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Valuation and Value Creation of Insurance Intermediaries

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Claudia Max

The book offers a comprehensive analysis of insurance intermediaries from a capital markets perspective. It presents an up-to-date market perspective, drawing the attention to the important trends and developments in the industry and recommends strategies to secure future growth. Further, it offers a detailed description of a valuation approach specifically tailored to small and mid-sized brokers. Research on insurance intermediary M&A reveals that positive abnormal returns are achieved for acquirers. The author points out which factors lead to value creation and investigates performance drivers in the tied agent channel.
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5 Performance Transformation in the Tied Agent Channel: Achieving a step-change in Tied Agent Productivity

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5.1 Introduction

Once considered an out-of-date sales channel condemned to lose market share, tied agent organizations today are still the largest sales channel in most European countries (Blair, Herndon 1994, p. 283–285; Regan 1997, p. 41–42; Anderson et al. 1998, p. 639–640; McGranahan 2013). There are multiple reasons for this: tied agents meet customers’ needs for personal and competent advice, particularly as insurance products grow increasingly complex. Furthermore, they provide the insurer with information on customers’ expectations and competitors’ activities; they contribute to stability; and, as an in-house organization, have advantages over the broker channel, e.g., in terms of controllability and brand delivery (Marvel 1982; Schmitz 2002, p. 56–68). Agents are the interface between the insurer and the customer and contribute materially to a company’s reputation and awareness ratings (Eickenberg 2006, p. 28; Goergen 2007, p. 188). Finally, tied agents’ client relationships and knowledge make them a well-established connector between customers’ demand for online and offline offerings.

Despite these advantages and the channel’s dominance, however, tied agent sales forces face a large number of structural challenges:

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