While economists often discuss the U.S. economy as if it were a single entity, America has increasingly become a collection of distinct regional economies. Over the past several decades, economic activity has become concentrated in the country’s larger metropolitan areas, while many smaller cities and rural communities have struggled to keep pace. The result is a widening regional economic divide.
For insurance brokers, this shift matters because insurance demand follows economic activity. National economic indicators are still relevant, but brokers increasingly operate in markets with different growth rates, labor conditions, industry concentrations, demographics, and risk profiles. Firms that understand these local dynamics and adapt accordingly will be better positioned to grow.
Current economic trends creating the divide
Regional economies are following increasingly divergent paths. Businesses tend to locate where they can access talent, customers, suppliers, and investment capital – creating economic clusters that attract even more growth. Technology has flourished in markets such as Silicon Valley and Seattle; healthcare has become concentrated in cities like Boston and Minneapolis; and advanced manufacturing is experiencing a resurgence in parts of the Midwest. For example, StarPlus Energy made a $7.5 billion investment in two plants in Kokomo, Indiana, while Ford and CATL spent $2.5 billion on a battery plant in Marshall, Michigan.1
At the same time, distribution centers, warehouses, and data centers continue to expand along key transportation corridors throughout the Midwest and South. Talent remains one of the most important drivers of regional growth, with companies making location decisions based on workforce availability and workers migrating toward areas with greater economic opportunity.
Insurance demand tends to follow the movement of people, jobs, and capital. Where businesses invest and grow, insurance opportunities often follow.
What the regional economic divide means for brokers
Varying local economic conditions change the way insurance demand develops across the country since different economies produce different risks. Local industry concentrations, construction activity, workforce dynamics, and demographic trends all influence risk exposure and insurance demand. A broker serving manufacturers in Ohio will face a different set of client challenges than a broker working with technology firms in Austin, TX or healthcare systems in Boston, MA.
The regional economy also directly influences a brokerage’s organic growth potential. Firms serving high-growth markets benefit from expanding commercial activity, business formation, increasing property values, and growing employment, all of which contribute to a larger and more dynamic client base. Conversely, firms in slower-growth regions often face business consolidation, greater cost pressures, and fewer opportunities to acquire new clients. As shown in the chart below, these dynamics create meaningful differences in organic growth across the country. Although the disparities appear modest in any single year, they compound over time, affecting revenue growth, producer productivity, firm valuations, and investment capacity.
Brokers in slower-growth markets must compensate by deepening and expanding their current client relationships, while also consistently bringing in new business and offering specialized expertise rather than relying on favorable market conditions alone. The best brokerage firms can grow in all market conditions by making adjustments that differentiate them from their competitors.
How brokers should adapt to diverse conditions
Every brokerage should have an economic development strategy. Most firms have sales and marketing strategies, but few have a formal process for tracking economic development.
Brokerage leaders that regularly review economic development data and regional nuances can provide more relevant and strategic advice. The firms that thrive in this environment will be those that treat economic intelligence as a competitive advantage and enable growth by:
- Becoming a regional business advisor: Brokers should pay attention to labor market conditions, business formation, population migration, economic development projects, and commercial construction activity. This knowledge creates opportunities for more meaningful client conversations. Instead of focusing solely on renewals, brokers can help clients navigate workforce challenges, growth plans, benefit competitiveness, and emerging risks.
- Building industry specialization: As regional economies become more distinct, industry expertise becomes increasingly valuable. Brokers should develop deeper knowledge of the industries driving their local markets, whether that is manufacturing, healthcare, logistics, agriculture, professional services, or technology. Specialization allows firms to provide more strategic guidance, differentiate themselves from competitors, and become less vulnerable to price competition.
- Following investment and growth: The best opportunities are often found where capital is flowing. Brokers should track business expansions, new construction projects, economic development announcements, industrial park development, and hiring activity. Even in slower-growth regions, there are typically pockets of investment and expansion. Firms that identify these opportunities early can align their sales efforts with areas of emerging demand.
- Expanding beyond local boundaries: Technology has made geography less restrictive than it once was. Many brokerages can support clients across multiple states, serve niche industries nationally, and provide remote advisory services. Being located in a slower-growth market no longer means growth opportunities are limited to local economic conditions.
The real divide may not be between fast-growing regions and slow-growing regions. It may be between brokers who understand the economic forces shaping their markets and those who do not. A brokerage leader should stop asking, “What is happening in the U.S. economy?” and start asking, “What is happening in the areas where our clients operate?” As regional economies become increasingly distinct, local economic intelligence is becoming a competitive advantage. The brokers that win over the next decade will be those that understand not only insurance markets, but also the movement of people, jobs, industries, and capital that ultimately drive insurance demand.
Contributions to this article by: Keith Captain, President, MarshBerry Networks.
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