Small insurance agencies may be going the way of the corner grocery

The small insurance agency may be a thing of the past. Small shop agencies, consisting of two or three agents and a secretary or two , are combining to beat inflation and offer customers better and quicker service.

These mergers and acquisitions are "primarily advantageous for the agency and customer, but it's a double-edged sword," says Wesley Harrington, director of industrial relations at the Independent Insurance Agents of Massachusetts.

While combined agencies can offer more services, cut costs, and spread risks, there are concerns about customers losing "the personal touch" they have come to expect from a small agency.

An acquisition is a buy-out of one agency by another agency or company. Employees are usually replaced with personnel from the buying company.

A merger is the combining of two agencies. The staff remains basically the same in both firms.

Some mergers and acquisitions involve publicly held firms; but many others are between private agencies and companies. For this reason it is tough to calculate how many agencies are combining. But one Boston lawyer who works only with the insurance business says he handled over 100 such cases last year, and his business is "really getting lively."

The benefits of either combination are varied:

* Computerization: Computer technology is "revolutionizing" the insurance industry, according to a report by Warren Levy, of the Florida Association of Insurance Agents. For the independent agent competing with huge insurance companies, automation is the "key to survival." Most small agencies cannot afford computer equipment. But by combining, agents can chip in and buy the equipment they need to keep them competitive.

* Risks: Combined agencies are more daring than their smaller counterparts, says George Frazier, former president of the Independent Insurance Agents of America. "Getting larger allows the agency to offer the public a greater portfolio of products." The agency that couldn't afford to experiment in both personal and commercial lines can now do so.

It is easier for a larger agency to be adept at all the lines it carries. Generally, a bigger agency means broader, better- researched coverage, says Ron Streiter, vice-president of marketing in the Hartford Insurance Group.

* Stability: With more capital to invest, the larger companies are more financially sound and more desirable both to contract companies, which provide policies, and customers, who are looking for a reputable agency.

* Premium volumes: An agency's volume is the total amount of premiums (the money a customer pays for a policy) it collects per year. With premiums getting higher, larger agencies are better able to absorb rising prices by writing more business.

Companies that provide agencies with their policies, such as Hartford, Kemper , or CNA, also are rising their premiums. Only the most profitable agencies can afford to carry a variety of policy lines. "This is the No. 1 reason most acquisitions and mergers take place," says David Bakst, a Boston lawyer who deals only with the insurance business.

* Sales: Combined profitable agencies allow the agents more time to "get out into the field" and sell, thus increasing premium volume. The agent has less paper work and fewer management responsibilities. He also has more time to spend with assureds.

* Professionalism: Gerald J. Betro, an accountant who has negotiated many mergers in the boston area, says he "can't emphasize enough" the growing important of professionalism in the insurance business. "The customer must respect the agent's skills and confidence."

Large firms exert greater control over their destinies. For instance, Boit, Dalton & Church, one of Boston's largest agencies, recently joined forces with Frank B. Hall, a huge national independent insurance firm. The reason? "The bigger the agency," Mr. Betro says, "the greater the impact in the industry itself and among customers."

Mergers and acquisitions are not always so rosy, however. "What scares me," says Mr. Harrington, "is that with larger, more complex agencies, the customer will no longer have the same amount of personal contact with his agent. This sense of provincialism has always been important to insurance customers who prefer to deal with brokers, rather than larger companies."

Says one customer bout the small agency: "I like to know the guy who sold me the policy, knows me, and will handle my claims."

A big plus for the independent agent has always been his close association with his community. This "guy next door" attitude helps lend the agency the credibility that goes along with personalization. Acquisitions often lead to a complete change in the personnel and location of an agency.

Mergers are usually less severe. Customers may not even be aware a merger has taken place. And they often save a small agency that would go out of business without the additional financing.

Mr. Bakst says the main problem with a merger is discord among the personnel. "If they can't work together, the agency can't work."

Paul H. Attridge, a partner in the recently merged Boston agency Hollis, Perrin & Attridge Inc., says, "The day and age of the small insurance agency, like the corner grocer, is going by the wayside. With the insurance business becoming complex, a new level of expertise attainable with a larger agency is necessary to survive."

As to the success of the merged agencies, Mr. Attridge says, "the jury is still out. No two outfits do it the same way so we're trying to work out our differences."