AI is not here to replace independent agents, but it is here to amplify them.
Disclaimer: This article was written with the help of generative AI.
7:45 a.m., not too far in the future. An agency owner sits at the kitchen table with a cup of coffee, scrolling headlines before the day gets away from her. One catches her eye: “Local Insurance Agency Doubles Growth Using AI – Sells at Record Valuation.”
She sighs. Yesterday was a blur – reconciling carrier statements by hand, reviewing policy forms line by line, answering service emails late into the evening. The agency down the road used to look just like hers. Same size. Same markets. Same struggles.
So, what changed?
The competitor didn’t hire twice the staff or stumble onto a magic niche. They invested early in artificial intelligence – and now the gap between the two agencies is widening.
Which raises a question many independent agents are quietly asking themselves right now:
Is AI just another tech fad, or is it becoming essential to growth, valuation, and long-term survival?
Agencies Are at a Strategic Crossroads
Independent agencies have always been resilient. But today’s environment is different.
Consolidation is accelerating. Carrier expectations are rising. Clients expect faster service, more personalization, and better insights. Meanwhile, it’s harder than ever to hire and retain good people, and many owners are staring down perpetuation or succession decisions.
In the middle of all that noise sits AI.
For some, it feels optional. For others, uncomfortable. But increasingly, AI isn’t a tactical “nice-to-have.” It’s becoming a strategic capability – one that directly affects organic growth, profitability, and ultimately what an agency is worth.
Insurance Carriers are Investing into AI. Does that Matter for an Agent?
Look upstream.
Carriers and large brokerages are pouring money into AI – not as an experiment, but as a foundation of how they operate. According to this report from Morningstar, AI tools will account for over 20% of carriers’ IT budgets in the next 2 – 4 years. They’re using it to improve underwriting accuracy, speed up claims, detect fraud, automate service, and cut loss ratios.
That matters for independent agencies because carriers don’t modernize in isolation.
As carriers get more efficient, they expect the same from their distribution partners. Agencies that exchange clean data, respond quickly, and operate digitally become easier and more attractive to work with. Agencies stuck in manual workflows become friction points for their carrier partners.
What High-Performing Agencies Are Already Doing
Here’s the part that tends to surprise skeptical owners: this isn’t theoretical anymore.
Top-performing agencies are already using AI in very practical ways and seeing real returns. From the 2025 Best Practices Study, a striking 60% of mid-large agencies ($25-$100M revenue) and 84.2% of jumbo agencies (> $100M) have already invested in generative AI solutions. Due to their size and sophistication, these are also the most valuable agencies.
These are some of the ways these agencies are using AI to enable their operations:
- Automating loss run analysis and drafting coverage comparisons
- Using AI assistants to answer internal “how do I?” questions from staff instantly
- Automating direct-bill reconciliation
- Running AI-powered policy checks to catch errors before they become E&O issues
In one documented case from the Big “I” and Reagan’s Best Practices Study, an agency has saved hours per employee per week, generated triple-digit ROI, and significantly increased revenue per employee.
Producers benefit too. AI tools are helping them research prospects faster, personalize outreach, and shorten sales cycles. Tech-enabled producers consistently write more new business and build larger books. A Reagan/ Broker Tech Ventures study cited in the Best Practices report found that producers under 35 who are “tech-enabled” generated $65,000 more in new business in a year and built books of business $168,000 larger than their non tech-enabled peers.
The takeaway is simple: Agencies using generative AI aren’t working harder. They’re getting more leverage out of the same people.
Growth, Valuation, and Why AI Ties Them Together
Agency value still comes down to two things: earnings and growth.
AI affects both.
On the growth side:
- Producers can prospect more efficiently
- Sales cycle shorten
- Cross-selling and account-rounding opportunities are easier to spot
- Service improves, driving retention and referrals
On the profitability side:
- Routine work gets automated
- Errors decrease
- Revenue grows without payroll growing at the same pace
That combination – profitable growth – is exactly what buyers, lenders, and perpetuation candidates look for.
