When I got into this business in the 90’s the direct carriers were going to destroy the industry. No one would be left. The sky was falling and by 2000 there would be no agencies left.
Fast forward to 2015 and we’re still here. The business and approach is different, but agents are still around.
The problem originates in the different policy forms they use. Start moonlighting deliverying pizzas? Some policies cover this, some don’t. Want to make a little extra cash as an Uber driver? Most policies don’t cover this, but a few can. Just wrecked a loaner car? Some policies won’t cover this. Use your pickup truck on business? Many policies cover, some don’t.
Here are 12 auto insurance exclusions or limitations you won’t find in the ISO standard personal auto policy.
1.Undisclosed household residents are excluded. How many of your insureds have “boomerang” kids living at home that you’re not aware of?
2.Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner auto?
3.Business use of ANY auto is excluded. Do any agency employees ever run to Staples or the post office on agency business?
4.Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
5.Vehicles over 10,000 pounds in GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
6.Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics and yes, even the delivery of insurance policies to customers by an agency producer.
7.Permissive users only get minimum limits. This can apply to people who borrow your car or even unlisted household drivers.
8.“Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured in the process.
9.Criminal acts are excluded or limits reduced. DUIs or even speeding tickets may preclude coverage.
10.Medical payments only include licensed physician fees. One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
11.Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he left his keys in the car.
12.Sales tax is not covered under loss settlement. This cost one “same coverage” insured more than $2,000 out of pocket for sales tax on a replacement auto.
Bill, I couldn’t agree with you more. This is why I have been asking for the state insurance departments to require standard forms and endorsements again – for both auto and home policies. I have some terrible stories to tell about customers that I lost to internet and 1-800 carriers only for them to call me later for advise when they have had a claim that would have been covered on the policy they had with me for many years but, not on the policy with their new carrier. Funny how it works, some of my customers that are computer geeks only stayed with internet based carriers for about a year before coming back to me. They were smart enough to realize that with their improving economic situation that they needed a true insurance professional – something they were not going to get GEICO or someone like them.
Nice going, David. I am so encouraged that intelligent civil discourse is still alive in this country! I agree with Agent. This latest move has proven that Google has gotten WAY too big.
Remember, this is Google the tech GIANT of the world. This isn’t Walmart or some bank. There will indeed be insurance agents in 10 years. It will just be 5% of the amount of them from today.
This is unlikely to see any huge success and will probably be limited to auto only customers. It’s not the type of platform that those who need higher limits or homeowners insurance. These people want to talk to someone and like the having an agency in place to keep an eye on their needs. To summarize, this will not be for the more sophisticated consumers with greater insurance needs.
Agency – I recall when Agents / Brokers said Esurance wouldn’t work. I’m old enough to remember people saying Progressive wouldn’t work as nobody wants to purchase a policy online.
The truth is, IF Google goes about this the correct way, it will be successful. Keep in mind, the next generation (such as my daughters) PREFERS to buy things online. They prefer to not have an agent and they have grown up without the same face-to-face connections we grew up with. Times are changing. Does this mean the death of the independent agency? Not at all. Those will always be around, at least until the Baby Boomer generation dies off.
Dan, they have been predicting the death of the Independent Agent for the past 30 years and we are still here and doing well. Our customers appreciate our advice on all their needs.
They haven’t been predicting the death of independent agents for 30 years. Perhaps they have been predicting the death of the captive agent but that was for the past 20 years. However, the technology is now here. Independents will have the best chances of survival. However, captive agents are f#####. Guaranteed only 5-10% will be left in 10 years. If you check Allstate and Farmers, they are losing 800-1200 agents a year for the past 3 years. The only thing left will be direct and a few Independents. Death to captive is inevitable.
David, I would take the other side of the argument, and propose that captives have more job security than IA’s. Full disclosure: I am ex captive, and have been an IA for a few years now. State Farm, Farmers and Allstate really make their money in the life insurance products, not the P & C. Captives need the agent lap dogs to push their overpriced life products. IA companies don’t push life, and therefore I believe will dump the agent channel before the captives do. IMHO.
looks like they are just using the google name to bring in business (for brokered companies?); it’s like anything else that takes a few brains – it’s whether the person sitting across from you or on the other end of the line knows what they are talking about – or cares.
Google trying to make Insurance even more impersonal and McDonaldized. Use a local agent and establish a relationship with someone you trust….not a faceless drone in a 300 cubicle warehouse somewhere out of state.
So another player in the blurred distribution of tomatoes, oh I mean auto insurance is around the corner. Welcome them. Lets see how they deal with the client when the loss occurs and the client wants to know why they do not have car rental on the policy.Have you ever tried to talk to a Google rep about their analytics?
David, do you think they will mention that changing the Auto will get rid of the companion credit the customer gets for both the Home and Auto currently?
I doubt they will mention much. If I understand it there will be little to no human conversation since the world is going tech, tweet, hashtag etc. I also think that a majority of auto sales are still done face to face despite the on line trend to price the policy. The better client probably wants one point of contact for all lines.
On Auto sales, I use the internet to search for a car, features, sticker, see if it is in stock at the Dealership, figure out what my car is worth with KBB and I go in well armed with info and speak to a salesman. They can take my offer or leave it. Usually, they want their sale and we quickly come to terms. None of that going back and forth with his manager or I am out of there.
It’s not a matter of justifying ourselves. It’s a matter of there will be a certain section of the population that will enjoy this way of purchasing insurance, but Agency is right. It will mostly be for personal auto insurance. Once you get into more complex coverages, you will need more interface. And forget this venue for large commercial accounts. They will never buy their insurance electronically.
Libby, did you know that the GEICO lizard thinks they can write Commercial now? Commercial Auto, Business Insurance Packages? They were stupid enough to send an insurance agent a solicitation for coverage. Myself and my partners had a big laugh about it.
I suppose I could tell them I am a dynamite hauler or a roofer and see if I fit their appetite guide.
January 12, 2015 at 9:28 am
CL PM says:
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Agent – there are several on-line sites successfully writing BOP today. (Insureon, Bolt, AssureStart, Hiscox) I believe there will be many small businesses who want to do business on-line who can be successfully insured without a local agent. Small Commercial Auto may also be handled this way. But, like your comments on Personal Lines, there is a limit to the size of account that can be handled without a local agent. I do not see the demise of either IA’s or Exclusive Agents ever happening. There will always be complex accounts that need a knowledgeable agent involved. Plus, many IAs and Exclusives do a great job of handling the simpler policies as well and their customers want to continue dealing with them. I believe that all of these distribution channels will fill needs and will co-exist.
I’ve been both captive agent (14 years) and Independent currently. Just more proof that most carriers are whores. They are not committed to any specific channel of distribution. Don’t be naïve into thinking anyone is safe with your livelihood. Traditionally captive carriers (Allstate, Farmers) and IA carriers (Met, Progressive, Hartford) are both doing it. Sadly enough many consumers don’t give a rats ass who their “agent” is as long as its cheap. I’ve done a great job building a loyal customer base (twice now) but it gets harder and harder with all dollars spent promoting insurance as a commodity.
LSIA, it is a good thing you are Independent and not Captive anymore. Those captive guys only have one market to go to so they often lose out if their market tanks. Ask almost any Allstate or Farmers agent if they would rather be Captive or Independent.
If the ability to quote / buy online is the death of an agent model, why hasn’t Esurance and 21st Century taken over the insurance world? Last I heard, Esurance was still unprofitable for Allstate, running at about a 113 loss ratio. And Farmers, which owns 21st Century, is trying to wind down that company since it is not profitable. Granted, Google offering insurance could be different, but so far the data I have seen is that the perpetual rate chasers / shoppers, who shop and change carriers every 6 months because their rate went up by 5% are not profitable customers to the companies. Time will tell on this. If the customers that are written through this new Google channel are uber profitable, then I can see it succeeding. I just have not seen the historical data from other online companies that would convince me yet, that this is an undiscovered gold mine for the companies.
Esurance does not have a 113 loss ratio. They have about a 113 combined ratio. Their loss ratio is OK, it is the marketing expense ratio that is hurting them. Which, by the way, may better prove your point. Without the scale of GEICO and Progressive, it is difficult to make a profit as a Direct carrier due to the cost of attracting new business. Local agents are more cost effective for most carriers.
Yea but a 113 combined LR is a loser no matter whether it comes from underwriting, inadequate pricing or acquisition expense. If they cut acquisition expense, no one hears them and quote volume goes down with volume. If they cut price, the LR goes up unless they have a magic box that tier underwrites better than anyone else.
When you compete largely (and allegedly) on price, there comes a point where you’re about as efficient as you can possibly be on the expense side with regard to advertising, marketing, underwriting, processing, etc. About 80% of the auto premium dollar goes to pay losses and loss adjustment expenses. Once you’re as efficent and effective as you can get on the non-loss expense side, and you’re STILL competing on price, there is only one thing you can do…reduce losses and loss adjustment expenses. The easiest way to do that is reduce coverages and apply more stringent claims practices. Then you end up with products even more inferior than many of those being touted today as “SAME COVERAGE, Better Value.”
