give small agents some of the same advantages as larger ones. Another is making friends with the marketing reps from the various carriers.
"You get to know them and you establish relationships, and you also show them results of what you've done previously," he said.
A Trickle, Not a Flood
Small agencies merging into larger ones isn't a new phenomenon, of course. Daniel Foley Jr., vice president of government affairs for the Framingham-based Massachusetts Association of Insurance Agents, said solo agents may not be selling or closing much more now than they were in the past.
"I think over the years, that's kind of been a normal trend," he said. "Whether it's more so because of these new changes coming down from the auto system, it's hard to judge. It's not an everyday occurrence that we get calls."
For those that are looking to sell, Ryan said, most will be able to find a buyer, but they may not get as fat a check as they'd like.
In fact, Ryan said he wouldn't advise most small agencies to sell now. He said all agents will suffer if national companies like Geico and Progressive, which market directly to customers, come into the market. But he said that's only likely if the state opens up its regulations to let carriers use information like customers' credit scores to set rates, and he isn't betting that will happen.
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