The tides continue to shift in small commercial lines. Independent agencies seek to re-focus their efforts on managing this business as efficiently as possible, and while many winning agencies are able to grow through acquisition, true organic growth has been hard to generate.

In addition, more carriers are competing for business directly through alternate distribution channels. With more than 28 million small businesses in the U.S., small commercial still represents a significant growth opportunity for agents. But accomplishing this while maintaining margins requires a disciplined approach.

Agents have charted many different courses to success in small commercial. The best agents share a common commitment to the following best practices:

Partnering with a carrier committed to helping them succeed. Given the emerging trend among some carriers to build direct distribution channels, agents appreciate that some carriers are building their businesses specifically around the needs of agents and their customers. They recognize that carriers which focus their distribution on the agency channel bring valuable market insight with products and services designed specifically for their customers.

Dedication to operational best practices. Agents who drive high margins in small commercial are disciplined around key operational tenants. These include leveraging carrier service centers, having dedicated small commercial units, limiting the use of wholesalers and not splitting accounts between carriers or effective dates. 

Partnering with a carrier that offers true consolidation capabilities. Agents expect their carrier partners to help them through their consolidations. While many carriers claim they can do this, few have the dedicated resources necessary to help agencies migrate and manage the business.

Seeking dedicated underwriting and sales teams from carriers. These carriers offer competitive, market-based pricing that minimizes disruption for an agency’s customers, rather than relying heavily on “black box” predictive modeling to drive decisions. “Black box” carriers significantly reduce agency margins as pricing swings cause extra remarketing activity for agency account managers. 

The sheer size of the small commercial market represents tremendous opportunity for agents. By refining their processes and applying industry best practices, many agents have created strong and profitable businesses that will provide them with competitive advantages going forward.

Michael R. Keane is president of small commercial at The Hanover Insurance Group.