I think Google is the perfect one to get into auto insurance. Someone will have to insure their autos that drive themselves and what better company than the one that created them. I’m not sure many other companies would want to insure them until they got more data. So this is my guess why Google is doing this. To get the Insurance companies the data they will need to insure these in the future. Plus if they start having issues and failing, Google will have the data much quicker to do any recalls to fix computer errors.
google is highly creative. I’m sure they will crush plently of players out there in the insurance world. They will be able to quote you in a heartbeat based on all the information they already have on you.
why have a thousand independent agents when google can have an agent pop on your google glasses anytime you need one. Same thing for the claims adjusters.
This article should make us all stop and think. Staying abreast of all of the technology innovations that will ultimately impact our business processes and competitive position in our marketplace, is challenging. As leaders, we are told we should spend 80% of our time working “on” our business- reading, thinking, strategizing communicating vision. This is difficult to do alone, but by engaging with peers who are facing similar challenges, we can build off of one another’s perspectives to craft objectives that will position our firms for success both now, and into the future. I encourage all Vertafore users to engage in NetVU – the Network of Vertafore Users (www.netvu.org). Access to this Network of peers is a major benefit of purchasing a Vertafore system. Whether you are charged with crafting vision, building workflows, or training to implement system components, you can take full advantage of NetVU and the resources we make available to stay ahead on issues like Google entering the auto insurance space via many of our independent agency channels.
Google should use their excellent search platform to uncover the often dramatic and potentially catastrophic coverage differences among these insurers.
I’ve posed these questions to some brokers across the pond:
1. Do you know what kind of presence Google has in the UK auto market?
2. Do you have a “state”-mandated policy that all insurers must use or are there a variety of policy forms in the marketplace?
One of the major issues here is that coverage can be dramatically and potentially catastrophically different among carriers, particularly the “nonstandard” and price-focused advertisers. I’ve seen many five- and some six-figure claims denied by these carriers that would have been covered by an “ISO standard” or better policy.
Someone will go with a carrier that’s $75 cheaper with complete disregard to the fact that their old carrier covered their existing exposure(s) but the new carrier does not because no consideration was given to contract language and claims practices differences.
The only way to compete solely on price and service is to sell a true commodity, a “state”-mandated policy. And, even in that case, there are always going to be differences in claim handling procedures and contract interpretation.
Agent’s comment above about GEICO attempting to quote commercial insurance is an example of what Google will do with writing auto insurance. Those of us who have been doing this for decades don’t worry. We’ve been through this before numerous times and eventually the Google Geeks will sell off this division to a real agency and make a couple of bucks. Who isn’t writing auto insurance? Commodity product with little loyalty. Hey Google – lets see you try to write a multilocation restaurant chain. No business owner would trust these dweebs with their company.
Here are 12 auto insurance exclusions or limitations you won’t find in the ISO standard personal auto policy.
Undisclosed household residents are excluded. How many of your insureds have “boomerang” kids living at home that you’re not aware of?
Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner auto?
Business use of ANY auto is excluded. Do any agency employees ever run to Staples or the post office on agency business?
Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
Vehicles over 10,000 pounds in GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics and yes, even the delivery of insurance policies to customers by an agency producer.
Permissive users only get minimum limits. This can apply to people who borrow your car or even unlisted household drivers.
“Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured in the process.
Criminal acts are excluded or limits reduced. DUIs or even speeding tickets may preclude coverage.
Medical payments only include licensed physician fees. One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he left his keys in the car.
Sales tax is not covered under loss settlement. This cost one “same coverage” insured more than $2,000 out of pocket for sales tax on a replacement auto.
Good post Bill. There have been many players enter the market and they are not insurance people. Many banks have bought insurance agency and then found out it is not their cup of tea. The so called direct channels with geeks taking calls and quoting are manned by non insurance people that only sell price. They don’t run reports before selling and often the customer gets a shock when the policy is issued with much higher rates than the customer had. They then come crawling back asking us to write them.
Yes Farmer, when they started doing Financial Services, they started neglecting their core P&C business. I wonder who would want to finance their auto with State Farm.
I never quite understood the appeal of the Google search engine. It stores everything you ever search for, including porn, it retains all sorts of personal information, and most (not all) of the results I get are irrelevant.
I typically lean toward to less regulation & free market competition with respect to products & services. But I could see how Google could really benefit if the FCC votes to eliminate net neutrality.
Google can accumulate and search through carriers rating variables to produce their rate comparisons. But they haven’t considered key variables of coverage and exclusions. So, their Auto Insurance Market shopping system would be comparing Apples and Oracles.
A commenter mentioned the poor underwriting results by Esurance and other insurance e-marketers. That doesn’t surprise me because the internet enables concealment and fraud, if not only soft underwriting practices. It would be enlightening to know exactly what caused the difference in results from standard marketing approaches. Is it frequency, soft filed rates not properly accounting for risk differentials, or something else?
Disagreements about whether or not insurance e-marketing systems will end Independent Agents or Captive Agents are amusing. No one knows for certain, but it seems ‘GEEKO’ will be limited to less complex lines; e.g. personal auto and standard homeowners risks. The greater complexities of WC and various sublines of GL may be captured by similar systems. But highly diverse commercial properties and excess & surplus lines may be an insurmountable challenge for the geeks to overcome.
Finally, I am confused by the logic of developing a system to search for Auto insurance rates and compare them when such a system already exists… i.e. an internet search. Yes, GEEKO comparisons are mechanized, and save time. But could dumbing-down of the comparison to price shopping only yield coverage gaps that may be more costly – – – i.e. insurance premium plus deductible plus non-covered losses – – – in the end?
I know I google all kinds of things to gather information; legal, medical, and how-to. But I still hire a lawyer, doctor, or contractor to do the real work. It will take only one uncovered loss for an insured to realize insurance is the same as these other professions and they don’t know any more about it than they do performing heart surgery.
Full disclosure, I’ve owned an IA and State Farm agency. Agents are just as much to blame as carriers. Both have made auto a commodity. Ever walked into an agent’s office? Listen for a bit, the first thing that comes out of the CSR’s mouth is about price. Agent’s advertising talk about lowering your rate. The problem is that very few agents or carriers are unique in their product offering. Everyone says we have the best systems, claims service, blah blah blah. Agents typically don’t even have a value proposition they offer. Heck, my agent hasn’t contacted me in two years. So the one thing they have left to compete on is price. It’s laughable that anyone thinks this has no chance of being successful. Wait until Homeowners goes online too. An agent had mentioned earlier they are pushing for standardized forms for auto and home to avoid confusion with the policyholder. Guess what, if they are all the same, why do you need an insurance agent anymore? Insureds have access to more information than ever today. Do you really think that Google can’t be successful online?
VP, can I hazard a guess that you got away from State Farm to go to IA? How did you get away from your non compete contract with State Farm? A lot of captives have had big issues with management. Allstate agents had to form a guild/union to deal with management.
Price sells most auto insurance for most people. Always has. Google will just be the delivery mechanism. And like everything else, you’ll get what you pay for.
The main competitors for Google at first will be Progressive,GEICO, esurance and other internet companies since internet shoppers will have another choice. My guess is that the agency market share on Private Passenger Auto will gradually erode at the same pace as it does now with the introduction of this new product.
While attractive looking, the sites offer inaccurate quote comparison.
I used both of them to generate quotes and then using the websites of every insurer they listed, generated a new set of quotes. Neither site had even close to the correct premiums (Margins of well over 20% higher or lower for most).
When I ranked the insurers from Price (Lowest-to-Highest) in a similar fashion as the two sites, even the ordering was vastly different. For instance: The cheapest in one group was number 5 in another.
Rating algorithms are complex, and even though Quotes from different insurers’ websites are “In-your-face” and freely available, these “One-size-fits-all” comparative rating websites, use a small set of rating variables to create the quoted premium, will return an incorrect quote and will mostly likely not get the shopper the best deal.
The InsuranceJournal states
”
Google could present formidable competition for other insurance sellers. As many as two-thirds (67 percent) of insurance customers said they would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon, according to research by Accenture.
”
This comment answers a vastly different, but interesting question: “Would you buy insurance from Google?”. Basically this shows that shoppers in the Insurance marketplace trust Google and Amazon as viable options for Insurance Brands.
It is a necessary question if Google decides to sell Insurance itself, but it is a quantum leap in logic to suggest that its acquistion of Comparative rating websites implies it will also sell insurance. Regardless of current developments in Autonomous vehicles, many people still physically drive their own vehicles. As a result, Actuaries and other Ratemakers have used a drivers’ characteristics to set prices. I believe it would be far outside of Google’s MO to start hiring Actuaries and collect the appropriate Rate-making data.
This is not to say that if Vehicle Telematics really “took off” Google wouldnt be able to enter that game. Google certainly has the development and analytical brainpower to create a proprietary Telematics device, and could deploy it in the Marketplace alot easier than most Insurance behemoths.
