Will Soft Prices Propel Agency Start-Ups?

The chief executive officer of an online agent quote service ispredicting that softening insurance rates will fuel a surge inagency start-ups, with the formation of “hundreds” of brokeragesand independent agencies.

Richard Kerr, the chairman and CEO of Dallas-based MarketScout,made his comments in the wake of findings that overall premiumgrowth for property-casualty insurance was roughly 7 percent in Maya tiny gain compared with double-digit jumps in past years.Property insurance premium costs decreased five-to-10 percent lastmonth, even as some tougher liability lines increased, MarketScoutfound.

Mr. Kerr said that as the market softens, insurance companieswill be more aggressive looking for business and seek more outletsin the form of new agents and brokers.

Up to now, he said, the insurers have refused to deal withstart-ups and appoint them as agents unless they could promise todeliver $1 million to $5 million in premium.

“We want it up front and we want it on the books now,” he said,mimicking carrier sentiments that indicate what the climate hasbeen like during the last four years. But it's changing. There'spent-up demand for new start-ups, he said.

In addition to MarketScout.com, an online insurance portaldesigned to assist the retail insurance agents in locating quotesfrom insurance companies, he said there are “a number of exchangesthese brokers can go to and get access to four or fivecarriers.”

Mr. Kerr predicted that not only will smaller independent agentsbe formed, “but we will also see new upstart brokers as clusters ofpeople leave the bigger brokers” to start their own operations.

Venture capitalists will also be arriving with cash to invest instart-ups. “You'll see the formation of new brokers,” he said.

MarketScout's announcement accompanying its May compositepremium increase estimate said brokers and their insurers “will befighting to maintain their renewals as intense competition formajor accounts accelerates.”

Mr. Kerr said, in the coming soft market, “a lot of businesswill be moving Every deal will be subjected to aggressivecompetition.”

With new aggregators, start-ups have access to 20-to-30 markets,which was not the case a few years ago, he said. Now, “if you havethe markets and a computer and a disk, you're ready to go.”

Reproduced from National Underwriter Edition, June 11, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.