Cyber premiums are also expected to increase as ransomware threats continue to soar

The outlook for independent agent distribution channels for insurance in 2022 is “somewhat mixed”, according to Doug Mohr, vice-president of industry relations and partnerships at software company Vertafore.

Independent agents are brokers or insurance agents that are not employed by a specific insurance agency and can therefore sell policies from multiple companies. They are typically paid via commission for each policy sold.

Mohr told Insurance Times: “As we look to what lies ahead for the independent agent distribution channel in 2022, the outlook is somewhat mixed.

“There is an indication that premium rates for commercial lines will not increase as rapidly as they did in the latter half of 2020 and early 2021, or they may even flatten.”

He added that the hard market could even be coming to an end in some commercial lines, with rates stabilising or declining.

For example, the Council of Insurance Agents and Brokers’ Commercial Property/Casualty Market Report Q2 2021, which was published in August 2021, found that average commercial lines rate increases in quarter two last year were 8.3%, down from 10% in Q1 2021.

Since insurance agents gain most of their revenue from commissions on written policies, this means their revenue might remain flat or see slightly declining growth year-on-year for 2022, Mohr explained.

He warned: “As a result, agents must be better at servicing existing clients to keep their retention percentage up, or even try to gain a percentage point or two to continue to see growth in their business.”

Dave Acker, Vertafore’s vice-president of product management, added that several new startup “insurtech carriers” have gone to market over the last few years using a consumer-to-carrier direct sales model - Vertafore therefore thinks that it is “extremely viable” for these entities to determine the value of the independent agency channel.

Acker continued: ”From a personal lines perspective, we are seeing both auto and homeowner insurtech carriers enabling connectivity with the traditional comparative raters in the channel, to extend their reach into a market they originally believed was overvalued and lacking in technology solutions.”

Ransomware losses

Ransomware attacks soared during the Covid-19 pandemic. For example, Howden’s Cyber Insurance: A Hard Reset report, published in July 2021, recorded that the number of cyber attacks increased by 170% globally in Q4 of 2020, compared to Q1 2019.

This has subsequently pushed the cost of cyber insurance up and bolstered demand, with the report also revealing that cyber insurance pricing was up 32% year-on-year as of June 2021.

Mohr added: “Rates stabilising or declining in 2022 also means agents might look to other lines of business, such as cyber security policies, to make up for the decrease in commissions in other lines of business.

“It is expected that cyber premiums will increase through 2022 as the industry struggles with massive ransomware losses.”

Vertafore is an insurance software solutions firm for independent agencies, MGAs, brokers and carriers.