If Google does decide instead to get into the Comparative Rating game it most certainly has a competitive advantage. It has a large amount of Marketshare on “The Search”. Anything customers search for, look for, etc online. If a customer is “Googling” GEICO, Progressive, State Farm Google knows this and has a handle on the landing pages for all of these Insurers’ quote pages.
If it had the appropriate customer information (Possibly through some online form the customer filled out and Saved to their Google-plus account?) it could index the competitors’ quote pages, auto-populate the quote input fields, and return a rank-order of Insurance quotes on its main search page, much like it currently does with Airline rates. The veracity of such quotes would most likely suffer from the same inaccuracies that CoverHound does, but with Google’s technological and innovative edge, could improve and expand upon Coverhound’s “One-size-fits-all” approach.
All that said, more accurate rank-ordering of quotes would be good for the consumer. Allowing them essentially to truly get the “best deal”, and find that deal considerably quicker then searching all over the internet themselves.
However, even if one rules out its potential accuracy, with Google’s large market dominance in all things Search, would consumers trust its estimates of competitor rates “willy-nilly” without independent verification? And if so, which ways will Google monetize this new-found ability?
This is interesting. I have also heard of the death of the IA. Has not happened yet but you have to admit the IA model is getting squeezed. The issues are numerous including commoditization. Many companies have forced the personal auto product toward being a commodity when in fact, it is probably one of two insurance offerings that should be counseled by an agent. Not saying this can’t be done electronically especially if it is high risk drivers with low limits.
*next issue is youth buyers. They are more likely to buy online and buy cheap and are less than
Likely to prefer consultative selling. That is only going to grow with technology.
*Standardization causes products to become more commoditized and easier to market and sell. IA’s would better off with differentiated products that they can use to their advantage, up sell and have a better buyer end product.
* end product service is generally better using an IA. It is more personal, the customer can be handheld if needed and can be an advocate when something goes wrong. However, technology and buyer tech ability will continue to put pressure on the market.
*scale. Companies like Geico can use size and assets to develop high brand awareness that drives quote volume and sales. Court is still out on companies like Goji. They are basically large brokers that use the web to drive quote volume. They have a centralized underwriting unit (Boston in Goji’s case-high cost structure) and can often have a high operating cost. Goji probably has expense problems and just pushed their CEO out from operations. So it will be interesting to see if it works. Looks like they could use an experienced operator but we will see.
Bottom line for me is:
* use technology to your benefit and do not be afraid to spend a little money to make good use of social media as a part of your marketing plan.
* be efficient. Drive costs out of your business. It is a defensive move but the direct companies drive efficiency every day.
* continue to be customer centric with good customer service. Look for new ways to attach up selling and cross links to your customer as touchpoints to service.
* hire the best people you can find. Do background checks before hiring. Train them and turn them loose. Pay them better than your competitor and keep them around
I could go on and on. We actually own an agency consulting business that works with IA’s to do what I have outlined above in this broad post. Even for some of our competitors. Why, because the stronger we are as a group the better off we are
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Hey Sargeant, it has been a while since you have commented on this forum. I agree with what you are saying that Independent Agents need to do some changing and use Social Media more. We are doing that with our website people and will be having another meeting with them today to maximize our offerings. Yes, there is a segment of the market (mostly the young cell crowd)that want to simplify the buying process with insurance being one of them. However, most have no clue what they are buying and the online markets do not advise well. Flo says just pick your price and they believe her. Reports are run after the buying decision and these young people with tickets, accidents often get a disappointing result when they get their policy.
Did I see an article a few weeks ago that Detroit has the highest auto rates in the country? What have you done to adjust to that and who can pay those rates up there?
Good to see you back. Be careful not to insult Libby or Ron. Rosenblatt is the self appointed monitor of the forum now and you will be fined points if you put them in their place.
Agent – you’d better move that meeting up. Your website is terrible. Sarge is not able to stop himself from insulting me, same as you. In fact, you seem obsessed with me since you mention me by name in one out of every 10 posts. I think you both have a crush on me.
Rosenblatt, deduct another credit. Libby is shooting for a new record in insults. Sargeant may not have been following the forum for a while. I was giving him fair warning.
How about giving me your agency website Libby and let me analyze it for content and usefulness? That’s right, I don’t know how to break in and reveal the identity of me and my website so I need your help. Put your cards on the table or shut up about it.
Yes, “young” for use of a better term people are tech drivers. They want to go to the web, look and buy. Do they make good decisions? Not always especially when buying financial services. So, when something is not covered and they have a problem, it is bad for the industry. They don’t necessarily see it as a distribution problem, or a purchase problem. It becomes all insurance companies are bad problem. That is why IA’s should not strive for standardization of products. They become a commodity. As an industry we should drive quality, differentiated products that serve different buyers with different products. That way, when doing good consultative selling, the customer understands what they buy and why they paid what they paid.
As far as Detroit insurance rates? They are well earned. The past city servants ( the corrupt thieves that served themselves) ran the city in the ground and after 50 years of liberal democratic government the city went broke and many of the city serpents went to prison. The real issue has been one of the highest theft rates in the country and the city and county being named one of the worst liability “Hellholes” ( that is what the industry calls it not me) in the country. That said, since the Feds put the mayor in fed prison for 28 years, chief of staff in prison, city council persons in prison or thrown out; Things are looking up.
In fact, those mean old Republican businessmen are investing hundreds of millions (maybe billions) of dollars buying property and putting jobs back in the city. I have never really been afraid of going into the city but a lot of my neighbors really don’t care to go unless it is a ball game, concert etc. I take them quite often and they love it. Great restaurants, great symphony orchestra, opera and many new restaurants. If we can get rid of the rest of the scrum, improve the schools and city services, I might even move back.
Good one Sargeant. Libby just knew your first comment would insult her. You kept your comment professional and informative.
Here is a question for you. Do you think insurance companies listen to agents at all when developing their rates in their black box algorithms? Some say the actuaries just do their thing and damn the torpedos, full steam ahead and if they run off business doing that, so what. I say they listen to agents and when the companies are wrong, they take action to fix it as they have with some of mine.
I think some companies listen and some don’t. It depends on the company, their core product focus and management. Let’s face it, some insurance companies have succession plans that are either FUMU, or all internally driven so that one bad manager follows his boss that was a bad executive. However, there have been some that have been progressive and have good executive management.
As far as their agents, There are some who actually believe the agent is core to the success of the company. Others talk a good game but if they could cut you out to save acquisition costs, they would. Then there are others who refer to agents as FSGs or Fnn sales guys (sorry ladies the term is generic and includes you too).
Take a company like Dairyland. For years their distribution model has been retail independent agents. If you read about Google, Goji etc each article has mentioned Dairyland. So Dairyland, who made hundreds of millions of dollars off the back of independent agents are now going to cut their acquisition costs by bypassing the independent and rely on an Internet play managed by an Internet wholesaler. How do You think Dairyland or Viking agents like that?
As far as listening for the purpose of rate development I would say some do to an extent. Each company knows they need to make money and what margin they need or want. Some public companies need ROE higher than a mutual for example in order to appease shareholders. AdditIonally, each company also knows what their acquisition costs are, reinsurance costs, general and administrative expeneses are, what their allocated loss adjustment expense is, taxes boards and bureaus are plus any contingent commission on the backside of the reinsurance agreements etc. These expenses/costs are different between each company and are reflective of individual company practice and management. So while they may listen, when the formula for the above gets plugged into actuarial models you might or might not like the outcome.
There are a lot of pieces to the puzzle and like anything else some are better than others and some are more compassionate about their agency force.
Sargeant, as we are veterans of this business for many years, we have seen the cyclical nature of the business. I have lost count of how many soft and hard markets I have been through. Some companies from time to time try to capture more market share by lowering rates, then realize they have some reserve issues and raise them back. If they are a big player, they think all the smaller markets will quickly follow suit. This recent market is almost inexplicable. A poor economy with a harder market does not a good situation make. A lot of people don’t have as good a score as they used to have in better times, so the model says they should pay more for insurance. That presents a unique challenge to agents trying to explain price increases to loss free customers. I maintain that actuaries are largely responsible for the cyclical nature of this industry.
I believe the smaller companies do a much better job of listening than the large ones. My company in particular opened a new state by talking to agents about what they wanted in a HO carrier, and we’re in it for the long haul. We could be the absolute cheapest on the block for all markets, and then have dramatic rate increases after the storms hit, but we chose to use realistic guidelines and be competitive at the same time.
Hey Bill, good point. Our regionals are a lot easier to talk to than the big boys and are more responsive to our needs. I am currently considering a book roll to a regional from a national carrier that has flopped (for years) and run business off due to their black box algorithms that make them uncompetitive. No carrier is a best fit for all customers as we have found out and when some rating was done, but we will probably split the book by three carriers to get the best deal for customers and it won’t hurt to see the volume increase from the acquiring companies.
No, I am in Texas. We are a weather state so companies are always fiddling with their black boxes to take rate. It doesn’t seem to matter how good an agent does with managing their book or producing a profit for the company. They will always seek more rate and it is often state wide.
