Thank you IJ for publishing this article. It is a little belated because we first got the doomsday articles about how the Independent Agent was on life support and would quickly be sent to the scrap heap. Independent agents have learned to be quick on their feet, adopt better technology and their carrier partners have added more value to their products. We can’t advertise like the GEICO’s, Progressives etc of the world so we depend on website support, referrals and more referrals to increase our standing.
I don’t think IAs are going away… I do think it is highly probable that their share of personal P&C insurance will shrink unless IAs provide best-of-class customer service so that their clients feel they have a positive experience during / after each interaction.
However, I also believe that insurance carriers have the same right to succeed as IAs do… that means to me that carriers must provide their clients (the people who actually pay the premiums) as many options to interact as the clients want. So yes, carriers should, and must be, offering online digital channels to their clients that want them. Or do IAs think that Millennials will want to conduct business exactly like their parents and grandparents?!
Barry, that is a two edged sword on company interaction with clients. Companies keep offering their “Gold Service” to us where they take on service duties and interact with customers. They do this for a fee of course. The agent gets cut out of the loop with customers and we don’t know what is going on behind the scenes. If the company ticks off the customer due to a rate increase, they may just leave for greener pastures without us knowing until a cancellation notice shows up. They already promote reporting claims direct to them. I have my reservations about too much contact between a company and a customer.
We have a good website and put our customers email into it and the customers get regular newsletters and they can communicate needs direct to us or they can call with questions, refer people to us etc. That keeps us in better control of the situation.
Barry – I believe Brian Sullivan of Auto Insurance Report has the right theory – as a consumer’s financial life becomes more complicated, they seek a more sophisticated distribution channel for the products they buy. For example, a single renter with one car can easily get the quotes for and purchase the policies they need online from someone like Esurance or GEICO. However, a 40-something married couple who owns a home, has four vehicles, 2 youthful drivers, a boat and rental property needs someone to help them purchase the right coverage. When Millennials reach that stage, they will likely seek out a local agent (independent or captive) to help them make their purchases. So I see IA’s being valuable to consumers forever (or at least until long after I’m on the other side of the grass).
Barry, the good news for agents is that generations do age and needs still change. If we miss the Millenial crowd buying minimum limits Auto and Renters Insurance, so be it. GEICO & Progressive can have them.
I’ve spent my career on the company side, working in product development for P&C carriers that distribute through independent agencies, and to me the very idea of the demise of this distribution channel is ludicrous.
As much as companies try to provide excellent customer service, the CSRs and claims people still work for the company, and policyholders without an independent agent don’t have the added benefit of having someone to act as their advocate in the event of a policy or claims dispute unless they lawyer up.
Additionally, independent agents are entrepreneurs, and like-minded business owners will continue to seek out independent agents for their insurance needs, relying on the independent agent’s expertise and access to multiple carriers instead of putting all of their insurance eggs in one basket or going it alone.
I do see the lower end of the P&C market shifting more toward direct online sales for minimum limits auto and renters policies, and the retention for this group is typically poor. The portion of the Independent Agency channel that serves this segment – high volume non-standard retail agencies looking to charge a broker fee at new business and even charge a fee just to take a payment – will undoubtedly see some shrinkage as many of them add little to no value for consumers.
As insurance buyers mature, gain assets and become more sophisticated – or have a bad experience with a company – there will still be those that want the added value of working with an independent agent.
I’m with a captive agent carrier myself and I feel like I’m in good hands, but it’s a good company (with the exception of their agency scuffle a few years ago) and I work in the industry. For people who don’t work in the industry my advice is always to seek out a carrier with a high satisfaction rating or find an agent – captive or independent – you trust and feel comfortable with.
I am an employee benefits and individual health insurance broker, no P&C. But I have read the same about my business for years. However, I have found that the doomsayers have never been a broker. They really do not know nor understand what we do. So, they are totally unqualified to prognosticate about the broker’s future. Does some guy from McKinsey writing a report know anything about brokers? How is he qualified to give opinions on the future of brokers? So, we brokers just go merrily along doing our thing. You just have to ignore these pin-heads who get paid to give uninformed opinions.
Good comment Bob. Yes, the company people and so called consultants have no clue what a broker/agent does, how they adjust to the changing marketplace since they have never been one. They also think we are stupid and only sell price. What a joke!
The independents still have a little life left for another 10 years. However, captives are dying daily. No chance of captives 10 years from now. It will either be an online or independent channel.
McKinsey came through the Independent Adjusters world about 20 years ago, first at Crawford & Company and then GAB. Management accepted their reports and made some strategic mistakes. As a result GAB has been absorbed by Cunningham Lindsey and exists no longer and Crawford is shrinking as well. GAB did not adapt quickly enough to available technology. Crawford succumbed to trying to be the cheapest provider, which only works when there is consistent, steady volume. Claims volume is extremely variable and thus being cheap only insures that you go out of business or shrink every time volume drops.
