Broker performance – how are brokers faring amid market challenges?

While the numbers are still good, insurance brokers’ performance this year slightly decelerated compared to last year, according to management consulting firm Reagan Consulting.

“The picture emerging for 2024 is that of a really strong year — just not as strong as 2023,” said Reagan Consulting partner and CEO Kevin Stipe (pictured).

PL is on the top, and CL now runs second

At 9.7%, personal lines (PL) were the fastest-growing lines of business in the second quarter of 2024.

“Personal lines, which has lived in obscurity for decades, is suddenly enjoying its moment in the spotlight,” Stipe said.

Stipe explained that several factors have propelled PL into the limelight, including a hard market driven by natural disasters and also man-made disasters such as nuclear jury verdicts and litigation financing.

Meanwhile, commercial lines (CL) – which have been in a hard market for nearly seven years – saw a decelerated growth in the second quarter of 2024. From 2021-2023, CL were the fastest-growing lines of business for GPS firms, and in Q2, they were still a solid contributor at 8.0%, but no longer the leading line of business, the Reagan Consulting survey noted.

“Nobody knows when this hard CL market will end, but when it does, we’ll likely see CL organic growth rates return to mid-single digits, as they’ve been in the past,” Stipe said.

On the other hand, employee benefits (EB) grew by 8.0%, its highest Q2 growth rate since the survey began in 2008.

“With 2024 marking the third consecutive year of increasing growth, EB now adds a legitimate growth engine to offset the deceleration of CL as commercial premium growth cools,” stated the survey.

Profitability is still strong

On a positive note, the broker industry’s profitability is still strong, notwithstanding the numbers.

Second-quarter profitability, the survey noted, is still robust by historical standards, although EBITDA margins were down slightly at 26.8% from 27.1% in 2023

“Broker profitability reached new heights during COVID-19 and, surprisingly, has stayed at historically high levels ever since. It’s as if brokers realized the EBITDA level they could achieve during the pandemic and now refuse to give back the ground gained,” Stipe said.

How about the rest of 2024?

As the year marches on, notwithstanding the recent warning signs in the U.S. economy, brokers remain bullish about the second half of 2024, according to the survey.

“GPS survey participants predict they will achieve 10% organic growth this year — but is that simply wishful thinking?” Stipe quipped. “Regardless, 2024 is shaping up to be another strong year for brokers, even if it doesn’t match the glory days of 2023.”

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