February 13, 2015 at 10:23 am
james says:
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FUMU? FSGs? I’m afraid I don’t know all the lingo.
Agent,
I agree with you about the market, especially personal lines. Although commercial business is not much better. We have been fortunate to have some very special portfolios that her really helped us.
I am not so sure I would put all of the blame at the actuaries feet. As you probably have figured out, I am not an actuary but I have had them report to me. An actuary uses data and models to tell a story of how the business has developed and how it will continue to develop if no changes are made. Then decisions have to be made as to where the company wants to be positioned (product and price) and given the actuarial data, how they do it. That is a management decision and you might be really surprised at what some of them do. There are some real knee jerk decisions made. Then a lot of people stand around, look at each other and say -DUH! Anyone could see that coming.
I agree Sargeant. Company management is either good or not good. Look what happened to Fireman’s Fund with a succession of bad CEO’s, bad Board of Directors who hired those dufus CEO’s and now they are sold off. That was a substantial company at one time and they wrote a lot of business. The successful companies are the ones that use some common sense, stay stable and not jump out on some tangent that does not work out. How many stick to that concept anymore?
Knowall, companies should level with agents more. I get upset with companies who have a good combined Loss Ratio and get greedy and do these Predictive Modeling schemes done by stupid actuaries and try to push the envelope on rates and then come back after they fail and run off business wanting us to give them another shot because they are now competitive. How many customers want them back after receiving a large rate increase or non-renewal because they changed their appetite guide? Quick answer, not many.
Well knowall, I did have a company level with us when we were going over our year end and looking at what 2015 would bring. Of course, the company which I won’t name has been shrinking for the past 5 years due to those pesky algorithms which makes their products uncompetitive. They said they expected to keep doing the same thing in 2015 as they have been doing. They are one of the few companies out there which has in their contract that if an agent declines more than 5% in volume, they do not qualify for contingency no matter how good the loss ratio is. Our loss ratio is currently 10.4% and we declined by 7% in volume so we get nothing yet again. That is why we are looking for book roll with our other carriers. What a joke.
Yes, there are good and bad and a lot of so so management in the middle. That is a real problem with our industry. Couple that with all the other variables and the industry will change continually. We, as independent business owners will need to continue to remain nimble, adapt and overcome. IA’s are far from death’s door and in fact if we make good decisions, technology can work in our favor, not against us. IA’s need to work hard and position themselves as best they can in the market and have a contingency plan that they can use if something happens.
For example, we have a fairly large portfolio of homogenous business that we were sending to essentially 1 carrier. Our fear was that if carrier “A” decided to exit the market or got into financial problems, or we had more than one bad year, they might bolt on us. So we decided to set up our own captive and take risk on that portfolio. We also decided to have a panel of two carriers, both of which would cede business to our captive. If they bolt we have options. Move the business to the other carrier or get a fronting carrier and cede all the business to our captive. Now if carrier “A” gets nasty with us (not saying they will) we have alternatives. Loyalty in the insurance business died a long time ago.
Well, it sounds like you are on top of the situation. Some years ago, carriers were giving us a pitch that we had too many markets and we needed to book roll business to them and look how much we could make. That was a disastrous thing to do if things went south with that carrier. I know agents who had to sell out or merge/cluster to survive when it soured.
I also remember when the contract was a mutually beneficial partnership between agents and carriers. You are right, there is no loyalty at all anymore. I am glad I have 5 major standards and numerous other facilities with brokers to send business to. Did you ever buy that agency in Texas or did that fall through? I would imagine it would be difficult to manage from long distance.
Well, we would have had it bought but the owners are vacillating as to whether or not they want to sell and become a part of our larger group. I understand that and much of the back and forth is emotional on their part. It is selling something that they started and built. I get that. So we are still waltzing. I think we will get it done, in time.
How is business? I just read another trade rag that declared that this market may be the best we will get and that it may soften further especially on the personal lines side and commercial property business. Not enough disasters- Ha!
Business is good Sargeant. We made Contingency with several carriers due to excellent loss ratio and volume produced. How did you do in that environment? The demise of the Independent agent has been “exaggerated” by many on this forum.
Did you get a mailing that GEICO is wanting to write Commercial now? They were stupid enough to send it to an Independent agent. We all had a big laugh about that.
Well, the articles I have seen is for a little softening in the market, but we will see. The economy will dictate a lot of what happens and all we need is a hurricane to come in or some tornado damage in the Midwest and we will be back to square one.
Regarding agent buy outs, we see some of the small mom & pops merging or selling to larger agents from time to time. I have even had some solicitations from Nationwide agents to buy us. They have no clue how to handle a varied Independent agency so we laugh them off.
I am a sales/marketing rep for a large National Carrier, and as much as I’d love to see the independent agency plant succeed in the future for my own job security, I just see it as a dying breed. Many small to medium size agencies are being gobbled up by large brokers who mainly focus on larger, Middle Market policies leaving their personal lines small commercial customers to be serviced by a service center or csr.
I would bet many of the people commenting on how the independent agent will live on forever are in their 50’s or 60’s, not understanding the Millenials and the young kids who will be consumers in the next 5-10 years. They don’t want to talk to people, they do everything online and the thought of them going to an independent agency to get insurance instead of just going online is a far fetched thought.
Those folks in their 50s and 60s were in their 20s and 30s when they first heard about the death of the independent agent. If a millenial thinks he or she has a life-threatening medical condition, would s/he rely on WebMD.com or would s/he seek personal attention from a medical professional? If sued, would s/he rely on legal advice from a web site or hire the best attorney their money can buy?
Even millenials understand the significance and difference between researching and buying a bluetooth speaker online and needing in-depth medical analysis or legal advice.
The problem is that consumers have been DUPED into thinking that auto insurance is a commodity distinguished only by price and purchasing convenience by large corporations who are only interested in them as a component of billions in cash flow.
Insurance policies are different and the exposures can be catastrophic. If you choose the wrong product on Amazon, you end up with a crappy product. If you choose the wrong insurance product and insurer, you could end up losing everything you own and a garnishment of your wages for the next 10-20 years.
When “Flo” says, “You get the SAME COVERAGE, often for less,” she’s just kidding…it isn’t the same coverage.
“Cheap fabric and dim lighting, that’s how you move merchandise.” – legendary salesman, Morty Seinfeld
“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” – John Ruskin
Marketing Rep, you need to join the real world. I just talked to a Marketing Rep with our largest national carrier and he said the millennial trend is showing signs of slowing down. Many Millenials eventually start buying houses, having kids and settling down. They realize the value in having an agent protect their assets, something you don’t get with GEICO and others of their ilk. Agents have been adjusting to interlopers for years and are still thriving. Yes, some of the small Mom & Pops get sold to larger agencies, but that has been going on for a long time. The key is succession of principals. We have a mixture of older and younger owners and the younger ones will carry the agency forward into the future. Frankly, we don’t want many millennial customers because they aren’t loyal and will change for a dollar. There are plenty of people out there in their late 20’s, 30’s,40’s,50’s & 60’s and even 70’s and they do realize the worth of the agent and the value we represent.
I don’t quite understand all of the hoopla about Google Compare UK (GC) services. The many outcries suggest GC will cause big implications for US insurers. The truth of the matter is that GC’s business niche is no different from any other existing auto-rating services that offer only quotes and rates. Although GC advertises to be an innovative online car insurance comparison service, the service does not compare AUTO INSURANCE POLICIES. There’s only one online service that offers auto policy comparisons, and that service is Insurance Snoopers, Inc.
Trust a geek with your Auto Insurance. See how good they are on accidents, claims. What a scam.
You sound like a captive agent trying to convince yourself you will have a job in 5 years.
Sorry to disappoint you David. I am an Independent agent with 5 major markets. Where will you be in 5 years, looking for a job with Google?
I retired.
When I got into this business in the 90’s the direct carriers were going to destroy the industry. No one would be left. The sky was falling and by 2000 there would be no agencies left.
Fast forward to 2015 and we’re still here. The business and approach is different, but agents are still around.
Yes, and most of their incomes have eroded into the pocket books of rich executives at top. Thanks but no thanks.
David- sounds like you either retired at the wrong time or just sucked as an agent. Enjoy your retirement.
Which is better for a purchaser of auto insurance to do first and why with a direct insurer – Compare auto policies or compare price?
I don’t know Agent, the carriers mentioned in the list (with the exception of a couple)handle claims just about as well as any other company.
The problem originates in the different policy forms they use. Start moonlighting deliverying pizzas? Some policies cover this, some don’t. Want to make a little extra cash as an Uber driver? Most policies don’t cover this, but a few can. Just wrecked a loaner car? Some policies won’t cover this. Use your pickup truck on business? Many policies cover, some don’t.
Here are 12 auto insurance exclusions or limitations you won’t find in the ISO standard personal auto policy.
1.Undisclosed household residents are excluded. How many of your insureds have “boomerang” kids living at home that you’re not aware of?
2.Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner auto?
