Insurance broker consolidation could put pressure on middle market carriers

Since 2020, insurance broker transaction activity has transitioned from an environment dominated by small-to-midsize agencies acquiring and merging with peers to a more mature pattern of private equity-backed and public brokers buying larger, regional brokers, resulting in carrier premium volume flowing through a smaller number of larger platforms.

This consolidation activity increases broker leverage; larger brokerage platforms control more premium volume and policy submissions. As a result, brokers may be in a stronger position to negotiate higher commission rates, supplemental compensation agreements and preferred-carrier status.

Middle market insurance carriers should consider the new risks that accompany this landscape of consolidation.

Understanding the insurance agency M&A landscape

Insurance agency mergers and acquisitions have undergone three distinct phases since 2018.

In the first phase, from 2018 through the first quarter of 2020, the M&A landscape for this sector in North America held relatively steady—averaging around 700 deals per year and around $4 billion in total transaction value—with small-to-midsize agencies as the primary players.

The second phase was from the start of the pandemic through the second quarter of 2022, when low interest rates made leveraged acquisitions highly attractive, fueling a sharp spike in deal count. Deal values, meanwhile, stayed largely consistent with prepandemic levels.

The third phase emerged in mid-2022, when deal count began to normalize again amid higher interest rates. Then, from 2023 through 2025, average deal value increased dramatically, with publicly traded brokers and private equity-backed firms focusing more on acquiring large regional brokers.

This consolidation has left middle market carriers working with a smaller number of increasingly large brokerage platforms. As U.S. total direct written premiums continue to rise among insurers, consolidated brokers will inherently have access to more customer coverage submissions, more premium volume, more data, and more control over carrier access. That greater access typically results in an increase in leverage that can be used to seek better compensation, stronger panel status, preferred quote access, additional service fees or analytics compensation.

Shifting risks for insurance companies to manage

Middle market carriers that must compete with these larger, newly consolidated brokers will face new risks. These include:

• Pricing and margin pressure via regulatory asymmetry
  Earnings may lag due to the lengthy process of obtaining regulatory approval for admitted-rate changes compared to the cost changes described above. Middle market carriers can reduce their exposure by being more proactive than reactive, evaluating which brokers they are currently using and determining whether existing concentration could lead to pricing pressures.
• Distribution dependency and broker concentration risk
  Middle market carriers risk reliance on a shrinking number of increasingly powerful broker decision makers. A growing share of policy submissions and placement decisions is controlled by a smaller number of large brokerage organizations. If a carrier is not in a large broker’s preferred panel of carriers, they may never get a chance to quote. If the carrier has a major concentration with one broker (or a mix of brokers that all fall within the same broker consolidation), the loss of any one of these brokers could lead to an immediate revenue

In response, carriers should evaluate how they are actively managing broker concentration risk. Questions that can help leadership teams with this effort include:

• Where are our greatest concentrations by broker, broker parent company or distribution platform?
• How does our current broker portfolio align with our risk appetite?
• What contingency plans are in place if we lose access to a significant distribution partner?
• What metrics and early warning indicators help us identify emerging concentration risks?

4 ways middle market insurance carriers can adapt

Four levers of defense can help middle market insurance carriers better compete given the sector’s recent consolidation:

• Manage broker concentration risk
  Best-in-class carriers will go beyond monitoring their broker concentration to manage it actively. For many companies, this might involve treating broker distribution like an investment portfolio to ensure no single broker channel can materially disrupt the business. Reducing correlation risk can also help manage broker concentration. Carriers should look beyond individual broker relationships and assess whether multiple brokers are tied to the same private equity-backed platform or distribution network, which can create hidden concentration risk.

• Rebalance negotiating power with brokers
  Consider moving from commission-based to performance-based economics to shift the conversation from “pay us more” to “earn more by performing better.” Carriers with strong underwriting performance can tie compensation incentives to measurable outcomes such as loss ratios, growth quality, policy retention and product mix.
• Become the broker’s first call
  Brokers often prioritize carriers that deliver speed, predictability and ease. Therefore, carriers that are fast to quote, clear on appetite and consistent in underwriting can become the “default market” for brokers, making it less likely that the broker will replace carriers.
  Carriers should avoid adverse selection from their brokers (i.e., becoming the “leftover market”). Tracking loss ratios per broker will provide insight into whether the carrier is receiving the best risks from their brokers.
• Invest in proprietary advantages
  Carriers that want to shift the balance of power should consider building or investing in differentiated underwriting platforms or product capabilities that brokers cannot easily find elsewhere. There is information asymmetry between brokers and carriers; brokers have access to cross-carrier pricing visibility, loss ratio insights and market-wide benchmarks, whereas carriers typically have a limited view outside of their own book.
  Carriers can narrow this information gap by investing in broker-level performance dashboards, market benchmarking and predictive placement insights. Being armed with information can provide a competitive edge in negotiations.

Adapting to insurance sector shifts

Rather than viewing recent consolidation as a temporary market shift, carriers should understand it as a structural change in the insurance distribution landscape. Companies that regularly assess broker concentration risk, strengthen their distribution strategies, refine their operating models and invest in differentiated underwriting capabilities will be better positioned to maintain profitable growth and compete effectively as broker influence continues to expand.