Is Google going to run the independent agent out of business

[InsuranceMaestro]

As an owner of an independent insurance agency I feel my business is threatened and very vulnerable with the news that Google and Overstock.com are creating insurance agencies. At least compared to Geico, we independent agents have the upper hand of being able to rate with more than one carrier; but now these two big companies can also provide multiple quotes to a customer.

How are we to compete? Not only does Google have an advertising budget that would vastly surpass that of any independent agency currently in business, but it also controls major components of the internet: Google search, Google business listings, YouTube, Chrome web browser, gmail, etc. These are all ways for customers to either find me or contact me.

Does anyone else think that Google just put the nail in the independent agent's coffin?

[lonestar]

maestro, it is too soon to tell exactly what impact this will have. However, I can tell you one thing, and most independent agents do not like to hear this, but I believe it to be true. If you and I do not learn how to sell on other factors other than price, then the IA companies do not need the agents. Period. Many IA companies this year have taken the stance, that if the agents cannot demonstrate a certain level of retention(which means selling less on price) then they are either terminating codes or mandating the agent participate in the policies being serviced by the company's call center for 1.5 to 2% commission cost.(Safeco is doing this.)

If all we do as agents is present the client with an EZ Lynx list of quotes, ordered from cheapest to most expensive, we are done. Companies can do this either by opening their own call center, or by participating in an online rater to push their products, and remove from their ledger sheet agent renewal commissions.

As agents, we will have to actually go back to basics, and actually work to educate consumers on other factors besides price.

[ocbroker]

maestro, it is too soon to tell exactly what impact this will have. However, I can tell you one thing, and most independent agents do not like to hear this, but I believe it to be true. If you and I do not learn how to sell on other factors other than price, then the IA companies do not need the agents. Period. Many IA companies this year have taken the stance, that if the agents cannot demonstrate a certain level of retention(which means selling less on price) then they are either terminating codes or mandating the agent participate in the policies being serviced by the company's call center for 1.5 to 2% commission cost.(Safeco is doing this.)

If all we do as agents is present the client with an EZ Lynx list of quotes, ordered from cheapest to most expensive, we are done. Companies can do this either by opening their own call center, or by participating in an online rater to push their products, and remove from their ledger sheet agent renewal commissions.

As agents, we will have to actually go back to basics, and actually work to educate consumers on other factors besides price.

I agree with this wholeheartedly - good post. In summation, yes, Google will run some agencies out of business. For the most part, however, it will be a thinning of the herd. The weakest and least skilled agents will flounder and leave the business. Those who provide superior service and have meaningful relationships with their insureds will survive.

[mightyquinn]

Insureds will use the web for shopping companies and prices BUT when it comes down to purchasing they will usually defer to their local agents because they want a live person close by to call when they have claims. Unlike shopping for consumer goods, there is a bit of sophistication that live breathing agents can provide when guidance/explanation is required. I don't see online platforms ever controlling the P&C market. Life and health perhaps, but not P&C.

If you are primarily a personal lines agency then you are late to the game. The banks tried this and failed for essentially the same reasons.

[agent14]

The banks tried this and failed for essentially the same reasons.

Have the banks failed? I don't know, I am just asking. I still get home and auto solicitations in the mail from BB&T bank with my mortgage statement.

I would be curious if there is any data on banks ceasing to offer home and auto products...

[d's insurance store]

I remain convinced that the longevity of a storefront, main street, primarily P&C Personal Lines Agency with the kindly, friendly, knowledgeable agency principal and a small number of 'helpers' (usually a spouse or offspring) is going the way of the old travel agency business model...in other words, about to be extinct.

Every time I bring up this comparison to independent insurance people they almost always say 'but there are still travel agencies out there in business', and I reply yeah, but they are highly specialized because the days of writing airline tickets for a 10% commission ended a long time ago and now the money is in cruises, packaged vacations and consultative fees and there are damn few surviving agencies selling that product.

What Google and others are doing is just a manifestation and acknowledgement that the personal lines consumer is changing or already has, and yes, there will be potential clients for the personal lines vendors in high value categories and some people will still want agency intervention and advice on their insurance matters, but the up and coming generation of personal lines insurance consumers will by and large be making their buying decisions on their smart devices based on protection of assets...they either have those assets or they don't. We'll all be chasing a shrinking slice of insurance pie without a whole lot of differentiation in the eyes of the consumers. Blah, blah, Blah...I know...we and we alone hold the key to customization of carrier offerings based on individual circumstances and risk mitigation needs and off the shelf solutions purchased from web sites can't possibly serve any function and just wait until a loss occurs and the policy holder realized there's a coverage gap and that's why the small time agency will survive serving the public in a trusted advisor capacity as we've done since the days of horse drawn fire trucks and sponsoring the little league teams and being members of the local service clubs and passing out calendars every Christmas to our valued clients...yuck.

I don't think the curtain is coming down next week or next year, but 4 or 5 or 6 years from now, if an agency thinks it can and will survive and be financially viable just peddling auto, home, small biz BOP's and simple life beyond that, they're foolish.

The message will be go big, or go home. Sell while your agency still has value. Get out before the carriers force it on you for lack of growth and cut commissions.

That's my forecast.

[Scooter33]

I also think if you are a personal lines P&C agency, it will be really tough to survive. I think we have 3-5 years max. Before agencies start dropping like travel agencies. I hope I am wrong, but I do not think I am based on how the trend has been in other parts of the world.

[rcenters]

I have not been following this closely; is Google planning to also service policies, or would that be done by carriers?

Also, how would Google deal with things outside of the box? For example, individual person decides to self-GC building a home? Will they have a product for that king of thing, or will they have to direct them to independent agents when/if they can't help?