3.Business use of ANY auto is excluded. Do any agency employees ever run to Staples or the post office on agency business?
4.Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
5.Vehicles over 10,000 pounds in GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
6.Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics and yes, even the delivery of insurance policies to customers by an agency producer.
7.Permissive users only get minimum limits. This can apply to people who borrow your car or even unlisted household drivers.
8.“Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured in the process.
9.Criminal acts are excluded or limits reduced. DUIs or even speeding tickets may preclude coverage.
10.Medical payments only include licensed physician fees. One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
11.Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he left his keys in the car.
12.Sales tax is not covered under loss settlement. This cost one “same coverage” insured more than $2,000 out of pocket for sales tax on a replacement auto.
http://www.iamagazine.com/magazine/read/2014/07/01/price-check#sthash.Wt4YugQ2.dpuf
As Morty Seinfeld says, “Cheap fabric and dim lighting, that’s how you move merchandise.”
Bill, I couldn’t agree with you more. This is why I have been asking for the state insurance departments to require standard forms and endorsements again – for both auto and home policies. I have some terrible stories to tell about customers that I lost to internet and 1-800 carriers only for them to call me later for advise when they have had a claim that would have been covered on the policy they had with me for many years but, not on the policy with their new carrier. Funny how it works, some of my customers that are computer geeks only stayed with internet based carriers for about a year before coming back to me. They were smart enough to realize that with their improving economic situation that they needed a true insurance professional – something they were not going to get GEICO or someone like them.
I am a proud insurance geek… so yeah, Trust your insurance to a geek.
Nice going, David. I am so encouraged that intelligent civil discourse is still alive in this country! I agree with Agent. This latest move has proven that Google has gotten WAY too big.
Remember, this is Google the tech GIANT of the world. This isn’t Walmart or some bank. There will indeed be insurance agents in 10 years. It will just be 5% of the amount of them from today.
This is unlikely to see any huge success and will probably be limited to auto only customers. It’s not the type of platform that those who need higher limits or homeowners insurance. These people want to talk to someone and like the having an agency in place to keep an eye on their needs. To summarize, this will not be for the more sophisticated consumers with greater insurance needs.
Agency, My guess is the most applicants will be from the cell addicts who will try to apply while texting and driving.
Agency – I recall when Agents / Brokers said Esurance wouldn’t work. I’m old enough to remember people saying Progressive wouldn’t work as nobody wants to purchase a policy online.
The truth is, IF Google goes about this the correct way, it will be successful. Keep in mind, the next generation (such as my daughters) PREFERS to buy things online. They prefer to not have an agent and they have grown up without the same face-to-face connections we grew up with. Times are changing. Does this mean the death of the independent agency? Not at all. Those will always be around, at least until the Baby Boomer generation dies off.
Wait until they have an at-fault accident and learn more about the product they’ve purchased.
Why wait to compare auto insurance companies? Go to http://www.goji.com
Google wants to be us ;)
Ahhh the death of the Independent Insurance Agent.
Dan, they have been predicting the death of the Independent Agent for the past 30 years and we are still here and doing well. Our customers appreciate our advice on all their needs.
They haven’t been predicting the death of independent agents for 30 years. Perhaps they have been predicting the death of the captive agent but that was for the past 20 years. However, the technology is now here. Independents will have the best chances of survival. However, captive agents are f#####. Guaranteed only 5-10% will be left in 10 years. If you check Allstate and Farmers, they are losing 800-1200 agents a year for the past 3 years. The only thing left will be direct and a few Independents. Death to captive is inevitable.
David, I would take the other side of the argument, and propose that captives have more job security than IA’s. Full disclosure: I am ex captive, and have been an IA for a few years now. State Farm, Farmers and Allstate really make their money in the life insurance products, not the P & C. Captives need the agent lap dogs to push their overpriced life products. IA companies don’t push life, and therefore I believe will dump the agent channel before the captives do. IMHO.
looks like they are just using the google name to bring in business (for brokered companies?); it’s like anything else that takes a few brains – it’s whether the person sitting across from you or on the other end of the line knows what they are talking about – or cares.
Google trying to make Insurance even more impersonal and McDonaldized. Use a local agent and establish a relationship with someone you trust….not a faceless drone in a 300 cubicle warehouse somewhere out of state.
So another player in the blurred distribution of tomatoes, oh I mean auto insurance is around the corner. Welcome them. Lets see how they deal with the client when the loss occurs and the client wants to know why they do not have car rental on the policy.Have you ever tried to talk to a Google rep about their analytics?
David, do you think they will mention that changing the Auto will get rid of the companion credit the customer gets for both the Home and Auto currently?
I doubt they will mention much. If I understand it there will be little to no human conversation since the world is going tech, tweet, hashtag etc. I also think that a majority of auto sales are still done face to face despite the on line trend to price the policy. The better client probably wants one point of contact for all lines.
On Auto sales, I use the internet to search for a car, features, sticker, see if it is in stock at the Dealership, figure out what my car is worth with KBB and I go in well armed with info and speak to a salesman. They can take my offer or leave it. Usually, they want their sale and we quickly come to terms. None of that going back and forth with his manager or I am out of there.
It’s a little sad watching some of you struggle to justify yourselves. Did the dinosaurs understand the sign ificance of the approaching asteroid?
yeah, but I can sue the dinosaur for errors and omissions for failing to tell me there was an approaching asteroid!
It’s not a matter of justifying ourselves. It’s a matter of there will be a certain section of the population that will enjoy this way of purchasing insurance, but Agency is right. It will mostly be for personal auto insurance. Once you get into more complex coverages, you will need more interface. And forget this venue for large commercial accounts. They will never buy their insurance electronically.
Libby, did you know that the GEICO lizard thinks they can write Commercial now? Commercial Auto, Business Insurance Packages? They were stupid enough to send an insurance agent a solicitation for coverage. Myself and my partners had a big laugh about it.
Would love to know the response you get when you are done messing with their heads.
I suppose I could tell them I am a dynamite hauler or a roofer and see if I fit their appetite guide.
Agent – there are several on-line sites successfully writing BOP today. (Insureon, Bolt, AssureStart, Hiscox) I believe there will be many small businesses who want to do business on-line who can be successfully insured without a local agent. Small Commercial Auto may also be handled this way. But, like your comments on Personal Lines, there is a limit to the size of account that can be handled without a local agent. I do not see the demise of either IA’s or Exclusive Agents ever happening. There will always be complex accounts that need a knowledgeable agent involved. Plus, many IAs and Exclusives do a great job of handling the simpler policies as well and their customers want to continue dealing with them. I believe that all of these distribution channels will fill needs and will co-exist.
Dinosaurs were giant creatures like Google, Walmart, etc. The small creatures like independent agents largely survived and evolved.
I’ve been both captive agent (14 years) and Independent currently. Just more proof that most carriers are whores. They are not committed to any specific channel of distribution. Don’t be naïve into thinking anyone is safe with your livelihood. Traditionally captive carriers (Allstate, Farmers) and IA carriers (Met, Progressive, Hartford) are both doing it. Sadly enough many consumers don’t give a rats ass who their “agent” is as long as its cheap. I’ve done a great job building a loyal customer base (twice now) but it gets harder and harder with all dollars spent promoting insurance as a commodity.
LSIA, it is a good thing you are Independent and not Captive anymore. Those captive guys only have one market to go to so they often lose out if their market tanks. Ask almost any Allstate or Farmers agent if they would rather be Captive or Independent.
Insurance is not a commodity. Fight back:
http://www.independentagent.com/Education/VU/Pages/featured-resources/Commodity/default.aspx
If the ability to quote / buy online is the death of an agent model, why hasn’t Esurance and 21st Century taken over the insurance world? Last I heard, Esurance was still unprofitable for Allstate, running at about a 113 loss ratio. And Farmers, which owns 21st Century, is trying to wind down that company since it is not profitable. Granted, Google offering insurance could be different, but so far the data I have seen is that the perpetual rate chasers / shoppers, who shop and change carriers every 6 months because their rate went up by 5% are not profitable customers to the companies. Time will tell on this. If the customers that are written through this new Google channel are uber profitable, then I can see it succeeding. I just have not seen the historical data from other online companies that would convince me yet, that this is an undiscovered gold mine for the companies.
Esurance does not have a 113 loss ratio. They have about a 113 combined ratio. Their loss ratio is OK, it is the marketing expense ratio that is hurting them. Which, by the way, may better prove your point. Without the scale of GEICO and Progressive, it is difficult to make a profit as a Direct carrier due to the cost of attracting new business. Local agents are more cost effective for most carriers.
Yea but a 113 combined LR is a loser no matter whether it comes from underwriting, inadequate pricing or acquisition expense. If they cut acquisition expense, no one hears them and quote volume goes down with volume. If they cut price, the LR goes up unless they have a magic box that tier underwrites better than anyone else.
