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Sector Spotlight: Insurance Agencies

The insurance business seems like a sure bet, and it just might be. Still, business owners will need to stay on top of changes and trends to be successful.

Facts and figures:

  • The U.S. insurance industry is the largest in the world in terms of revenue
  • Since 2011, the annual revenue in insurance premiums in the U.S. exceeded $1.2 trillion
  • The insurance industry contributes close to 40 percent of the GDP of financial institutions
  • The insurance industry employs more than 2 million people

The median annual income for an insurance agent in 2016 was $49,990, according to the Bureau of Labor Statistics. That’s just the median, and most people that are interested in getting into the business of owning an insurance agency realize that the earning potential is often much higher.

The insurance business is attractive because it is lucrative. In fact, the U.S. insurance industry is the largest in the world in terms of revenue. And because there will always be a demand for insurance, it’s also a sustainable business. It’s no surprise then, that the demand for insurance agencies generally far outpaces the number of insurance agencies available for sale at any given time.

Let’s take a closer look at the insurance agency sector to see what it’s all about and what trends will impact this industry in the near future.

When considering an insurance agency as a potential business opportunity, would-be owners can take one of two approaches: They can either start an agency from the ground up or buy into a franchise. The world of insurance is dominated by some big players, which is making it tougher for solo agents to compete. Because of this, buying into one of these franchises is often a more appealing and sensible option. In the U.S. the insurance industry is dominated by companies including AIG, MetLife, Prudential Financial, and Allstate. MetLife and Prudential Financial top the list of health insurers when it comes to premiums written. Meanwhile, State Farm, Liberty Mutual, and Allstate hold top spots in property and casualty insurance in the United States.

Adapting to challenges, embracing innovation

If you’re going to be in the insurance business you have to be adaptable. While that’s always been the case, it’s even more so now, thanks to always-changing regulations, as well as the upcoming changes to the tax codes that will impact many business owners starting with the 2018 tax year.

Insurance agency owners will see even more changes related to the rules of engagement in the coming years. More fast-paced changes will also be driven by technological innovations and higher customer expectations relative to convenience and response times. To that end, an uptick in digital prowess and presence will also be essential for those insurance agencies that want to remain competitive. 

Connectivity and advanced analytics will allow agencies to narrow the life insurance application-to-closing process from weeks to minutes, for example. This will help to lower onboarding costs and lessen consumer dropout rates. According to a recent report, accelerated underwriting metrics — based on medical data that is available electronically, drug prescription information, and even facial analytics technology — can be used to estimate an applicant’s life expectancy, thereby eliminating traditional medical tests.

“In 2018, the combination of competitive conditions, availability of cost-effective technology, and numbers of independent agents striving for growth and better client service creates the perfect storm to drive significant acceleration in agent digital transformation,” said Jason Walker, managing partner of Smart Harbor, which provides technological expertise and consultation to insurance agencies. “Barriers that once prevented agents from implementing digital technologies have been removed.”

Contending with the costs

As insurers look to grow top-line sales and boost bottom-line profitability they will continue to contend with the common challenges associated with rising interest rates and catastrophe losses. The U.S. insurance industry saw underwriting losses more than double, to $5.1 billion, for the first half of 2017 compared with the year before. And, insurance companies paid out $50 billion in natural disaster claims in 2016 — a figure that will end up being much higher for 2017 due to events including Hurricanes Harvey, Irma and Maria, and wildfires in California.

The capital and overhead required to start and run an insurance agency is also a major cost consideration. The amount you will need to get started can range from as little as $5,000 to $50,000 or more, depending on where an agency is located, whether it’s independent or part of a franchise, and how the business will operate.

The importance of the personal touch

Because insurance touches so many personal aspects of people’s lives, it’s important that insurance agents know how to interact with their customers to facilitate trust and camaraderie.   Following some vital guidelines for better and more personalized service can help agencies to remain competitive and excel.  

While there are never any blanket guarantees in business, the insurance sector is one that is set to see ongoing demand and profits. When it comes to how to keep your insurance agency competitive, success and profitability depend on anticipating events, being prepared, adapting to changing circumstances, and offering superior customer service. By doing these things and keeping abreast of trends and changes, insurance agency owners can thrive.

Bruce Hakutizwi

About the author

USA and International Manager for, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.


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