People/oganizations who can change and adapt will survive. There are some factors that are tough to overcome, like economies of scale for smaller operations but technology can also be leveraged to the small firm’s advantage. Insurance on the low end as some of you have commented can be close to a commodity. Maybe that is best left to the aggregators. On the upper end there is no substitute for a knowledgeable Independent Agent.
Brian Sigmon, AIC
Evers & Associates of Birmingham, Inc.
What if the insurance carriers cease supporting an 18th century business model,meaning back when agents were truly agents. Perhaps it is time to end the inherent conflict of interest that exists when carriers pay commissions to agents. Keeping it real, most agents act like brokers, who should be paid by the insured.
I submit that if agents/brokers had to bill their customers for services rendered, just like lawyers and accountants, there would be fewer agents and brokers. Why because they would have to really earn their money by providing real service and advice to insureds.
Truth is the many agents and brokers focus only on the sale and when made, they move on to the next one. Little effort is expended to truly be an agent for the company. For it they did, the underwriting decisions would be accepted. Alas, the first response is “I’ll move my book unless you do what I want!”
Jade, obviously you are not an agent or have been one before with that attitude. You may not have noticed it, but things have changed and agents have adapted. We really didn’t have any choice. When I started, no internet, we rated out of manuals, mailed applications in, mailed claims in or called it in. Everything is 100% different in this technology world and we are efficient and are in close touch with companies and customers.
The service provided by an agent is, for all practical purposes, free. Direct insurers like GEICO claim to save 15% because, when they started using that slogan, that was about the commission level of independent agents. Not so anymore. In addition, GEICO has it’s own salaried agents…you can’t sell or service insurance without having an agent’s license. So, what’s more costly, a full salaried and benefited employee or someone being paid 10-12% of the premium? In addition, that 15% you allegedly save is largely eaten up by their BILLION DOLLAR advertising budget.
So, for the most part, the services of an agent don’t really cost you much of anything. However, a GOOD agent knows the products he or she sells (often from multiple markets), knows the products being sold by the competition, takes the time to actually assist consumers figure out their unique insurance exposures, and provides value in the form of the right product at the best price.
Even more valuable is the advocacy a consumer or business person gets at claim time. As I type this, there are independent insurance agents getting claim denials reversed for their customers. And the advantage an independent agent has over a captive is that the independent agent, not the insurer, “owns” the business and has a vested interest in advocating for the customer.
Good comment. A retired agent once told me when I was coming up that the customer may not always be right, but he is always the customer. We advocate for the customer if he is right, but also give him the news when he isn’t. He pays the premium that we make a living from.
Thank you IJ for publishing this article. It is a little belated because we first got the doomsday articles about how the Independent Agent was on life support and would quickly be sent to the scrap heap. Independent agents have learned to be quick on their feet, adopt better technology and their carrier partners have added more value to their products. We can’t advertise like the GEICO’s, Progressives etc of the world so we depend on website support, referrals and more referrals to increase our standing.
I don’t think IAs are going away… I do think it is highly probable that their share of personal P&C insurance will shrink unless IAs provide best-of-class customer service so that their clients feel they have a positive experience during / after each interaction.
However, I also believe that insurance carriers have the same right to succeed as IAs do… that means to me that carriers must provide their clients (the people who actually pay the premiums) as many options to interact as the clients want. So yes, carriers should, and must be, offering online digital channels to their clients that want them. Or do IAs think that Millennials will want to conduct business exactly like their parents and grandparents?!
Barry, that is a two edged sword on company interaction with clients. Companies keep offering their “Gold Service” to us where they take on service duties and interact with customers. They do this for a fee of course. The agent gets cut out of the loop with customers and we don’t know what is going on behind the scenes. If the company ticks off the customer due to a rate increase, they may just leave for greener pastures without us knowing until a cancellation notice shows up. They already promote reporting claims direct to them. I have my reservations about too much contact between a company and a customer.
We have a good website and put our customers email into it and the customers get regular newsletters and they can communicate needs direct to us or they can call with questions, refer people to us etc. That keeps us in better control of the situation.
Barry – I believe Brian Sullivan of Auto Insurance Report has the right theory – as a consumer’s financial life becomes more complicated, they seek a more sophisticated distribution channel for the products they buy. For example, a single renter with one car can easily get the quotes for and purchase the policies they need online from someone like Esurance or GEICO. However, a 40-something married couple who owns a home, has four vehicles, 2 youthful drivers, a boat and rental property needs someone to help them purchase the right coverage. When Millennials reach that stage, they will likely seek out a local agent (independent or captive) to help them make their purchases. So I see IA’s being valuable to consumers forever (or at least until long after I’m on the other side of the grass).
Barry, the good news for agents is that generations do age and needs still change. If we miss the Millenial crowd buying minimum limits Auto and Renters Insurance, so be it. GEICO & Progressive can have them.
I’ve spent my career on the company side, working in product development for P&C carriers that distribute through independent agencies, and to me the very idea of the demise of this distribution channel is ludicrous.
As much as companies try to provide excellent customer service, the CSRs and claims people still work for the company, and policyholders without an independent agent don’t have the added benefit of having someone to act as their advocate in the event of a policy or claims dispute unless they lawyer up.