When you compete largely (and allegedly) on price, there comes a point where you’re about as efficient as you can possibly be on the expense side with regard to advertising, marketing, underwriting, processing, etc. About 80% of the auto premium dollar goes to pay losses and loss adjustment expenses. Once you’re as efficent and effective as you can get on the non-loss expense side, and you’re STILL competing on price, there is only one thing you can do…reduce losses and loss adjustment expenses. The easiest way to do that is reduce coverages and apply more stringent claims practices. Then you end up with products even more inferior than many of those being touted today as “SAME COVERAGE, Better Value.”
I think Google is the perfect one to get into auto insurance. Someone will have to insure their autos that drive themselves and what better company than the one that created them. I’m not sure many other companies would want to insure them until they got more data. So this is my guess why Google is doing this. To get the Insurance companies the data they will need to insure these in the future. Plus if they start having issues and failing, Google will have the data much quicker to do any recalls to fix computer errors.
google is highly creative. I’m sure they will crush plently of players out there in the insurance world. They will be able to quote you in a heartbeat based on all the information they already have on you.
why have a thousand independent agents when google can have an agent pop on your google glasses anytime you need one. Same thing for the claims adjusters.
This article should make us all stop and think. Staying abreast of all of the technology innovations that will ultimately impact our business processes and competitive position in our marketplace, is challenging. As leaders, we are told we should spend 80% of our time working “on” our business- reading, thinking, strategizing communicating vision. This is difficult to do alone, but by engaging with peers who are facing similar challenges, we can build off of one another’s perspectives to craft objectives that will position our firms for success both now, and into the future. I encourage all Vertafore users to engage in NetVU – the Network of Vertafore Users (www.netvu.org). Access to this Network of peers is a major benefit of purchasing a Vertafore system. Whether you are charged with crafting vision, building workflows, or training to implement system components, you can take full advantage of NetVU and the resources we make available to stay ahead on issues like Google entering the auto insurance space via many of our independent agency channels.
I hate Google, and don’t use them.
Google should use their excellent search platform to uncover the often dramatic and potentially catastrophic coverage differences among these insurers.
I’ve posed these questions to some brokers across the pond:
1. Do you know what kind of presence Google has in the UK auto market?
2. Do you have a “state”-mandated policy that all insurers must use or are there a variety of policy forms in the marketplace?
One of the major issues here is that coverage can be dramatically and potentially catastrophically different among carriers, particularly the “nonstandard” and price-focused advertisers. I’ve seen many five- and some six-figure claims denied by these carriers that would have been covered by an “ISO standard” or better policy.
Someone will go with a carrier that’s $75 cheaper with complete disregard to the fact that their old carrier covered their existing exposure(s) but the new carrier does not because no consideration was given to contract language and claims practices differences.
The only way to compete solely on price and service is to sell a true commodity, a “state”-mandated policy. And, even in that case, there are always going to be differences in claim handling procedures and contract interpretation.
Agent’s comment above about GEICO attempting to quote commercial insurance is an example of what Google will do with writing auto insurance. Those of us who have been doing this for decades don’t worry. We’ve been through this before numerous times and eventually the Google Geeks will sell off this division to a real agency and make a couple of bucks. Who isn’t writing auto insurance? Commodity product with little loyalty. Hey Google – lets see you try to write a multilocation restaurant chain. No business owner would trust these dweebs with their company.
Fred, don’t forget that it is a PERCEPTION that auto policies are a commodity product. They aren’t:
http://www.iamagazine.com/magazine/read/2014/07/01/price-check
Here are 12 auto insurance exclusions or limitations you won’t find in the ISO standard personal auto policy.
Undisclosed household residents are excluded. How many of your insureds have “boomerang” kids living at home that you’re not aware of?
Business use of non-owned autos is excluded. Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner auto?
Business use of ANY auto is excluded. Do any agency employees ever run to Staples or the post office on agency business?
Use of ANY non-owned auto is excluded. Better not drive anyone’s car but your own.
Vehicles over 10,000 pounds in GVW are excluded. Have you ever rented a U-Haul truck or an RV thinking your liability coverage extended to the rental?
Any type of delivery is excluded. Denied claims include pizza, newspapers, Mary Kay cosmetics and yes, even the delivery of insurance policies to customers by an agency producer.
Permissive users only get minimum limits. This can apply to people who borrow your car or even unlisted household drivers.
“Street racing” is excluded. Google “street racing” and see how often people are killed or critically injured in the process.
Criminal acts are excluded or limits reduced. DUIs or even speeding tickets may preclude coverage.
Medical payments only include licensed physician fees. One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
Theft without evidence of forced entry is excluded. One insured had a four-figure vehicle theft loss denied because he left his keys in the car.
Sales tax is not covered under loss settlement. This cost one “same coverage” insured more than $2,000 out of pocket for sales tax on a replacement auto.
Good post Bill. There have been many players enter the market and they are not insurance people. Many banks have bought insurance agency and then found out it is not their cup of tea. The so called direct channels with geeks taking calls and quoting are manned by non insurance people that only sell price. They don’t run reports before selling and often the customer gets a shock when the policy is issued with much higher rates than the customer had. They then come crawling back asking us to write them.
Good point Agent, just as Allstate, Snake Farm and Farmers found out when they jumped into the financial services markets.
Yes Farmer, when they started doing Financial Services, they started neglecting their core P&C business. I wonder who would want to finance their auto with State Farm.
My Google stock just went up – again! :-)
I never quite understood the appeal of the Google search engine. It stores everything you ever search for, including porn, it retains all sorts of personal information, and most (not all) of the results I get are irrelevant.
https://duckduckgo.com The search engine that doesn’t track you.
I typically lean toward to less regulation & free market competition with respect to products & services. But I could see how Google could really benefit if the FCC votes to eliminate net neutrality.
Google can accumulate and search through carriers rating variables to produce their rate comparisons. But they haven’t considered key variables of coverage and exclusions. So, their Auto Insurance Market shopping system would be comparing Apples and Oracles.
A commenter mentioned the poor underwriting results by Esurance and other insurance e-marketers. That doesn’t surprise me because the internet enables concealment and fraud, if not only soft underwriting practices. It would be enlightening to know exactly what caused the difference in results from standard marketing approaches. Is it frequency, soft filed rates not properly accounting for risk differentials, or something else?
Disagreements about whether or not insurance e-marketing systems will end Independent Agents or Captive Agents are amusing. No one knows for certain, but it seems ‘GEEKO’ will be limited to less complex lines; e.g. personal auto and standard homeowners risks. The greater complexities of WC and various sublines of GL may be captured by similar systems. But highly diverse commercial properties and excess & surplus lines may be an insurmountable challenge for the geeks to overcome.
Finally, I am confused by the logic of developing a system to search for Auto insurance rates and compare them when such a system already exists… i.e. an internet search. Yes, GEEKO comparisons are mechanized, and save time. But could dumbing-down of the comparison to price shopping only yield coverage gaps that may be more costly – – – i.e. insurance premium plus deductible plus non-covered losses – – – in the end?
I know I google all kinds of things to gather information; legal, medical, and how-to. But I still hire a lawyer, doctor, or contractor to do the real work. It will take only one uncovered loss for an insured to realize insurance is the same as these other professions and they don’t know any more about it than they do performing heart surgery.
Full disclosure, I’ve owned an IA and State Farm agency. Agents are just as much to blame as carriers. Both have made auto a commodity. Ever walked into an agent’s office? Listen for a bit, the first thing that comes out of the CSR’s mouth is about price. Agent’s advertising talk about lowering your rate. The problem is that very few agents or carriers are unique in their product offering. Everyone says we have the best systems, claims service, blah blah blah. Agents typically don’t even have a value proposition they offer. Heck, my agent hasn’t contacted me in two years. So the one thing they have left to compete on is price. It’s laughable that anyone thinks this has no chance of being successful. Wait until Homeowners goes online too. An agent had mentioned earlier they are pushing for standardized forms for auto and home to avoid confusion with the policyholder. Guess what, if they are all the same, why do you need an insurance agent anymore? Insureds have access to more information than ever today. Do you really think that Google can’t be successful online?
VP, can I hazard a guess that you got away from State Farm to go to IA? How did you get away from your non compete contract with State Farm? A lot of captives have had big issues with management. Allstate agents had to form a guild/union to deal with management.
no need agent LOL
Price sells most auto insurance for most people. Always has. Google will just be the delivery mechanism. And like everything else, you’ll get what you pay for.
The main competitors for Google at first will be Progressive,GEICO, esurance and other internet companies since internet shoppers will have another choice. My guess is that the agency market share on Private Passenger Auto will gradually erode at the same pace as it does now with the introduction of this new product.
While attractive looking, the sites offer inaccurate quote comparison.
I used both of them to generate quotes and then using the websites of every insurer they listed, generated a new set of quotes. Neither site had even close to the correct premiums (Margins of well over 20% higher or lower for most).
When I ranked the insurers from Price (Lowest-to-Highest) in a similar fashion as the two sites, even the ordering was vastly different. For instance: The cheapest in one group was number 5 in another.
