Future of Independents

[DJHog]

What is the future of the Independent insurance agent? I know that alot of captive agents are seeing their companies lean more and more to the internet ane 800's (I'm a captive agent and I'm seeing the trend first hand). I would not be suprised to see captive agents obsolete in 15-20 years.

Are any of the Independents on here seeing any of this? I'd hate to make the switch only see the same trend 5 years down the road.

[Sports_Agent]

I was a direct writer (captive) as both an agent and in management for 19 years. I have owned an independent agency for 15 years. When purchasing insurance people want a choice (not available from captive agents or from most internet providers or 1-800 numbers), they want a local agent they can sit down with and talk to (not available on the internet or with a 1-800 number), and they want to participate in the decision making process by being given information/options. I am certainly not dissapointed as an independent agent. There are several companies which have assured me that they are dedicated to the independent agency system and have no plans to go to an internet based or 1-800 based marketing system.

[JBURLY]

A few years back when the internet started booming alot of insurance companies were saying "The writing is on the wall, the consumer wants things quick & easy & 1-800 & the internet are the way of the future. So agents beware, we might have to cut your commision rates to remain competitive & a certain percent of you probably won't be here in the next few years"
Most of us agents disagreed because we knew our customers wanted to deal with us, one on one, person to person, not through a computer or calling 1-800 to someone that could hardly speak english & knew little if anything about insurance. A large percent of my customers that did choose to try 1-800 or internet have called me back as soon as they needed some REAL customer service or had a claim & got to hear "I'm sorry your policy doesn't cover that."

The internet is a great source for information, but most people realize (or find out the hard way) that with insurance products, you better know what you're doing. As long as us agents can be of value we will survive.

[d's insurance store]

I'll give my opinion and expect to be criticized...but here goes...

I'm located in a big city suburb in California. I own and operate a general practice agency...mostly personal lines, small commercial, a bit of life, a larger bit of health...many here know the drill.

Trends that I'm witnessing do not bode well for the mid to long term future of my type of agency, in my opinion. First, the drivers of rate shopping have pretty much ceased to exist, meaning higher rates every six months or every year. That alone used to drive the telephone to ring on a very frequent basis. However, here in California, personal lines and small commercial rates have been very stable to downward in recent years due to Proposition 103 and its continuing residual effects. The only ones out shopping for rates that I'm exposed to are by and large the 'hard to help', 'lapsed for non pay' and those experiencing 'life changes' such as recent heavy MVR activity, newly licensed young drivers and those in the property market tossed for claims or underwriting concerns. New to the area move in people have all but disappeared, which greatly diminishes any referrals from the old networks of real estate agents and title company workers.

Secondly, there's the internet. Many (or perhaps not too many) years ago we as agents used to be keepers of information that we would dispense along with our advice and counsel to prospects. In this internet and wired age, prospects can and do go out and get that information on their own. I'm also experiencing more and more clients expecting to transact business on their policies on a 24/7 basis, without every wanting or needing to contact my office for routine service needs. So, the dependency factor diminishes as clients end up servicing themselves.

Thirdly, I'm seeing a lower need for what I'll call the 'trusted insurance adviser' amongst the upcoming generational group of insurance buyers. Fact is, there's just no need any more for a constructive conversation about whether someone 'needs' 25/50/25 or 50/100/50. People either fall into asset bearing categories, needing higher liability limits or no asset categories, whereby minimal insurance is appropriate.

In the fourth position is the changed buying habits of prospects. In the past five years, I've seen 'traditional' sources of advertising become less and less relevant rendering things like direct mail and yellow page and newspaper media just about useless. And have you tried to advertise on the web? Design a web page, set up a hosting service and pay per click. Google 'auto insurance' and come up with 7 million hits from competitors all promising 'low rates-great service & instant SR22's and binding'.

Now, all of my observations and conclusions are based on my own narrow view of my own market of 25+ years. Others in different demographic categories and zip codes may get better mileage from the same gasoline, but if the trends that I'm witnessing in my upwardly mobile, higher income area spread, then agency owners in smaller venues may too begin seeing what I'm seeing in a couple of years.

None of this means I'm folding in the next year or two. I can continue to do quite well for the mid term future. But, my forecast at this moment is that 8 to 10 years from now, unless there is a major change in my insurance market landscape, it will probably not be worth continuing the business in its current format.

In fact in the current market place, I'm convinced that an agency has to either be very small or very large, because the cost squeeze in the middle is something I wouldn't want to be managing in this market, what with rising costs and flat or declining revenue in the bread and butter lines. I think this goes way beyond a simple soft market in personal lines and small commercial. And as for individual health, I think that the politics and needs of the immediate future will pretty much spell the end of 10% lifetime commissions on health policies. In a revamped health system, the first thing to go will be agent commissions when agent involvement after the point of sale is virtually nil.

Let the flaming begin....I've got my extinguisher ready...

[independent guy]

Sadly, "D", I have to agree with you. It doesn't mean I'm throwing in the towel, it means that I have to try and adapt and persevere. Traditional advertising doesn't work so well anymore, but we've found a few things that are helping. The biggest one is to advertise on other local business & association websites. Our website gets quite a few referrals from that, and people can fill out information there to get a quote. Traditional referrals from existing clients has always been, and still is, our best way to get quality business. I'm 27 years old and I've been in the business in a full-time fashion for the last 6. I decided to make a point to differentiate myself from my peers through knowledge, professionalism, and credentials. As far as I know, I'm the only CPCU/API/AIS in town. When in groups of other people my age, they always ask me insurance questions and then when I give them a deep answer, they realize they don't know jack about insurance and have no business buying it online. I have a very high success rate selling them on it at that point.

[InsMgmt]

"D", I too agree with you.

If I were in your position, I suppose I would have a 5 year plan to develop my agency into an attractive "buyout" asset to a larger, regional agency. Get on board with a well-known, Top-10 California agency, start marketing your services to the "asset bearing" clients, and leave your small, indiscriminate client base behind. With your erudite and thoughtful approach to this business, you would be a great find for any professional agency digging for the gems in the industry landscape. I would focus my marketing and networking efforts towards gaining a future VP position in a $5MM-$10MM annual revenue agency.

Your insights expose you as being too talented to stay in the trenches for the long term. The country needs folks like you to lead from a significant vantage point. We've had enough of the PHDs (Pin Headed Dolts) in positions of responsibility.

Either that, or start looking into MLM opportunities. If that sparks your interest, give me a call. Have I got a deal for you!

[independent guy]

Its also important to remember that we're in a very soft market right now. Indications are that that will change shortly.