Diminishing Role of the Agent for P&C Insurance

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bjwestner
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Diminishing Role of the Agent for P&C Insurance

Post by bjwestner »

Hello All,

I work for an auto insurance company that also sells homeowners as well. All of our business is agent driven, virtually no direct business. It seems like as each year comes and goes, more and more people purchase especially auto insurance direct, leaving a diminishing window for agents. Even with commercial policies, more and more small businesses seem to be able to purchase direct through Geico, Progressive, etc.

This is painful to see for several reasons, first of all, the diminishing role of the agent. It also appears to hurt cross-selling other products such as life insurance, etc.

What upsets me is these carriers such as Progressive/Geico are using this "price your policy" type tool where people are really getting ripped off - yes they are getting coverage, but there is nobody there to tell them "NO - DO NOT BUY A MINIMUM LIMITS POLICY!"

It seems to me that this can not be right. After what we just witnessed with the mortgage crisis, is someone going to step in and put and end to this?
Big Dog
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Re: Diminishing Role of the Agent for P&C Insurance

Post by Big Dog »

There are no laws that forbid people from making stupid decisions - be it with getting sucked into the wrong type of mortgage or by purchasing inadequate limits of insurance (add into that not understanding what their insurance does and does not cover).

If you read between the lines of what I just wrote, you'll figure out that those individuals that got into an adjustible rate mortgage are also responsible for the pickle they're in.

That said, personal lines insurance agents missed the mark long ago when they fell into the cheapest price syndrome.

I work in the risk management department for a large healthcare organization, and I've run into vendors/contractors/tenants that have purchased their policies online - and in most cases they have inadequate limits of coverage, and oft times aren't covered properly. In those cases, we don't do business with them until they get their "ducks in a row".
d's insurance store
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Re: Diminishing Role of the Agent for P&C Insurance

Post by d's insurance store »

I don't know if there's any comparison with the residential lending marketplace, but indeed, I certainly see a major shift away from the local, neighborhood model of a trusted insurance advisor into the online direct marketplace.

A lot of this has to do with shifting buying habits and the idea that insurance is a price driven, commodity product that doesn't differ from company to company and agent to agent. Some of this has to do with the purchasing habits and expectations of the upcoming generation of insurance consumers who feel that life can be pretty much led online.

And, in fact, just how many personal lines agents have had that constructive conversation about whether 50/100/50 or 50/100/100 are better auto liability limits? People either have assets worth protecting or they live a brick & board & beanbag existance where minimal limits are 'good enough'.

Agency owners are now struggling with ways to kick start the prospect stream, as traditional ways of client attraction don't work any more and the business model of an agency owner, a spouse and a CSR or Producer or two just doesn't pencil out anymore for medium sized agencies.

Except for the very large personal lines agencies, yes, I forecase that over the next 10 years or so, the smaller agencies will go the way of one hour photo stores and full service gas stations.
AgencyEquity
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Re: Diminishing Role of the Agent for P&C Insurance

Post by AgencyEquity »

bjwestner wrote:Hello All,

I work for an auto insurance company that also sells homeowners as well. All of our business is agent driven, virtually no direct business. It seems like as each year comes and goes, more and more people purchase especially auto insurance direct, leaving a diminishing window for agents. Even with commercial policies, more and more small businesses seem to be able to purchase direct through Geico, Progressive, etc.

This is painful to see for several reasons, first of all, the diminishing role of the agent. It also appears to hurt cross-selling other products such as life insurance, etc.

What upsets me is these carriers such as Progressive/Geico are using this "price your policy" type tool where people are really getting ripped off - yes they are getting coverage, but there is nobody there to tell them "NO - DO NOT BUY A MINIMUM LIMITS POLICY!"

It seems to me that this can not be right. After what we just witnessed with the mortgage crisis, is someone going to step in and put and end to this?
The auto only agent is going the way of the internet, but the clients in the middle to upper income category who have auto,home and umbrella needs with still need the agency. Also, for the most part, commercial accounts with be handled by an Agency as there are too many customized needs for a process that can not be duplicated so easily as an online system. Also, business owners need that professional advice and guidance, just like middle to high netwoth individuals and families need.
http://www.agencyequity.com
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bjwestner
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Re: Diminishing Role of the Agent for P&C Insurance

Post by bjwestner »

I agree AgencyEquity, I guess my point was also the fact that as the baby boomers get older and this new generation gets older, it can lead to decreased opportunities for Agencies to help this new generation becauase the new generation is so used to purchasing things such as personal auto online/directly.

The flip side of this I suppose is that there is going to be an increasing opportunity to service the baby boomers with additional medical insurance and long term care products as they continue to age.

