Standing strong amid consolidation - how small agencies compete when big brokers are buying everything

Private equity-backed buyers closed 520 insurance agency acquisitions in the first nine months of this year. That number keeps shrinking - down 7 percent from the same period last year - but the concentration keeps growing. The top 10 buyers now control 54 percent of all deals, up from 44 percent just five years ago.

If you run a 20-person agency, this probably feels suffocating.

Your phone rings with buyers every month. PE-backed brokers flash acquisition offers at multiples that make you pause. Meanwhile, 75 percent of Baby Boomer agency owners plan to transition within eight years, half of them within three. Every agency owner you talk to at industry events is either selling, thinking about selling, or quietly wondering if they waited too long to exit the increasingly intense small insurance agency competition.

But consolidation does not mean elimination.

Small insurance agency competition has never been fiercer, yet small agencies are not disappearing - they are adapting. The ones surviving and thriving are not playing the acquisition game. They are playing a different game entirely, one where relationships trump resources and technology erases the advantages that once belonged only to big brokers.

The consolidation wave is not slowing down

Let me show you what is actually happening in the market.

About 750 reported acquisitions occurred in 2024, down from 830 the year before. But that decline is deceptive. What matters is who is buying. Private equity-backed and hybrid buyers accounted for 72 percent of all acquisitions this year - despite comprising only 26 active firms.

The number of unique buyers dropped from 140 in 2020 to 99 in the first half of this year. Consolidation is consolidating.

BroadStreet Partners led all buyers with 57 transactions year-to-date. Hub International grabbed 38. Arthur J. Gallagher is acquiring AssuredPartners for $13.45 billion. Brown & Brown is buying Accession Risk Management for $9.8 billion. These are not mergers. These are empire building.

Private equity finds the brokerage space attractive because it is a free cash flow business that is not capital intensive and much less regulated than the carrier sector. PE firms can buy a brokerage for $5 million at a 5X free cash flow multiple, finance 30-60 percent of it, grow the business through more acquisitions, and sell it three years later for $10 million at a higher multiple. The math works beautifully for them.

Not so beautifully for the 20-person agency trying to compete for that commercial account against a PE-backed regional player with 200 producers and carrier relationships you cannot match. Small insurance agency competition becomes a war of attrition when your opponent has unlimited capital.

What small agencies lose in resources, they gain in something else

Here is what the consolidation wave missed: 88 percent of insurance customers expect more personalization from their providers.

Large brokers struggle with this. Badly.

Your CSR knows every client by name. She knows their kids, their expansion plans, their risk tolerance. When a certificate request comes in, she does not need to look up who they are or what they do. She already knows. When renewal time hits, she remembers the conversation six months ago about that new location they were planning.

Try scaling that to 10,000 clients across 15 states.

Small agencies cost clients a bit more but provide a more personal experience with agency ownership and upper management. That is not marketing fluff. That is structural advantage. Due to their size, small agency producers spend greater time with small businesses despite comparatively low premiums. Big brokers cannot replicate this without destroying the efficiency that justifies their existence.

Local expertise is another moat. Independent agents understand the unique aspects and challenges of the local area, allowing them to offer tailored insurance solutions that national players miss. You know which carrier will actually write that restaurant downtown. You know which underwriter will listen when the loss runs look bad but the story is good. You know the commercial real estate market well enough to spot when a client is underinsured before the claim happens.

The big broker has a playbook. You have knowledge.

Technology used to be the great divide - not anymore

Ten years ago, big brokers had technology advantages small agencies could not touch. Comparative raters, automated workflows, carrier integrations, client portals - these cost hundreds of thousands to implement and required dedicated IT staff.

That advantage is gone.

Early adopters of AI in insurance are seeing 30 percent productivity gains and 40-60 percent cost reductions. These are not enterprise-only tools anymore. AI agents and automation platforms now run on cloud infrastructure that small agencies can afford, often at outcome-based pricing that scales with your book.

