Change is an inevitable reality, in business as in life. For the insurance industry, change has come in the form of ever-increasing consolidation amongst intermediaries at both the retail and wholesale level. Large national and international brokerage agencies, fueled by private equity, are driving a buying spree of more and more small and mid-sized operations. Each passing week brings new acquisition headlines, leaving many agency principals and producers to ask the obvious question – what does this mean for us?
Daniel Beck, a Managing Partner of Synapse Services LLC, recently sat down to answer some questions about the trend towards consolidation and how independent agencies can differentiate themselves in an evolving market.
Q: What does it mean to be an “independent” insurance broker?
The “independent” label – applied by many brokers to describe or market themselves – has become oversaturated, and perhaps not fully understood. Traditionally, the term meant independence from one single insurance company, where brokers offered their insureds access to multiple markets to find best available coverage. The meaning of “independence” in the insurance world has taken new form recently, now also referring to an agency’s ownership and management structure. Independent agencies are typically privately owned and managed by a smaller group of individuals, rather than large publicly traded operations or those managed by private equity firms.
More and more, I see “independence” as a corporate value, or principle. Independent brokerages are those who manage and grow themselves internally, who resist the call of private equity, and whose decision-making is geared towards long-term perpetuation and superior client results.
Q: What are key differentiators for independent brokerages competing in an environment driven by consolidation?
I’ve considered this question at length recently, as a constantly-shifting industry landscape has brought the headlines to our doorstep. How can we differentiate ourselves in an evolving marketplace?
Synapse recently celebrated our fifteen-year anniversary, providing a moment to reflect and look ahead at the same time. From roots sown from the personal investments of our founding principals to our position of industry leadership today, we truly are an Independent Wholesaler.
There are three fundamental company principles that I believe differentiate us from our non-independent competitors.
- Our Culture
- Our Clients
- Our Carriers
Synapse prides itself on its independent culture. Our tight-knit, family-oriented company provides critical advantages for our producers and employees, including personal attention to family, flexibility to accommodate our producer’s needs and long-term career objectives, a pension plan, and other individually tailored benefits unencumbered by the bureaucracy of a mega-sized agency. I and my fellow Managing Partners work hard to preserve our culture as Synapse has grown over the past fifteen years.
We remain, as we began, client-focused. The difference is our attention to detail, and the value each and every account holds within our agency. In the face of increased competition, we have prioritized our client relationships and re-doubled our efforts to support and enhance our retail partners. As an independent wholesaler, we owe no allegiance to one particular market. Instead, we apply our industry-leading expertise to help retail partners win and retain business through better coverage and pricing for their clients.
The third pillar of a strong, independent wholesaler is our carrier relationships. Consolidation has given the alpha-agencies a further leg up in buying power, but their scale is both a strength and a weakness. Accounts are herded into large program business, without taking time to examine the specific risk and compare market options. Synapse knows its markets, and works hard to nurture carrier relationships down to the individual underwriters. Through our industry-leading environmental premium aggregation, we consistently deliver differentiated coverage terms against even the largest wholesale and retail competitors.
Q: What does it mean to be a “specialist” wholesale broker, and how has this term evolved with the growth of the marketplace?
Specialization was a commonly-used marketing concept for wholesalers in selling themselves and their products to retail brokers. Today, almost everybody labels themselves a “specialist” in one area or another. Like the term “independent,” its meaning has evolved in response to consolidation.
True specialist wholesalers are those capable of driving market change relative to certain insurance products. As specialty products become more generally accepted and accessible to insureds, a specialist agency must respond by demonstrating value in new and different ways. We’ve done so through focusing on data as a resource for our retail partners.
Synapse was fortunate enough to enter the environmental market in its early development stage. We were there as a market controlled by a small handful of Insurers exploded into many, and we’ve closely followed its diversification and product development. That experience has generated meaningful data on the evolution of market appetite, policy forms, pricing, claims trends and more.
Our data resources are driven and complimented by our talent-rich staff. Our producers and management team have extensive backgrounds in the insurance and environmental industries, including engineering, legal and consulting professionals. As a specialist broker, we advise on complex risks, manuscript policy language, and provide claims support services to our retail partners and their insureds, all backed by unparalleled industry data.
Today’s “specialist” wholesaler must do more than understand unique risks. They should be able to provide human and data resources that enhance their retail partner’s ability to compete, support new product sales and deliver better products at a lower cost. These are service deliverables we constantly are focusing on.
Q: With the current trend towards consolidation, where do you see the independent wholesaler in the next 10 years?
There will always be a role for independent wholesalers, but there’s no question the competition has and will continue to intensify. Agencies must focus on culture and core operating principles to maintain their talent base. Specialists must do more to demonstrate value to retail partners and insureds alike.
Consolidation is a reality, one that must be met head-on by the remaining regional and mid-sized brokerages. The value of independence should be embraced, and used to attract talent, win business and offer a welcome alternative to the large “alpha” brokerage houses.
We look forward to the challenge.
Daniel Beck, Vita DeMarchi, Ken Burrell and Brian Macrae are Managing Partners of Synapse Services LLC, a leading U.S.-based environmental and specialty wholesale insurance brokerage. Synapse is an asset rich, independent specialty wholesale insurance brokerage dedicated to serving our retail partners and their valued clients. Our Mission is to provide the highest level of expertise and service in the specialty insurance marketplace by building and nurturing the best people and partnerships.