Rating algorithms are complex, and even though Quotes from different insurers’ websites are “In-your-face” and freely available, these “One-size-fits-all” comparative rating websites, use a small set of rating variables to create the quoted premium, will return an incorrect quote and will mostly likely not get the shopper the best deal.
The InsuranceJournal states
”
Google could present formidable competition for other insurance sellers. As many as two-thirds (67 percent) of insurance customers said they would consider purchasing insurance products from organizations other than insurers, including 23 percent who would consider buying from online service providers such as Google and Amazon, according to research by Accenture.
”
This comment answers a vastly different, but interesting question: “Would you buy insurance from Google?”. Basically this shows that shoppers in the Insurance marketplace trust Google and Amazon as viable options for Insurance Brands.
It is a necessary question if Google decides to sell Insurance itself, but it is a quantum leap in logic to suggest that its acquistion of Comparative rating websites implies it will also sell insurance. Regardless of current developments in Autonomous vehicles, many people still physically drive their own vehicles. As a result, Actuaries and other Ratemakers have used a drivers’ characteristics to set prices. I believe it would be far outside of Google’s MO to start hiring Actuaries and collect the appropriate Rate-making data.
This is not to say that if Vehicle Telematics really “took off” Google wouldnt be able to enter that game. Google certainly has the development and analytical brainpower to create a proprietary Telematics device, and could deploy it in the Marketplace alot easier than most Insurance behemoths.
If Google does decide instead to get into the Comparative Rating game it most certainly has a competitive advantage. It has a large amount of Marketshare on “The Search”. Anything customers search for, look for, etc online. If a customer is “Googling” GEICO, Progressive, State Farm Google knows this and has a handle on the landing pages for all of these Insurers’ quote pages.
If it had the appropriate customer information (Possibly through some online form the customer filled out and Saved to their Google-plus account?) it could index the competitors’ quote pages, auto-populate the quote input fields, and return a rank-order of Insurance quotes on its main search page, much like it currently does with Airline rates. The veracity of such quotes would most likely suffer from the same inaccuracies that CoverHound does, but with Google’s technological and innovative edge, could improve and expand upon Coverhound’s “One-size-fits-all” approach.
All that said, more accurate rank-ordering of quotes would be good for the consumer. Allowing them essentially to truly get the “best deal”, and find that deal considerably quicker then searching all over the internet themselves.
However, even if one rules out its potential accuracy, with Google’s large market dominance in all things Search, would consumers trust its estimates of competitor rates “willy-nilly” without independent verification? And if so, which ways will Google monetize this new-found ability?
This is interesting. I have also heard of the death of the IA. Has not happened yet but you have to admit the IA model is getting squeezed. The issues are numerous including commoditization. Many companies have forced the personal auto product toward being a commodity when in fact, it is probably one of two insurance offerings that should be counseled by an agent. Not saying this can’t be done electronically especially if it is high risk drivers with low limits.
*next issue is youth buyers. They are more likely to buy online and buy cheap and are less than
Likely to prefer consultative selling. That is only going to grow with technology.
*Standardization causes products to become more commoditized and easier to market and sell. IA’s would better off with differentiated products that they can use to their advantage, up sell and have a better buyer end product.
* end product service is generally better using an IA. It is more personal, the customer can be handheld if needed and can be an advocate when something goes wrong. However, technology and buyer tech ability will continue to put pressure on the market.
*scale. Companies like Geico can use size and assets to develop high brand awareness that drives quote volume and sales. Court is still out on companies like Goji. They are basically large brokers that use the web to drive quote volume. They have a centralized underwriting unit (Boston in Goji’s case-high cost structure) and can often have a high operating cost. Goji probably has expense problems and just pushed their CEO out from operations. So it will be interesting to see if it works. Looks like they could use an experienced operator but we will see.
Bottom line for me is:
* use technology to your benefit and do not be afraid to spend a little money to make good use of social media as a part of your marketing plan.
* be efficient. Drive costs out of your business. It is a defensive move but the direct companies drive efficiency every day.
* continue to be customer centric with good customer service. Look for new ways to attach up selling and cross links to your customer as touchpoints to service.
* hire the best people you can find. Do background checks before hiring. Train them and turn them loose. Pay them better than your competitor and keep them around
I could go on and on. We actually own an agency consulting business that works with IA’s to do what I have outlined above in this broad post. Even for some of our competitors. Why, because the stronger we are as a group the better off we are
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Hey Sargeant, it has been a while since you have commented on this forum. I agree with what you are saying that Independent Agents need to do some changing and use Social Media more. We are doing that with our website people and will be having another meeting with them today to maximize our offerings. Yes, there is a segment of the market (mostly the young cell crowd)that want to simplify the buying process with insurance being one of them. However, most have no clue what they are buying and the online markets do not advise well. Flo says just pick your price and they believe her. Reports are run after the buying decision and these young people with tickets, accidents often get a disappointing result when they get their policy.
Did I see an article a few weeks ago that Detroit has the highest auto rates in the country? What have you done to adjust to that and who can pay those rates up there?
Good to see you back. Be careful not to insult Libby or Ron. Rosenblatt is the self appointed monitor of the forum now and you will be fined points if you put them in their place.
Agent – you’d better move that meeting up. Your website is terrible. Sarge is not able to stop himself from insulting me, same as you. In fact, you seem obsessed with me since you mention me by name in one out of every 10 posts. I think you both have a crush on me.
Rosenblatt, deduct another credit. Libby is shooting for a new record in insults. Sargeant may not have been following the forum for a while. I was giving him fair warning.
Just where did I insult you in my post above?
How about giving me your agency website Libby and let me analyze it for content and usefulness? That’s right, I don’t know how to break in and reveal the identity of me and my website so I need your help. Put your cards on the table or shut up about it.
Hello Agent
Yes, “young” for use of a better term people are tech drivers. They want to go to the web, look and buy. Do they make good decisions? Not always especially when buying financial services. So, when something is not covered and they have a problem, it is bad for the industry. They don’t necessarily see it as a distribution problem, or a purchase problem. It becomes all insurance companies are bad problem. That is why IA’s should not strive for standardization of products. They become a commodity. As an industry we should drive quality, differentiated products that serve different buyers with different products. That way, when doing good consultative selling, the customer understands what they buy and why they paid what they paid.
As far as Detroit insurance rates? They are well earned. The past city servants ( the corrupt thieves that served themselves) ran the city in the ground and after 50 years of liberal democratic government the city went broke and many of the city serpents went to prison. The real issue has been one of the highest theft rates in the country and the city and county being named one of the worst liability “Hellholes” ( that is what the industry calls it not me) in the country. That said, since the Feds put the mayor in fed prison for 28 years, chief of staff in prison, city council persons in prison or thrown out; Things are looking up.
In fact, those mean old Republican businessmen are investing hundreds of millions (maybe billions) of dollars buying property and putting jobs back in the city. I have never really been afraid of going into the city but a lot of my neighbors really don’t care to go unless it is a ball game, concert etc. I take them quite often and they love it. Great restaurants, great symphony orchestra, opera and many new restaurants. If we can get rid of the rest of the scrum, improve the schools and city services, I might even move back.
Good one Sargeant. Libby just knew your first comment would insult her. You kept your comment professional and informative.
Here is a question for you. Do you think insurance companies listen to agents at all when developing their rates in their black box algorithms? Some say the actuaries just do their thing and damn the torpedos, full steam ahead and if they run off business doing that, so what. I say they listen to agents and when the companies are wrong, they take action to fix it as they have with some of mine.
I think some companies listen and some don’t. It depends on the company, their core product focus and management. Let’s face it, some insurance companies have succession plans that are either FUMU, or all internally driven so that one bad manager follows his boss that was a bad executive. However, there have been some that have been progressive and have good executive management.
As far as their agents, There are some who actually believe the agent is core to the success of the company. Others talk a good game but if they could cut you out to save acquisition costs, they would. Then there are others who refer to agents as FSGs or Fnn sales guys (sorry ladies the term is generic and includes you too).
Take a company like Dairyland. For years their distribution model has been retail independent agents. If you read about Google, Goji etc each article has mentioned Dairyland. So Dairyland, who made hundreds of millions of dollars off the back of independent agents are now going to cut their acquisition costs by bypassing the independent and rely on an Internet play managed by an Internet wholesaler. How do You think Dairyland or Viking agents like that?
As far as listening for the purpose of rate development I would say some do to an extent. Each company knows they need to make money and what margin they need or want. Some public companies need ROE higher than a mutual for example in order to appease shareholders. AdditIonally, each company also knows what their acquisition costs are, reinsurance costs, general and administrative expeneses are, what their allocated loss adjustment expense is, taxes boards and bureaus are plus any contingent commission on the backside of the reinsurance agreements etc. These expenses/costs are different between each company and are reflective of individual company practice and management. So while they may listen, when the formula for the above gets plugged into actuarial models you might or might not like the outcome.
There are a lot of pieces to the puzzle and like anything else some are better than others and some are more compassionate about their agency force.