An agency with strong EBITDA margins, clean data, scalable processes, and a clear growth story will always command a better valuation than one held together by principal heroics and overtime hours.
AI and How it Could Benefit Your Eventual Perpetuation
This may be the most overlooked benefit of AI.
Internal perpetuation often fails to begin for two reasons:
- Cashflow – The next generation can’t grow the agency fast enough to generate a healthy cashflow surplus while they pay the prior principal.
- Over-reliance on the owner – The business depends too heavily on the current owner, their personality, relationships, and knowledge, while ignoring good processes to enable knowledge transfer.
AI can help on both fronts.
Younger producers expect modern tools. Agencies that invest in technology attract and retain future leaders. Additionally, as seen in the Best Practices Study, there are many instances of AI-enabled agencies out-growing their non-enabled counterparts. Giving a younger producer or a prospective owner the confidence that they can grow the business and generate enough cashflow to pay off the prior principal and have a surplus will increase the chances of a successful internal perpetuation.
At the same time, AI-enabled agency operations can reduce owner burnout and capture institutional knowledge in systems instead of just the current owner’s head. A business that runs not only on personality but also on processes is far easier to transfer – internally or externally.
In plain terms: generative AI tools can make your agency easier to grow, easier to manage, and easier to pass on.
A Practical Word for Smaller Agencies
This doesn’t mean every agency needs a massive AI budget.
For smaller agencies, the smartest approach is:
- Start with one or two high-impact, repetative tasks.
- Research point solutions that exist. These are tools made to address one specific “point” or problem.
- If there is not an existing point solution, research if tools such as paid instances of Copilot, ChatGPT, Claude, Gemini, or any other generative AI assistant could solve your manual task problems.
- Pilot small projects that save time quickly.
Early wins build confidence, and confidence builds momentum. AI adoption isn’t about flipping a switch. It’s about building muscle over time.
If you are a skeptic, think about this: we’ve been here before.
If you rewind the clocks to the 1980s and early 1990s, agency management systems were viewed much the same way AI is today – with skepticism, concern over cost, and a lingering belief that “good agencies don’t need that.” Early AMS platforms were initially adopted just to clean up accounting, and many agents resisted them as unnecessary or disruptive. Over time, however, those systems evolved into the backbone of agency operations – handling client data, workflows, sales activity, service, reporting, and productivity. Today, the idea of running an agency without an AMS is nearly unthinkable; the entire workflow and scalability of a modern agency hinges on it.
AI will follow a strikingly similar path. What feels experimental or optional today is rapidly becoming foundational infrastructure, embedded into the systems agencies already rely on. Just as management systems moved from “nice-to-have” to “can’t compete without it,” AI is on track to become the next layer of operational baseline – quietly powering productivity, insight, and growth behind the scenes rather than acting as a flashy add-on.
AI isn’t here to replace independent agents.
It’s here to amplify them
Agencies that treat AI as a strategic investment – not a gimmick – are already growing faster, operating more profitably, and building more valuable, perpetuable businesses.
In the end, investing in AI is really about investing in time:
- Time for producers to sell
- Time for staff to serve
- Time for owners to do what they want to do rather than be bogged down in administration
And in this business, time – used well – is one of the most valuable assets their is.
Connect with IA Valuations for information on how your agency can better implement AI tools. Reach out to Jarod Steed, Business Planning & Valuation Analyst, at jarod@iavaluations.com.
By: Jarod Steed
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About IA Valuations and Agency Link – Founded in 2017, the IA Valuations team has performed over 400 valuations to independent insurance agencies across the U.S. Our advisors have 30+ years of experience guiding agency owners on maximizing their agency value, planning, and legal needs for ownership transition. In addition, IA Valuations has provided perpetuation planning, financial modeling and business planning for independent insurance agencies. Finally, IA Valuations has advised dozens of agency owners on selling their agencies through our Agency Link process. Agency Link is a platform that connects buyers and sellers together to further the growth and strength of the IA system. To learn more about IA Valuations, please visit IAValuations.com or contact@iavaluations.com.
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