The chart on page 26 showing a 13.9% difference in the Operating Ratio remains a concern. Especially when that spread is calculated off “better than average IA companies”
Averages by Channel
National Agency Writers 41.5
Regional Agency Writers 38.9
Exclusive Agent Direct Writers 38.6
Direct Response Writers 27.6
A good part of the reason why the Direct Writers have gained is their overwhelming advantage in advertising dollars. We have non-stop ads on all major channels for GEICO, Progressive, 21st Century, Esurance on how they can save us $500 or more on our Auto Insurance. The geek crowd out there often buy on the internet and don’t care about personal contact with an agent. They also don’t have a clue what they are buying. All they seem to care about is what the monthly payment will be. Independent agents still have a great deal to offer on Homeowners and specialty coverages such as boats and Umbrellas and with the advent of bundling of coverage, we can still compete with the Direct Writers and Captives. The Independent Agency system does not advertise as much and Trusted Choice is a great idea, but they don’t get the message across as well or as often.
I blame our educational system somewhat for not instilling curiosity in our youth that will remain with them as they grow up. They are bombarded with the “save $500 message” and don’t bother looking beyond the ads. Often, that $500 is saved by writing less coverage and a lot of people don’t even think about what they are buying or that their decision at that moment could end up costing their their home, or a significant portion of their income, if there were underinsured for a catastrophic automobile liability loss. The direct writing arena has emphasized price as being the proncipal buying concern and nothing about the product itself, thus doing a disservice to the insurance buying public. Sadly, I think people put more thought into buying a TV than an insurance policy to protect their personal assets.
It’s not simply a lack of curiousity, it’s a lack of education. The youth should be taught personal finance – what to do with a paycheck, not just how to get one. Basics of personal insurance should be part of it – how the various types of insurance work, when and why you should buy each kind, and the importance of having a basic understanding of what you are purchasing. I know I could have benefitted from such a curriculum. Despite working in P&C I know woefully little about other types of insurance.
I definitely agree that the educational system is partially to blame. Obviously parents should be doing their part to teach responsible budgeting and spending, but the schools are in the best position to provide an overview of insurance and other financial products.
i think what GEICO execs stay up at night worrying about would surprise agents. Retention, Loss Ratio and the waining effect of their mass-media ad dollar. They have to start functioning like a hometown agent to fix those things. I wouldnt put it past them to get to the next level – so we need to be equally as dilligent on our end.
GEICO is already opening limited ‘neighborhood’ shops – have
one up the road just N of Houston – and they are now offering renters ins. Full Homeowners is next – all direct. It will be interesting in the next 4-5 yrs. to be an independent agent.
GEICO has had a “Special” relationship with Travelers to do Homeowners for their customers. Travelers tells us they don’t want monoline HO and we have to bundle and then they let GEICO do this. That is an interesting relationship. Their model is not well suited to doing HO. I can just see one of their geeks advising a customer on coverages they need to insure their home properly. In fact, I am working on one of these kinds of accounts and the HO is about as plain vanilla as it gets and the customer doesn’t know how vulnerable they are.
Its amazing how we agents just sit back,well we should ban together and do something about as a good friend of mine says I will not let Progressive and or Travelers or any other carriers in my office because they are the carriers trying to put me out of business and I have to agree with him. But we need to do something about it!And lets not wait lets find a way to come together
I guess Uncle Warren has never heard of Tier 1 & 2 in Texas. Carriers are avoiding that area like the plague. Anyone ever heard of Ike & Rita? Maybe GEICO will just write Fire & Lightning on Home and exclude the EC.
I agree that there is new generation of people buying auto insurance online. They have no clue what they are buying, they are just going for price point comparisons. These same people are also flat out of luck when they have a sticky claim or one that is boarder line covered or not. They are talking to direct employees of the company, so if there are questions about the claim validity who’s side does the employee take? I am also amazed at the skill level of the employees. If it’s not in their script they have no clue. I’ve written a lot of policies away based upon no claims help and total lack of experience. All it takes is one messy claim and these people go right back into the agent system of doing business.
