This document will outline the political, economic, sociological, legal, and environmental issues that surround an insurance brokerage.
Political
At this time, there are very few political risks associated with the insurance brokerage industry. The operations of these entities are governed by state law. One of the most positive aspects of operating in an independent insurance brokerage capacity is that they are able to aggregate quotes from numerous carriers. It is unlikely that there would be a political push to change the current methodologies that are implemented within this industry. The insurance industry, from a political standpoint, is secure.
Economic
Insurance brokerages have substantial economic staying power. This is primarily due to the fact that these businesses, once established, enjoy highly recurring streams of revenue from renewals. Over a five-year period, the income that is generated from these renewals can often mirror that of the fees generated from new policy placements. As it relates to the overall economic climate, moderate recessions can decrease the demand for new insurance policies (especially for big ticket purchase items such as vehicles, boats, RVs, and secondary homes). However, people will continue to purchase these products (especially among higher income demographics). Additionally, insurance brokerages are able to generate substantial revenues by working with business clients that operate in industries that are immune from negative economic changes (such as healthcare).
Sociological
It is no secret that life and business have a number of risks. Over the past fifty years, the insurance industry has expanded to include multiple types of personal and business lines that reduce risks. People tend to be risk adverse, and the demand among individuals to have protections in place to mitigate potential future issues will continue to remain immense.
Legal
There are currently no major changes to regulations that will impact the insurance brokerage industry. States still require that brokerage retain agents that have valid insurance producer licenses. In the future, and as online insurance portals become more prevalent, legislation that strives to streamline the insurance policy process may occur. However, this event is not expected to occur for a substantial period of time given the substantial level of employment that insurance brokerages and agencies provide for the economy.
Environmental
The primary environmental factor that will impact the insurance industry over the next twenty years is climate change. In areas that are hit hard by hurricanes, individuals and businesses in these markets may struggle to find affordable insurance solutions. This is being seen among many coastal states, especially in the Southeastern US. It is expected that specialty insurance firms that have a higher appetite for risk may enter these markets with high premium policies.