The year ahead will see the continuation of the consolidationtrend we’re seeing across the insurance industry--not just ofhuge health insurance carriers merging into a fewmegaliths, but of agencies combining to form something moreakin to a professional service firms, with a range of specialtiesunder one roof.

These new combined agencies will have to be able to service notonly employee benefits and group insurance, or retirement andfinancial plans with life insurance and annuities, or P&C, orbusiness insurance--they’re going to have to do it all.

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Instead of needing five separate agencies to cover all anindividual’s insurance needs, customers will be able to work withjust one agency that has five specialist brokers, each expert inhis or her area of insurance.

To draw a comparison, within a single law firm, one lawyer maybe a family law specialist, another might be practicing businesslaw, someone else may cover wills and estates and so on.Contracting with a law firm, clients are getting expertise in allthe different areas they need.

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Typically, an insurance agency today doesn’t have thatbroad-ranging capability.

But they need to get it--not only because the customer prefersone-stop shopping, but because the added expertise and bandwidthwill allow agencies to create client stickiness and expand therange of services it can offer a given customer.

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Larger agencies of this type will also have the means to keeppace with technology that streamlines the business, andremain aligned with the technological advances carriers are making.There’s also the element that sheer size will give agencies theheft to have some technological leverage with the hugecarriers.

This sea change will also see a blending of complementaryservices.

For example, the personal investment products offered bycompanies like Edward Jones and Metropolitan Life’s menu ofinsurance products will eventually have joint agents who willdistribute and sell both their product lines under one agencyroof.

Personal investment advisory firms will be selling a lot moreinsurance than they do now, and insurance companies will be gettinga lot more involved on the securities side.

In effect, regulatory changes are serving to create a merger orconsolidation of all financial services under one heading.

Here, the threat of disruption is coming from withinthe industry--suddenly there will be highly professionalized agentsappearing on the scene who know financial services deeply, versusagents who simply sell life or health insurance.

This is sending the insurance industry’s distribution channelinto a state of flux.

The monoline agent who only writes a certain type of coveragewill be heavily affected. He or she will no longer be able to say,“I sell life insurance”--the agent will have to become his or herclients’ financial advisor, too.

In order to survive, insurance agents will have to ramp up theirprofessionalism by acquiring new skills, undertaking continuingeducation, and generally staying ahead of a fast-changingregulatory kaleidoscope. The winning agent will need to be able tosell of the range of products, helping customers take care of alltheir present and anticipated needs-- health-related and successionalong with property and casualty.

In 2016, agencies are going to have to get bigger, give betterservice, and train and attract talent that operates at a higherlevel of professionalism. An agency that is structured like aprofessional services firm would, for example, have morewherewithal to bring in the technology resources needed to do morethan they do today.

As the distribution channel for insurance products to theconsumer, and now having more resources to serve customers, theywill be able to grow.

The big carriers will need to facilitate this, and to understandthat the future agency is not only going to be bigger, but moredemanding. Carriers will need to provide more to that agency thanthey do today, with technology, products, training andeducation.

Those insurance companies currently using independent agenciesaren’t suddenly going to start writing insurance directly--so theyare going to need to nurture their relationships with theirdistribution channels.

It’s an industry transformation that is going to happenquickly--it’s happening now--and the only way it can besuccessfully implemented is through modernizing the technology.