Twitter and the blogosphere were ablaze this week with the buzz surrounding an Accenture study that found three-quarters of U.S. consumers prefer to buy insurance products through agents and other trusted sources rather than online.

The study of more than a thousand Americans at least 18 years old who own one or more insurance products showed that 73 percent preferred to buy auto and home insurance products from an agent, and 75 percent preferred to buy life products from an agent or trusted source, such as an employer or financial advisor. (The exception is “younger and more affluent” customers, who preferred to buy products over the Web: 39 percent of consumers aged 18 to 24 and 28 percent of buyers with incomes above $60,000 said they preferred online purchases, especially for auto and home products.)

This is a bit of welcome news for independent agents, especially the smaller Main Street guys who are struggling right along with their customers in this tough economy. Am I surprised? Not really, considering that some of the biggest players in the business world are the doing the worst right now.

For years, smaller agents have been bludgeoned with predictions that they’re headed the way of the dinosaur. Ironically, these are the types of businesses that are poised to succeed in the worst economy in decades, probably because they’ve always practiced the ”doing more with less” philosophy that big corporations have just recently been forced to adopt.

The National Federation of Independent Business’s index of small business optimism hit 86.6 last month, breaking a 4-month pattern of declines. And the American Express Open small business monitor of firms with fewer than 100 employees shows that 77 percent think that managing their firms over the last several hard months has made them better at managing their businesses in general.

NPR recently aired a segment on how half the current home foreclosures could be avoided through loan modification. Banks take a massive hit on foreclosed property, so it’s in their best interest to work with troubled mortgage holders to keep them in their homes. Yet amazingly, megabanks like Wells Fargo and Citibank are literally ”not set up” to deal with the problem, even though they saw it coming ages ago–and the bigger the bank, the bigger the problem.

It got me to thinking that the bailout mantra of “too big to fail” could have just as well been applied to the dinosaurs.

Small is beautiful!

God knows our economy and the property-casualty industry are engulfed by what seems like an endless bank of dark clouds. But the Big I’s new “Agency Universe Study” suggests that there may be a silver lining in there somewhere (or as the optimistic kid said on finding a pile of horse manure under the Christmas tree, “There must be a pony somewhere!”).

First off, the number of independent agencies has stabilized since the 2006 study. Although down from an estimated 44,000 agencies in 1996, this year’s 37,500 is roughly the same as 2006, suggesting that many of the dire predictions about the demise of the small to midsized independent agent may be premature — and that the M&A boom of recent years is bottoming out.

But the real surprise is not the slowdown in M&A activity, but the increase of small (revenues of $150,00 and under),  start-up agencies — 11 percent of survey respondents were founded in 2004 or later (including 4 percent that launched in 2007 and 2008).

Another interesting point that quantifies what I’ve been hearing from agents is that a lot of this growth is around personal lines, especially in the South Atlantic and West South Central coastal areas where direct writers are reluctant to tread (we’ll tackle the personal lines issue in the February AA&B). These new agencies are deriving 48 percent of their insurance revenue from personal lines commissions.

The survey’s other major findings include:

• Declining revenues due to the soft market and shifting premiums, more common among medium-small and medium agencies (with $150,000 to $1.2 million in revenues), with 23 percent reporting average decreases of 10 percent
• More efficient operation through use of technology with fewer employees, with agencies employing 9 full-time employees in 2008 versus 11.2 in 2006
• Improved satisfaction with carriers, with more than one-third finding business planning with their No. 1 carrier very valuable
• Reduced usage of customer service centers, with only 24 percent of agencies using them
• More carrier representation for personal lines, with an average of 6.2 carriers
• Increased concern about controlling expenses and reinvesting

It seems to me that the really good news in these varied findings is that agents are finding creative ways to get around the problems of the economy and the soft market by providing consumers with a viable alternative to the ducks and the cavemen through more efficient service, increased personalization, and a choice of carriers. And that indeed means a pony is in the wings.

To hear a more in-depth perspective of the Agency Universe Study findings, listen to our interview with  Madelyn Flannagan, Big I’s vice president, education and research, at the podcast portion of the AA&B Web site at http://www.agentandbroker.com/Media/PodcastItems/FlannaganFinal.mp3.

While recently going through my Rolodex (yeah, I’m that old) and getting depressed over the many agencies long gone or absorbed by bigger fish, I came across a card for Don Eve, president of Eve Insurance Agency Inc. in Flint, Mich.

When I first spoke with Don years ago, I was writing for Business Insurance, and Flint was in the news with  Michael Moore’s controversial documentary, Roger & Me.  With images of boarded-up houses and a mouldering downtown fresh in my mind, my first question to Don was something like, ”How are you surviving in such a tough market?” Given today’s economy, that question is equally valid today.

So I was pleasantly surprised when a little Googling and e-mailing showed that not only is Eve Insurance still alive and kicking, but so is Don.

“It was good to hear from you,” Don e-mailed back. “I’m semi-retired, but my son, Greg Eve, who is now running the agency, is familiar with ‘this economy.’ So I’m going to have him respond to your question.”

Turns out Eve’s longstanding formula for success is personal lines. Eve Insurance has had a strong relationship with the local teachers’ credit union for almost 40 years, and today is almost completely  personal lines, with only 4 percent of business coming from commercial p/c. Annual written premium stands at $3 million-plus and has remained stable for the past 10 years.

Greg explained that the transition to personal lines had been initially one of sheer survival. ”Personal lines had always been more than 50 percent of our book of business since my dad and mother started the agency in 1973, but by the mid-1990s, we pretty much went all personal because the better commercial carriers just weren’t looking for Michigan agency appointments in the early 1990s.”

While insurers’ appetites may have changed since then, Eve’s focus has not. They’ve found they like the stability of the personal lines market, where premiums have not been as soft as commercial renewals, which are down as much as 40 percent in the region, Greg said.

The agency’s entire book of business is cross sold — “home, auto and the toys,” Greg said. While the national average for cross-selling policies is 1.25 policies per client, Eve’s is almost at 1.8, including home, auto, umbrella and life. They’re also exploring life products and baby boomer stuff like long-term care coverage.

 But isn’t this market cornered by the direct writers? Not according to Greg. “Access to multiple markets gives us an advantage,” he said. “We share a driveway with an Allstate agent, and we’re good friends, but there is a decided difference in the market. A few years ago (Allstate) took a 40 percent rate increase, and the agent didn’t have any alternative markets to go to.” Eve’s primary carrier is Auto Owners, which controls 62 percent of their book of business, followed by Citizens, Safeco, Progressive and Great Lakes Casualty.

Although he concedes there are many challenges – including a regional talent drain and the ongoing economic problems of the Rust Belt — Greg is confident that Eve will do better than just survive the current tough economy. “In mid-Michigan, there are basically two styles of people: those involved in the medical profession, and educators. School systems still have to have employees, so that’s a stable market. You find your market niche, figure where your carriers are strong, and that’s what you market to.”

http://www.eveinsurance.com/