Surprising Facts About Mergers and Acquisitions in Insurance

This is part of the list supported by AgentSync.

Mergers and acquisitions (M&A) are always a hot topic in insurance. From small organizations hoping to be acquired, large organizations hoping to expand, or carriers looking to expand into new locations or businesses, there are many reasons why companies consider mergers and acquisitions.

Since it is so common in the insurance industry, it is not surprising that we have already written about insurance mergers and acquisitions. Want to read why you should prioritize your business acquisition strategy? It’s done. Or are you wondering how to avoid lemons when buying insurance? It’s done. How about a debate about why your technologies are needed before you decide to sell your insurance? It’s over!

But if you’re just looking for the basics – the ones that talk about M&A in the insurance industry – then you’ve come to the right place. In this blog we will discuss basics such as:

  • What is merger and acquisition?
  • How are mergers and acquisitions different from each other?
  • Why are there so many bundles and purchases in insurance?
  • Why do some insurance companies acquire others?
  • Why do you want your insurance coverage?

Before you read on, remember that we are experts in producer license management but we are not your lawyer or accountant. Before considering any insurance policy for your M&A, be sure to get professional advice from a trusted professional. To simplify and streamline compliance for your agency, carrier, or MGA, see how AgentSync can help.

What does M&A mean in insurance?

The term M&A stands for merger and acquisition: the process by which several separate businesses become one. The combination of words and acquisition can involve several different activities, each with different meanings.

What is insurance coverage?

An insurance merger is when two different companies form one new company. For example, insurance carrier A and insurance agent B decide that they may be in a good position to form a new company: insurance agent C.

What is getting insurance?

An insurance acquisition is when one company acquires one or more companies, thus bringing the company under the company’s umbrella. The acquiring company, also called the parent, does not have to buy 100 percent of the target company. In most cases, a company only needs to acquire more than 50 percent of another business to gain control.

How are mergers and acquisitions different?

Simply put, a merger refers to a “merger of equals” in which two companies agree that it is a wise business idea to merge into a single, newly created company. An acquisition usually refers to a large company that buys all or part of a smaller company and becomes the new owner or parent company. A takeover can be voluntary or voluntary (sometimes known as a takeover or expropriation if the company being bought does not agree).

How big is M&A in insurance?

Mergers and acquisitions occur frequently in the insurance industry, including insurance agencies, carriers, MGAs/MGUs, and insurance technology companies (insurtechs).

Over the past 20 years, insurance M&A deals in value (how much money they’re worth) and volume (number of transactions) have grown and continued to grow: anywhere from under $40 billion through nearly 80 deals in 2003 to record. of $ 57.5 billion through 869 deals in 2021. We must note that the exact number of sales and the amount of sales differ from sources but everyone agrees that 2021 was a record year.

As the economy slowed in 2022, insurance company mergers and acquisitions slowed. However, the industry “remained strong” compared to M&A activity in other sectors of the economy – with corporate and mortgage services increasing M&A insurance at a greater rate than insurance carriers.

Why do insurance carriers engage in M&A activities?

The main reason an insurance agent will join is to buy and increase market share. They can do this by merging or acquiring an insurance company with a new brand, new businesses, or both. Sometimes insurance carriers look to acquire others by trying to swallow a company that they see as a significant competitor, that they would rather have under their roof than compete with them.

Insurance companies also see opportunities to reduce operating costs and expand through M&A.

Why do insurance companies engage in M&A?

In many cases, insurance policy owners see acquisition as a good way to exit when they are ready to retire. If an insurance agent has built a successful organization with a large and valuable book of business during their career, selling the organization to a larger organization can be an attractive idea. On the other hand, large organizations often want to expand their reach into new countries and new lines of business, and the easiest way to do this is often to find an insurance company that brings what they need to the mix.

Why mergers and acquisitions are attractive compared to organic growth?

Organic growth may be the gold standard for a healthy business but mergers and acquisitions can help a company grow and hit faster without hiring, training, or implementing new technology. In the best case scenario, the acquired company may begin to see immediate returns on their investment with an already profitable company under its umbrella.

What areas are covered under the insurance merger and acquisition?

Sometimes M&A creates deficits, both in people and systems. Spending time and money planning how the newly created business will operate when two previously independent companies are combined, or how one company will take over the other’s operations, can be difficult in mergers and acquisitions.

Having the right insurance technology in place can lead to successful mergers and acquisitions

This may not seem obvious, but when it comes to mergers or acquisitions, insurtech has a story. For companies that want to be bought, those who are already using modern insurance means that potential buyers have a clear idea of ​​what they will receive from management, finance, and compliance. With AgentSync, for example, a prospective insurance agency can provide buyers with a complete, real-time, accurate view of the compliance of each producer working under the agency.

For companies looking to acquire or merge, having the right technology means spending less time moving data manually. Having the right systems in place means that integration and automation can help eliminate the need for human resources to perform critical tasks throughout the integration and acquisition process.

Whether or not you’re considering M&A for your organization, check out AgentSync’s solutions to modernize your insurance business.

Mergers & Acquisitions

Leave a Comment