Could latest agency consolidations lead to even higher insurance premiums for Louisianans?

By Christopher Tidmore
Contributing Writer

The recent announcement that Marsh McLennan, the world’s largest insurance broker, acquired two middle-market agencies – Querbes & Nelson (Q&N) and Louisiana Companies – stunned the local insurance community. These transactions may constitute one of the largest buyouts of local insurance agencies/brokers in decades, with tens of thousands of customers affected.

Now, there is the question of whether the consolidation of the “insurance middlemen” in Louisiana is good for the consumer?

Critics fear these consolidations (and many others like it) may leave smaller agents with fewer insurance markets to offer to their customers – driving up personal and commercial insurance rates. Partially, this is a factor of how insurance policy purchases generally work in Louisiana. State law requires an agent or broker to serve as the primary retailer of insurance policies. Operationally, with the exception of captive agents who represent only one market (such as State Farm), most agent/brokers are empowered to sell insurance from a variety of companies, tailoring coverages to the needs of the individual consumer at the best price. (Technically, brokers possess the remit to represent the consumers who use them and can help them shop for policies from multiple providers, but as most independent agents serve as brokers as well, the distinction is less acute than it once was.)

That doesn’t mean, however, every insurance agent/broker has access to every possible insurance product. Many carriers require a minimum number of clients committed for an agent to continue to market the underwriter’s policies. In past years, insurance carriers held agents to a relatively reasonable (low) threshold. As consolidations of Louisiana brokers accelerate, however, the threshold required for an agent to represent a particular insurance market has grown steeper over the last two decades.

Arguably, this has forced many smaller independent agents almost out of the business, lacking enough variety of products to sell to their clients. Meanwhile, as the number of independent agencies decrease, the incentive has grown for major brokers to buy out their mid-range competition, as large underwriters require greater and greater pools of customers in order to agree to write policies in Louisiana.

This consolidation, critics argue, has allowed larger brokers to come to dominate Louisiana insurance markets. With smaller competition often eviscerated, little incentive exists to offer cheaper or more competitive insurance policy products to the customers base.

At least that serves as one of the justifications as to why the premiums of Louisiana insurance policies have skyrocketed in recent years. That is not to say reasonable environmental factors, such as a myriad of hurricanes since 2005, have not made property carriers resistant to write policies in the Pelican State. Yet, if a smaller and smaller group of agents/brokers have captured most of the marketable choices, little incentive exists to sell anything but the most expensive products to the local market. These limousine policies offer expensive coverages at increasingly pricey premiums.

Former insurance commissioner Jim Brown’s view of the current insurance climate is troubling: “I feel we are seeing the demise of many small insurance agencies throughout Louisiana. This is particularly unfortunate for people that live in smaller towns. It means less service, and the cost of insurance premiums will continue to rise.”

This article originally published in the February 26, 2024 print edition of The Louisiana Weekly newspaper.