[lonestar]

I can understand why some people view this development as another chapter in the "Gloom and Doom" chapter of the agency channel. But I really think that the future of the agent, independent agent anyway, is really dependent on whether the carriers value the business that the agent brings to the table. So this means that the agents better do a better job of attracting and retaining the better, more profitable customers.

The online shopper can be generally categorized as not very profitable to an insurance company, although there are exceptions to this statement. They move frequently due to price. Insurance companies don't really realize much profit unless the client stays for a few renewals, as I understand it. Also, this type of consumer generally has a higher loss ratio.

So, another "cheap insurance" marketing arm or two is going to be fighting the existing cheap insurance channels for this same market, which by all reports is about 20% of the insurance buying public, give or take. So I see this as increased competition for Geico, Progressive direct, comparenow.com and Esurance. The direct insurance channel has gone from spending roughly 1.8 billion in advertising in 2008 to around 6 billion in advertising as of late. But there market share has not increased by 3 fold. In fact their market share has remained somewhat flat, with only modest increases.

The 70 to 80% of the rest of the insurance buying public, for now, I see as still being served by the channel that they choose to do business with, the agency channel.

So, I do not see the Google or the Walmart in house agency as threats to eliminate the agency channel. There has always been a % of the public that has never liked dealing with an agent. So that is ok. In fact, the Walmart joint venture is with an independent agency. I think the future of the agent will be determined by the carriers. Will the carriers continue to view that the agency channel as having a better class of customers, with higher retention and better overall profitability compared with the "direct" consumer? Or will the agency channel deliver similar retention and profit numbers to the direct channel? I think we will for sure continue to see the companies squeeze the less profitable agents, and certainly squeeze the agents that sell only on price. This will leave other agents standing that do not sell only on price, and their retention numbers will show this.

If you look at Progressive, they have stated that their direct channel rates and the agency channel rates, each represent the underlying cost of doing business through each channel. And the Progressive direct rate, vs. the agency channel rate, do not differ hardly at all. Sometimes the agency channel rate is less, sometimes the direct rate is less. And the differences between the two rarely differ by more than 3-5%.

Now, if all the insurance companies decide to go to a high volume distribution with lower profit vs. a quality customer with lower volume, then that is the real threat as I see it to the agency channel. Or perhaps there will be another option here: A balanced mix of direct and agency channel distribution. Look at Travelers and Progressive, they have dual distribution. And one could also say that Liberty Mutual does too, since they own Safeco. And of course there is Allstate, which has a 3 tiered distribution model. Allstate is captive, Encompass through IA only, and Esurance is direct only.

[d's insurance store]

To Lonestar: With acknowledged appreciation for your insight and experience in the biz, I will ask the primary question that I think is vital to the survival to individual independent agencies...just where and how will you get your prospects in the very near future?

Without a pipeline of prospects that can be converted into clients, the agency model is dead in the water for personal lines and small commercial. Are you going to try and compete with an online presence? Pay per click? Rely on referrals? Yellow pages and direct mail? Email marketing? Twitter, Facebook and other social media? What happens to even the best retention figures when people die, move or just make a buying decision the saves them money? Will an agency service attribute list 'save' the client list to the degree that allows for business perpetuation?

And to your point about carrier behavior...insurance companies are just being reactive (albeit late to the table) to the perceived consumer demands in today's marketplace for retail insurance products. Most have their shareholders and Wall Street to satisfy and generally that means growth of the top and bottom lines, and in a static market they're going to look for growth wherever they can, independent agency be damned. An agency that thinks it can survive and prosper with low volume and low loss ratios because of selectivity in risk placement or rejection has, IMHO, a false expectation of the future that I forecast.

It's not that I foresee the demise of the IA system without any residual impact to the direct writers...the Allstate, State Farms and Farmer's models will also take hits. Heck, in many of their markets, the business model seems to be oversaturate with agency placement and see what and who sticks and let the failed agency policies go to orphan files with inertia driving profitability. After all, their hiring manager's have quotas to meet as well.

[lonestar]

d's, you may be right. Maybe we should all sell our agencies now, and look for another job.

[d's insurance store]

d's, you may be right. Maybe we should all sell our agencies now, and look for another job.

I'm not ready to pack it in today, tomorrow, next year or in 2017, but keep checking back in 2018 and beyond and I'll let you know.

[vla01001]

I am an agent selling commercial P&C. I personally buy my car insurance online, and not even from a carrier I have an appointment with. Why not? The price is better. Why would a personal car insurance buyer need an agent? Claims are handled by the carrier, payments are handled by the carrier, ID Cards are printed online, why would anyone need an agent? The same thing as travel agencies. Few years ago you can still see a few of them on main street, large companies such as priceline, cheapoair, etc got involved and the small independent travel agents disappeared. I see the same thing happening with the personal lines insurance agents. We just need to look at selling insurance that is not available online. That needs custom knowledge and experience. Such as trucking, builders, farms, manufacturing facilities, etc.

[mccluney]

Via 01001 said it best.

After being in the business for 30 years, I have migrated to writing tough commercial lines and group health. By pointing out serious coverage gaps in commercial polices, I have been able to round out by adding personal lines to these commercial accounts. Its the relationships not the price. Emphasis for me is on not writing personal insurance policies.

[goldenarms123]

vla01001 wrote:
Why would a personal car insurance buyer need an agent?

Maybe because 85% of the public do not understand a basic auto or homeowners insurance policy and their coverage's. Most people do not know what 25/50/10 means, yet Geico will automatically quote this to someone looking for insurance on their website. Does this person know they are getting the state minimum? Most likely not. Does this person realize that if they are involved in a multi car accident, they have the least amount of coverage for the situation? I would bet and say no. Obviously you don't need an agent, your in the industry but the general public have no idea what coverage's they have or what they could have.