The chart on page 26 showing a 13.9% difference in the Operating Ratio remains a concern. Especially when that spread is calculated off “better than average IA companies”
Averages by Channel
National Agency Writers 41.5
Regional Agency Writers 38.9
Exclusive Agent Direct Writers 38.6
Direct Response Writers 27.6
What are your thoughts on how to close that gap?
A good part of the reason why the Direct Writers have gained is their overwhelming advantage in advertising dollars. We have non-stop ads on all major channels for GEICO, Progressive, 21st Century, Esurance on how they can save us $500 or more on our Auto Insurance. The geek crowd out there often buy on the internet and don’t care about personal contact with an agent. They also don’t have a clue what they are buying. All they seem to care about is what the monthly payment will be. Independent agents still have a great deal to offer on Homeowners and specialty coverages such as boats and Umbrellas and with the advent of bundling of coverage, we can still compete with the Direct Writers and Captives. The Independent Agency system does not advertise as much and Trusted Choice is a great idea, but they don’t get the message across as well or as often.
Wrote the home but lost the auto. Yay.
I blame our educational system somewhat for not instilling curiosity in our youth that will remain with them as they grow up. They are bombarded with the “save $500 message” and don’t bother looking beyond the ads. Often, that $500 is saved by writing less coverage and a lot of people don’t even think about what they are buying or that their decision at that moment could end up costing their their home, or a significant portion of their income, if there were underinsured for a catastrophic automobile liability loss. The direct writing arena has emphasized price as being the proncipal buying concern and nothing about the product itself, thus doing a disservice to the insurance buying public. Sadly, I think people put more thought into buying a TV than an insurance policy to protect their personal assets.
It’s not simply a lack of curiousity, it’s a lack of education. The youth should be taught personal finance – what to do with a paycheck, not just how to get one. Basics of personal insurance should be part of it – how the various types of insurance work, when and why you should buy each kind, and the importance of having a basic understanding of what you are purchasing. I know I could have benefitted from such a curriculum. Despite working in P&C I know woefully little about other types of insurance.
I definitely agree that the educational system is partially to blame. Obviously parents should be doing their part to teach responsible budgeting and spending, but the schools are in the best position to provide an overview of insurance and other financial products.
i think what GEICO execs stay up at night worrying about would surprise agents. Retention, Loss Ratio and the waining effect of their mass-media ad dollar. They have to start functioning like a hometown agent to fix those things. I wouldnt put it past them to get to the next level – so we need to be equally as dilligent on our end.
GEICO is already opening limited ‘neighborhood’ shops – have
one up the road just N of Houston – and they are now offering renters ins. Full Homeowners is next – all direct. It will be interesting in the next 4-5 yrs. to be an independent agent.
GEICO has had a “Special” relationship with Travelers to do Homeowners for their customers. Travelers tells us they don’t want monoline HO and we have to bundle and then they let GEICO do this. That is an interesting relationship. Their model is not well suited to doing HO. I can just see one of their geeks advising a customer on coverages they need to insure their home properly. In fact, I am working on one of these kinds of accounts and the HO is about as plain vanilla as it gets and the customer doesn’t know how vulnerable they are.
reminds me of a Progressive/Homesite situation. I rewrote one of their Homesite “policies”. Their rate was huge and it was ACV… lovely =/
Its amazing how we agents just sit back,well we should ban together and do something about as a good friend of mine says I will not let Progressive and or Travelers or any other carriers in my office because they are the carriers trying to put me out of business and I have to agree with him. But we need to do something about it!And lets not wait lets find a way to come together
you are spot on!Time to come together
I guess Uncle Warren has never heard of Tier 1 & 2 in Texas. Carriers are avoiding that area like the plague. Anyone ever heard of Ike & Rita? Maybe GEICO will just write Fire & Lightning on Home and exclude the EC.
I agree that there is new generation of people buying auto insurance online. They have no clue what they are buying, they are just going for price point comparisons. These same people are also flat out of luck when they have a sticky claim or one that is boarder line covered or not. They are talking to direct employees of the company, so if there are questions about the claim validity who’s side does the employee take? I am also amazed at the skill level of the employees. If it’s not in their script they have no clue. I’ve written a lot of policies away based upon no claims help and total lack of experience. All it takes is one messy claim and these people go right back into the agent system of doing business.