Consolidating Producer Associations: One or Two… or What?

Consolidating Producer Associations: One or Two… or What?

For as long as I can remember, agents and brokers have disagreed over whether or not the two major producer associations in New York (IIABNY and PIANY) should merge or consolidate – you pick the combination wording du jour. In recent issues, one of our columnists, Jamie Deapo created a good give and take on the topic. In the past there have been other such discourses. There are many opinions on this on both sides of the question and there are good reasons, pro and con, addressing the establishment of one association or the sustaining of two. There are some substantial structural issues that could interrupt a plan of consolidation; there are two distinct histories and, some say, two different “corporate cultures.” There are some simple answers and some difficult ones. Among the easy ones, it is obvious that there is an economy of scale in one association versus two which might result in agents having to pay less for some services and possibly for dues; the counter, of course, is that there would be no real competition for agents’ dues, E & O dollars and all the rest if the associations were consolidated. There is the question of whether or not agents would do better to present one coherent voice to the legislature on key issues or multiple points of view. The pro and con here is not difficult to outline: the obvious argument is that with two associations there will be differences and seeming disharmony, letting legislators have their pick or simply stop short of any decision; the counter is that the differences may be helpful since more than one point of view is expressed; thus, the two, combined in some fashion would hammer out differences in an internal caucus, then present a plan to legislators. A corollary advantage ascribed to consolidation is presented as “strength in numbers” in the face of any regulatory or legislative appeal; the counter to this is, with two associations, there is a perception that, since there is more than one group to be appeased, unanimity among the two is a strong argument. And the list goes on and on.

There is a larger question left out that I will present later, below. For some time, I held the opinion that a consolidation of the two associations would be a worthwhile thing for agents and brokers and lauded the CIBGNY’s affiliation with PIANY and the other combinations affecting both associations. In these pages, an argument pro consolidation was presented in the late 1990’s. Since then, I have tempered my personal view, believing that the matter of diminishing independent agent population will decide it eventually. Yet, today I believe that it is good to have two agents associations for the same reason that, parallel to what an independent agent would argue to prospective clients, having a choice offered by the ability to shop for coverage through a more-than-onecompany agent is preferable to no choice. Further, there are identifiable differences in geographic concentrations, activities agendas, approaches to governance, products, sub groups, and, of course, in legislative strengths in Albany and Washington. There are two sets of officers and directors, several corporations, probably differences in holdings and overall wealth, two sets of very capable staffs some of whom would sadly be attritional to effect an economy of scale, there are competing loyalties down deep in many agents whose past service and friendships tie them to one or the other and so on and on. There is merit in the two-association structure, in my view, and yet an inevitability of one, possibly when the next round of consolidations reduces the number of buyers and the time they will give to volunteering. All that said, however, I do believe strongly that there are areas of common cooperation now that would potentially serve agents and brokers well, if efforts were consolidated. These areas of cooperation are educational programming, market structures that could be shared by the associations such as healthcare exchanges, some joint advertising to consumers (“Buy from Your Local Independent, Professional Agent”), an employment effort to find and train employees for the agency system, and there are other such cooperative endeavors or joint ventures that might between the two. The leaders of each get there by being good at business and at communicating, so this agenda might be far brighter than what I have suggested. Most important, I do believe that disparities on the two associations’ legislative positions should be argued in private and presented in public with unanimity. There are many association precedents in other fields where turf is out and tough is in. Some believe that there is the possibility that associations underline differences so that they justify separation. I do not agree with this, as we see even last year in the legislative views of the two, where differences were quite real.

I believe that the two associations do well for the agent by remaining separate, but would do even better by consolidating certain areas almost fully.

But there is one joint effort that is worth immediate research and attack. It is the larger question to which I referred above. The agency system itself is doomed unless those who represent it grow it organically, as M & A continues to work its reducing power. There is another group of brokers in the mix: the emerging ethnic, inner city broker in the five boroughs of New York and in other large municipalities who is underserved by both associations, despite their efforts to attract and sustain these brokers. Many of them were born abroad and come here with English as their second language. They are an underserved minority who might wind up as a third agents group as the CIBGNY did after World War II and as the CAIA has become today. The numbers are startling. New York is home to the only Indian owned insurer in the US, for example, whose clients and introducing producers are part of a large ethnic presence in Brooklyn, Queens, New Jersey and Philadelphia. In Northern New Jersey, Queens and parts of Nassau County you will find a sub set of licensed brokers of Korean background. There are non-native licensees from better than, at least, 60 countries in New York. Look at a map and count them. The list goes on and on of ethnic groups who make it in the City and move to the suburbs and become the powerhouse agencies of the next 100 years. Perhaps a joint task force to save a place for the independent agent in the economy of the future would begin by focusing on this growing set of brokers for starters and do a long term service for the industry and for each of the two associations. Involving new entrants would also provide a talent and expansion pool for members of both. Oh, and they open new client markets, for sure.

This signed editorial is more of a personal expression than I am typically use in editorials per se, as contrasted to my column, which is kind of a “Page Six” approach to this serious business. This is a personal expression of opinion from a student of this topic for many years, but may be full of holes, so I invite you wholeheartedly to grace our pages with your views, which we will surely seek to print. SA