Your biggest time-wasters - certificate processing, renewal prep, commission reconciliation, data entry - can now be automated at a fraction of what it would cost to hire another CSR. The ROI is not theoretical. Insurance companies reduced operational costs by up to 40 percent by using automation and digital solutions, with specific processes seeing cycle time reductions from five days to under 24 hours.

Certificate processing is the perfect example. Your team probably spends hours daily generating certificates, tracking expiration dates, sending reminders, updating records. Processes that generally take days or even weeks can be handled in a few hours with the right automation. AI agents can pull policy data, generate certificates, send them to clients, and update your AMS - all while your CSR focuses on that complicated bind that actually needs human judgment.

This is not about replacing your team. It is about eliminating the work that makes good people quit. Admin tasks currently consume more than 50 percent of an agent or broker’s time. Cut that in half and suddenly your three-person operation has the effective capacity of five people.

Technology no longer favors the big. It favors whoever implements it best.

The four areas where small beats big every time

Stop trying to compete on things large brokers do better. Compete on what they cannot do.

Speed and flexibility - Small agencies make decisions in hours, not weeks. No committee approvals. No regional manager sign-offs. A client calls with an unusual risk, you can have an answer by end of day. Big brokers need three meetings and a conference call with underwriting.

Client accessibility - Your clients can reach the owner. Try that at a PE-backed regional broker. The principal who sold them the account left two acquisitions ago. Now they talk to whoever is assigned their ZIP code that quarter.

Customized solutions - Small agencies can craft policies that fit specific needs because you work with various carriers and actually know the client’s business. Large brokers have preferred carriers, volume agreements, and profit-sharing arrangements that influence where they place business. You have freedom to do what is actually right for the client.

Community reputation - You are not going anywhere. The agency has been on Main Street for 30 years. The owner’s kids go to the same schools as the client’s kids. Trust is not a marketing campaign. It is decades of showing up.

These advantages survive consolidation because they cannot be acquired or rolled up. Big brokers can buy your book of business, but they cannot buy your relationships or replicate how you operate.

Small insurance agency competition means embracing AI agents, not avoiding them

The agencies that will survive the next decade of consolidation are not the ones resisting technology. They are the ones using it to amplify their natural advantages.

AI agents handle the repetitive work that big brokers threw bodies at. Certificate generation. Renewal reminders. Policy checking. Commission reconciliation. Data entry into your AMS. Status updates to clients. These do not require human judgment - they require consistency and availability.

An AI agent processing certificates does not get tired at 4pm. It does not call in sick. It does not leave for a job at the PE-backed broker down the street offering $10k more. It works while you sleep, handling routine requests so your team can focus on complex risks and client relationships.

The ROI is not about cutting staff. It is about competing with efficiency you could never afford with just humans. Your three CSRs can now handle the volume that required five. Your producers spend time advising clients instead of chasing down paperwork. Your agency operates with the productivity of a 30-person shop while maintaining the personal touch of a 15-person shop.

That is how small insurance agency competition works in the age of AI agents.

What this means for your agency right now

You have three realistic paths forward.

Sell to a PE-backed buyer, collect your multiple, and retire or stay on for the earn-out period. Many agency owners are choosing this, and it is a perfectly rational decision if you are in your 60s without a successor.

Merge with a peer to get bigger faster, combining books to compete for larger accounts and gain carrier negotiating power. This works if you find the right partner with compatible culture and complementary specializations.

Or double down on being small - invest in technology that eliminates your resource disadvantage, focus on the personalized service and local expertise that big brokers cannot replicate, and build competitive moats around relationships and responsiveness.

The third path is harder. It requires you to change how you operate, automate workflows you have done manually for years, and trust technology to handle work you used to think required a human touch.

But it is the path where you keep control, maintain your culture, and prove that consolidation does not mean big automatically wins.

Small agencies that embrace AI agents, eliminate administrative waste, and focus on what they do better than large brokers are not just surviving - they are winning small insurance agency competition on terms that favor them. Technology erased the resource advantage. Now the question is who uses it better.

The PE firms betting billions on consolidation are not betting that small agencies will disappear. They are betting that most small agencies will not adapt fast enough. Prove them wrong.