During the recent NAIC meetings in Boston, a Forum on Competition in Insurance Markets was held. Kenneth R. Auerbach, Esq., National Director from PIA of New Jersey and Chairman of the PIA National Business Issues Committee, addressed the topic. The following are excerpts from his remarks.

Mine is very much the perspective of a Main Street Insurance Agent. Despite the trend to consolidation among carriers and brokerages, ours remains a dramatically diverse and diffused industry. There are well over 2,000 P&C insurers, not to mention the multitude of reinsurers.

This diversity in numbers is matched only by the diversity in appetite, specializations and talent among our carriers. In fact, PIA’s own studies indicate that our typical member has an ever increasing number of agency appointments reflecting the need to use more carriers with greater specialized appetites to properly match policyholders to insurers. This trend also reflects the extraordinary competition that still exists for Main Street business and the agent’s need to make sure that he has a stable full of carriers in hopes of appropriately matching one to a client’s needs – covering your bases, if you will. Despite mergers and acquisitions, plenty of healthy competition remains in most states.

What this means for the customer is Choice.  But along with the blessing of choice comes the challenge of choice — namely complexity.  That is where the professional, independent agents and brokers come in.

Independent agencies bring the value of simplifying and perfecting choice.  For the consumer, our value is twofold.  First, to educate the insured on the risks presented and how they may be alleviated.  Second, to conduct the marketing process with the object of forming the best possible match between the insured and the willing, capable and available insurers.

As with any profession, if we serve our clients’ long-term good, we will likewise serve our long-term good. And we should all want a marketplace that has built into it mechanisms that secure the long-term interests of the insurance buyer. The key to an effective, efficient, competitive marketplace is to marry the long-term interests of the agent and his client.

As noted in the recent Wharton study, "A significant degree of mutual trust is required in the placement of commercial insurance contracts by independent intermediaries, and such contracts are governed by the principle of "utmost good faith."  Thus, the policyholder relies on an agent’s professionalism, as well as on the relationship between the agent and insurer when placing risks."  I can't tell you how often my clients and prospective clients tell me how important it is to them that I have lots of business with a carrier in hopes that I can throw my so called weight around on their behalf.

In the coming months I’m sure we’ll be speaking about the Wharton study quite a bit.  And while I’m sure that many of you have not had an opportunity to read it, let me just say one of its basic conclusions is something I’ve been going around the country since October telling anyone who would listen (although without the benefit of quantitative analysis) — that for Main Street risks handled by Main Street agents, competition is alive and well and the typical contingency agreements help properly match insureds and insurers so we all share a more efficient, healthy marketplace.

Kenneth R. Auerbach, Esq. is national director from PIA of New Jersey and chairman of the PIA National Business Issues Committee. He made these comments during the NAIC Forum on Competition in Insurance Markets held in Boston on June 14, 2005.

This article originally appeared in the June 2005 PIA Connection.