Independent Insurance Agency M&A: How Private Equity and AI Are Fueling Relentless Growth
Not long ago, industry insiders predicted the independent agency (IA) merger and acquisition (M&A) wave was about to crest. The logic seemed sound: there couldn’t be many “platform” agencies left to acquire, capital was getting expensive, and deal fatigue would eventually slow the pace. Yet, none of those predictions came true.
This is more than a story of numbers and transactions. It’s a story about how independent agencies are reshaping, how private equity is rewriting the rules, and how new technology—most notably artificial intelligence—promises to usher in a new era of change. Beyond the financial and operational shifts, the system is also experiencing cultural changes. These are harder to measure but carry significant implications for agents, brokers, principals, and consumers alike.
The Relentless Pace of Consolidation
Surveys show that annual agency acquisitions are over 700 a year, and these are primarily just the agencies “of size.” A number of mergers and acquisitions aren’t even captured in these surveys. Private equity-backed buyers accounted for over 80% of the deals in recent years!
I remember when it used to be just independent agencies purchasing other local independent agencies. Then the banks entered the picture and started acquiring agencies, and now it is private equity backed firms that dominate the acquisition activity. While the major acquisitions garner the headlines, what doesn’t get as much attention are the new startups that continue every year.
Private Equity: Reshaping the Industry
Not all PE backed firms operate in the same fashion. Some adopt the “Star Trek Borg” model where acquisitions are fully “assimilated.” They are required to adopt the brand, tech platform, standardized procedures and operations, HR rules, and more. There are obvious efficiencies in this model. Other PE backed firms do not fully assimilate the agency, finding that a local brand has value and that certain processes and procedures in the local agency can be conducive to a better consumer experience and higher agent/CSR satisfaction.
National PE backed firms do bring resources to the agency, such as upgraded and more robust agency management systems, marketing resources, technology expertise, AI and digital capabilities, enhanced market access, economies of scale, HR resources, and more. Of course, acquiring firms also many times have digestion problems and there is disruption in agencies when migrating to new agency management systems and adapting to a new culture, new bosses, and new processes.
The Push and Pull of Change
In short, the benefits of M&A can be better technology, marketing resources and power, access to capital, access to more markets, access to professional services such as HR and legal, and an enhanced ability to attract talent. On the other hand, parts of M&A can be transition disruption, dissatisfaction with the culture, transitioning from being an independent owner to an employee, employee dissatisfaction with losing independence and complying with new processes and rules, loss of the local brand and identity in the community, compensation changes for employees.
Yet, despite these tensions, consolidation shows no sign of slowing. Private equity firms continue to view the IA system as a strong, reliable investment with a great ROI. At the same time, many agencies turn down massive offers because independence is of utmost importance to them, and/or they have internal perpetuation plans. Some agents leave large consolidated groups to launch new startups because they miss and value entrepreneurship and true independence, keeping the cycle in place.
A Resilient System on the Edge of a New Era
While the IA system has and continues to undergo significant changes, the system is super resilient and it continues to evolve! It has survived the industrial revolution, the Civil War, world wars, the Great Depression, direct sales from carriers, major competition from captive agency brands, technology changes, drastic changes in consumer buying preferences and practices, legislative, legal and regulatory challenges, and much more. But the AI phenomenon is different from previous changes and challenges. It is at the initial stages of utilization in the insurance industry, including insurance distribution. Unlike the previous challenges to the system, such as direct writers, banks, and other real, alleged or self-proclaimed disrupters, AI has the ability to bring change at warp speed verses incremental changes in the past.
Final Thoughts
M&A will continue to redefine the independent agent and broker system in coming years. Consolidation brings both opportunity and disruption, but it does not signal the end of independence. The IA system remains resilient, adaptive, and alive with entrepreneurial spirit—even as it prepares for what could be the most transformative force it has ever faced: artificial intelligence.