Sargeant, as we are veterans of this business for many years, we have seen the cyclical nature of the business. I have lost count of how many soft and hard markets I have been through. Some companies from time to time try to capture more market share by lowering rates, then realize they have some reserve issues and raise them back. If they are a big player, they think all the smaller markets will quickly follow suit. This recent market is almost inexplicable. A poor economy with a harder market does not a good situation make. A lot of people don’t have as good a score as they used to have in better times, so the model says they should pay more for insurance. That presents a unique challenge to agents trying to explain price increases to loss free customers. I maintain that actuaries are largely responsible for the cyclical nature of this industry.
Hi Agent,
I believe the smaller companies do a much better job of listening than the large ones. My company in particular opened a new state by talking to agents about what they wanted in a HO carrier, and we’re in it for the long haul. We could be the absolute cheapest on the block for all markets, and then have dramatic rate increases after the storms hit, but we chose to use realistic guidelines and be competitive at the same time.
Hey Bill, good point. Our regionals are a lot easier to talk to than the big boys and are more responsive to our needs. I am currently considering a book roll to a regional from a national carrier that has flopped (for years) and run business off due to their black box algorithms that make them uncompetitive. No carrier is a best fit for all customers as we have found out and when some rating was done, but we will probably split the book by three carriers to get the best deal for customers and it won’t hurt to see the volume increase from the acquiring companies.
Are you in NC by chance?
No, I am in Texas. We are a weather state so companies are always fiddling with their black boxes to take rate. It doesn’t seem to matter how good an agent does with managing their book or producing a profit for the company. They will always seek more rate and it is often state wide.
FUMU? FSGs? I’m afraid I don’t know all the lingo.
Agent,
I agree with you about the market, especially personal lines. Although commercial business is not much better. We have been fortunate to have some very special portfolios that her really helped us.
I am not so sure I would put all of the blame at the actuaries feet. As you probably have figured out, I am not an actuary but I have had them report to me. An actuary uses data and models to tell a story of how the business has developed and how it will continue to develop if no changes are made. Then decisions have to be made as to where the company wants to be positioned (product and price) and given the actuarial data, how they do it. That is a management decision and you might be really surprised at what some of them do. There are some real knee jerk decisions made. Then a lot of people stand around, look at each other and say -DUH! Anyone could see that coming.
I agree Sargeant. Company management is either good or not good. Look what happened to Fireman’s Fund with a succession of bad CEO’s, bad Board of Directors who hired those dufus CEO’s and now they are sold off. That was a substantial company at one time and they wrote a lot of business. The successful companies are the ones that use some common sense, stay stable and not jump out on some tangent that does not work out. How many stick to that concept anymore?
I’ve told them in the past – don’t BS us – you can’t bs a bs’er for long – just tell us the truth
Knowall, companies should level with agents more. I get upset with companies who have a good combined Loss Ratio and get greedy and do these Predictive Modeling schemes done by stupid actuaries and try to push the envelope on rates and then come back after they fail and run off business wanting us to give them another shot because they are now competitive. How many customers want them back after receiving a large rate increase or non-renewal because they changed their appetite guide? Quick answer, not many.
Well knowall, I did have a company level with us when we were going over our year end and looking at what 2015 would bring. Of course, the company which I won’t name has been shrinking for the past 5 years due to those pesky algorithms which makes their products uncompetitive. They said they expected to keep doing the same thing in 2015 as they have been doing. They are one of the few companies out there which has in their contract that if an agent declines more than 5% in volume, they do not qualify for contingency no matter how good the loss ratio is. Our loss ratio is currently 10.4% and we declined by 7% in volume so we get nothing yet again. That is why we are looking for book roll with our other carriers. What a joke.
Yes, there are good and bad and a lot of so so management in the middle. That is a real problem with our industry. Couple that with all the other variables and the industry will change continually. We, as independent business owners will need to continue to remain nimble, adapt and overcome. IA’s are far from death’s door and in fact if we make good decisions, technology can work in our favor, not against us. IA’s need to work hard and position themselves as best they can in the market and have a contingency plan that they can use if something happens.
For example, we have a fairly large portfolio of homogenous business that we were sending to essentially 1 carrier. Our fear was that if carrier “A” decided to exit the market or got into financial problems, or we had more than one bad year, they might bolt on us. So we decided to set up our own captive and take risk on that portfolio. We also decided to have a panel of two carriers, both of which would cede business to our captive. If they bolt we have options. Move the business to the other carrier or get a fronting carrier and cede all the business to our captive. Now if carrier “A” gets nasty with us (not saying they will) we have alternatives. Loyalty in the insurance business died a long time ago.
Well, it sounds like you are on top of the situation. Some years ago, carriers were giving us a pitch that we had too many markets and we needed to book roll business to them and look how much we could make. That was a disastrous thing to do if things went south with that carrier. I know agents who had to sell out or merge/cluster to survive when it soured.
I also remember when the contract was a mutually beneficial partnership between agents and carriers. You are right, there is no loyalty at all anymore. I am glad I have 5 major standards and numerous other facilities with brokers to send business to. Did you ever buy that agency in Texas or did that fall through? I would imagine it would be difficult to manage from long distance.
Agent,
Well, we would have had it bought but the owners are vacillating as to whether or not they want to sell and become a part of our larger group. I understand that and much of the back and forth is emotional on their part. It is selling something that they started and built. I get that. So we are still waltzing. I think we will get it done, in time.
How is business? I just read another trade rag that declared that this market may be the best we will get and that it may soften further especially on the personal lines side and commercial property business. Not enough disasters- Ha!
Business is good Sargeant. We made Contingency with several carriers due to excellent loss ratio and volume produced. How did you do in that environment? The demise of the Independent agent has been “exaggerated” by many on this forum.
Did you get a mailing that GEICO is wanting to write Commercial now? They were stupid enough to send it to an Independent agent. We all had a big laugh about that.
Well, the articles I have seen is for a little softening in the market, but we will see. The economy will dictate a lot of what happens and all we need is a hurricane to come in or some tornado damage in the Midwest and we will be back to square one.
Regarding agent buy outs, we see some of the small mom & pops merging or selling to larger agents from time to time. I have even had some solicitations from Nationwide agents to buy us. They have no clue how to handle a varied Independent agency so we laugh them off.
I am a sales/marketing rep for a large National Carrier, and as much as I’d love to see the independent agency plant succeed in the future for my own job security, I just see it as a dying breed. Many small to medium size agencies are being gobbled up by large brokers who mainly focus on larger, Middle Market policies leaving their personal lines small commercial customers to be serviced by a service center or csr.
I would bet many of the people commenting on how the independent agent will live on forever are in their 50’s or 60’s, not understanding the Millenials and the young kids who will be consumers in the next 5-10 years. They don’t want to talk to people, they do everything online and the thought of them going to an independent agency to get insurance instead of just going online is a far fetched thought.
Those folks in their 50s and 60s were in their 20s and 30s when they first heard about the death of the independent agent. If a millenial thinks he or she has a life-threatening medical condition, would s/he rely on WebMD.com or would s/he seek personal attention from a medical professional? If sued, would s/he rely on legal advice from a web site or hire the best attorney their money can buy?
Even millenials understand the significance and difference between researching and buying a bluetooth speaker online and needing in-depth medical analysis or legal advice.
The problem is that consumers have been DUPED into thinking that auto insurance is a commodity distinguished only by price and purchasing convenience by large corporations who are only interested in them as a component of billions in cash flow.
Insurance policies are different and the exposures can be catastrophic. If you choose the wrong product on Amazon, you end up with a crappy product. If you choose the wrong insurance product and insurer, you could end up losing everything you own and a garnishment of your wages for the next 10-20 years.
When “Flo” says, “You get the SAME COVERAGE, often for less,” she’s just kidding…it isn’t the same coverage.
“Cheap fabric and dim lighting, that’s how you move merchandise.” – legendary salesman, Morty Seinfeld
“There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey.” – John Ruskin
Marketing Rep, you need to join the real world. I just talked to a Marketing Rep with our largest national carrier and he said the millennial trend is showing signs of slowing down. Many Millenials eventually start buying houses, having kids and settling down. They realize the value in having an agent protect their assets, something you don’t get with GEICO and others of their ilk. Agents have been adjusting to interlopers for years and are still thriving. Yes, some of the small Mom & Pops get sold to larger agencies, but that has been going on for a long time. The key is succession of principals. We have a mixture of older and younger owners and the younger ones will carry the agency forward into the future. Frankly, we don’t want many millennial customers because they aren’t loyal and will change for a dollar. There are plenty of people out there in their late 20’s, 30’s,40’s,50’s & 60’s and even 70’s and they do realize the worth of the agent and the value we represent.
I don’t quite understand all of the hoopla about Google Compare UK (GC) services. The many outcries suggest GC will cause big implications for US insurers. The truth of the matter is that GC’s business niche is no different from any other existing auto-rating services that offer only quotes and rates. Although GC advertises to be an innovative online car insurance comparison service, the service does not compare AUTO INSURANCE POLICIES. There’s only one online service that offers auto policy comparisons, and that service is Insurance Snoopers, Inc.