Additionally, independent agents are entrepreneurs, and like-minded business owners will continue to seek out independent agents for their insurance needs, relying on the independent agent’s expertise and access to multiple carriers instead of putting all of their insurance eggs in one basket or going it alone.
I do see the lower end of the P&C market shifting more toward direct online sales for minimum limits auto and renters policies, and the retention for this group is typically poor. The portion of the Independent Agency channel that serves this segment – high volume non-standard retail agencies looking to charge a broker fee at new business and even charge a fee just to take a payment – will undoubtedly see some shrinkage as many of them add little to no value for consumers.
As insurance buyers mature, gain assets and become more sophisticated – or have a bad experience with a company – there will still be those that want the added value of working with an independent agent.
I’m with a captive agent carrier myself and I feel like I’m in good hands, but it’s a good company (with the exception of their agency scuffle a few years ago) and I work in the industry. For people who don’t work in the industry my advice is always to seek out a carrier with a high satisfaction rating or find an agent – captive or independent – you trust and feel comfortable with.
I am an employee benefits and individual health insurance broker, no P&C. But I have read the same about my business for years. However, I have found that the doomsayers have never been a broker. They really do not know nor understand what we do. So, they are totally unqualified to prognosticate about the broker’s future. Does some guy from McKinsey writing a report know anything about brokers? How is he qualified to give opinions on the future of brokers? So, we brokers just go merrily along doing our thing. You just have to ignore these pin-heads who get paid to give uninformed opinions.
Good comment Bob. Yes, the company people and so called consultants have no clue what a broker/agent does, how they adjust to the changing marketplace since they have never been one. They also think we are stupid and only sell price. What a joke!
The independents still have a little life left for another 10 years. However, captives are dying daily. No chance of captives 10 years from now. It will either be an online or independent channel.
McKinsey came through the Independent Adjusters world about 20 years ago, first at Crawford & Company and then GAB. Management accepted their reports and made some strategic mistakes. As a result GAB has been absorbed by Cunningham Lindsey and exists no longer and Crawford is shrinking as well. GAB did not adapt quickly enough to available technology. Crawford succumbed to trying to be the cheapest provider, which only works when there is consistent, steady volume. Claims volume is extremely variable and thus being cheap only insures that you go out of business or shrink every time volume drops.
People/oganizations who can change and adapt will survive. There are some factors that are tough to overcome, like economies of scale for smaller operations but technology can also be leveraged to the small firm’s advantage. Insurance on the low end as some of you have commented can be close to a commodity. Maybe that is best left to the aggregators. On the upper end there is no substitute for a knowledgeable Independent Agent.
Brian Sigmon, AIC
Evers & Associates of Birmingham, Inc.
http://WWW.EVERSADJ.COM
Let’s fantasize a moment.
What if the insurance carriers cease supporting an 18th century business model,meaning back when agents were truly agents. Perhaps it is time to end the inherent conflict of interest that exists when carriers pay commissions to agents. Keeping it real, most agents act like brokers, who should be paid by the insured.
I submit that if agents/brokers had to bill their customers for services rendered, just like lawyers and accountants, there would be fewer agents and brokers. Why because they would have to really earn their money by providing real service and advice to insureds.
Truth is the many agents and brokers focus only on the sale and when made, they move on to the next one. Little effort is expended to truly be an agent for the company. For it they did, the underwriting decisions would be accepted. Alas, the first response is “I’ll move my book unless you do what I want!”
End the madness.
Jade, obviously you are not an agent or have been one before with that attitude. You may not have noticed it, but things have changed and agents have adapted. We really didn’t have any choice. When I started, no internet, we rated out of manuals, mailed applications in, mailed claims in or called it in. Everything is 100% different in this technology world and we are efficient and are in close touch with companies and customers.
The service provided by an agent is, for all practical purposes, free. Direct insurers like GEICO claim to save 15% because, when they started using that slogan, that was about the commission level of independent agents. Not so anymore. In addition, GEICO has it’s own salaried agents…you can’t sell or service insurance without having an agent’s license. So, what’s more costly, a full salaried and benefited employee or someone being paid 10-12% of the premium? In addition, that 15% you allegedly save is largely eaten up by their BILLION DOLLAR advertising budget.
So, for the most part, the services of an agent don’t really cost you much of anything. However, a GOOD agent knows the products he or she sells (often from multiple markets), knows the products being sold by the competition, takes the time to actually assist consumers figure out their unique insurance exposures, and provides value in the form of the right product at the best price.
Even more valuable is the advocacy a consumer or business person gets at claim time. As I type this, there are independent insurance agents getting claim denials reversed for their customers. And the advantage an independent agent has over a captive is that the independent agent, not the insurer, “owns” the business and has a vested interest in advocating for the customer.
That can be priceless.
Good comment. A retired agent once told me when I was coming up that the customer may not always be right, but he is always the customer. We advocate for the customer if he is right, but also give him the news when he isn’t. He pays the premium that we make a living from.