My point with the direct policies that are being purchased on the personal auto side is that we've seen in just the last few years that those people that purchased a house and got into more than they could handle are not all being held responsible. Organizations like Acorn cried foul that those that purchased these homes did not know what they were getting into, etc. Where are these organizations now to point out the fact that picking your price for your policy may be good, but if you hit someone your screwed? As this trend continues, the overall impact on society will increase as well.
mica.cooper
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Re: Diminishing Role of the Agent for P&C Insurance

Post by mica.cooper »

Auto is being sold more online because it has been commoditized.

This is because auto policies are small, well understood policies where the risk is known and can be priced very accurately. Thereby allowing the big boys to fight for that margin of profit. Its why companies such as small companies and Farmers are LOSING that business to Progressive or Geico.

-Small companies lose to big companies via they usually have a larger operating cost and a smaller underwriting profit.
-Farmers because they have the advantages of large but lose because of the percentage they pay to Zurich.

All policies, of any kind that can be commoditized, such as simple HO3, Renters, single location BOP, boat, motorcycle are all targets. As soon as the risk steps out of the simple, it becomes the realm of the agent. There will ALWAYS be a place for an agent because of this. Today, risk is more complex than ever, and agents are needed more than at any time in the past. The easy money from simple policies is going away. This is the way of progress, and we change and evolve, or wither and die.
mhutch69
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Re: Diminishing Role of the Agent for P&C Insurance

Post by mhutch69 »

Auto is being QUOTED AND SHOPPED online but NOT purchased without agent involvement in over 80% of cases based upon recent surveys.

We might be able to shop online and purchase insurance as we hold licenses and are qualfied to advise others on the purchase but most insurance buyers are utilizing an agency in the purchase of EVEN auto insurance.

Why do you think GEICOhas put in the local offices ALL over the country? Which I still think is exactly where I would locate my next retail shop is directly across or next door to the local GEICO office.

I would live fine on what they do NOT want pricewise or otherwise...
pshealy
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Re: Diminishing Role of the Agent for P&C Insurance

Post by pshealy »

That's why independent agents must compete with the direct writers and go 24/7. I know a company that can help them do that VERY AFFORDABLY!! Calls get answered after hours, holidays, weekends, busy overflow, bad weather days when you need to close or 24/7! Want more info - inbox me: pshealy@insitesupport.com
quoteme08043
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Re: Diminishing Role of the Agent for P&C Insurance

Post by quoteme08043 »

The reality is. Personal Lines Auto insurance IS A COMMODITY. The limits are the limits. No company is offering anything different than the other company (save Chubb with agreed value option on personal lines). Other than that, there are some small variations that everyone is jumping on, such as vanishing deductible options.

All that being said, it is the agent that provides value and this is where the boat is being missed.

There was a huge promotion by a law firm in NJ that does a lot of personal injury. They stated that they do not sell insurance and will not reccomend an agent, but they will review a policy for free and advise them accordingly.

The Dept of Insurance sat on their hands while non licensed individuals were reviewing coverages AND DISCUSSING THEM.

The same is what is going on with the internet. The whole reason you have to buy insurance from a licensed agent is because it is only the licensed agent that is allowed to discuss coverages!!!
mica.cooper
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Re: Diminishing Role of the Agent for P&C Insurance

Post by mica.cooper »

The agent is not the only one allowed to discuss insurance.

We all discuss what remedies someone should take for a cough, fever, etc but we are not doctors. We discuss the outcomes of trials and crimes as if we were lawyers, but we aren't. We are allowed to discuss these things within limits as defined by law.

Insurance is actually contract law and as such the within the realm of an attorney. We make a specific exclusion for insurance and allow persons to train, test, and be licensed to practice this sub-portion of law and we call them insurance agents. This is why attorneys are allowed to review policies, they are more qualified to interpret policies than an agent, but they do not have the experience of the agent in servicing customers.

Others allowed to discuss insurance without being agents are underwriters, adjusters, regulators, lawmakers, judges, etc.
sacman
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Re: Diminishing Role of the Agent for P&C Insurance

Post by sacman »

I agree with Mica.Cooper, there will ALWAYS be a place for the auto agent.
In certain areas the online purchases may make up a larger percentage than other areas, but the GOOD personal lines agent is in no danger of disappearing. The size of the agency is immaterial to its ability to compete and survive. Having quality, fairly priced products and providing positive customer service is what is vital. I do believe that captive agents are in more danger than IA's because of their limitation on providing a choice. However, IA agencies that can justify an extra couple of dollars per year by the support and service they provide have little to worry about, IMHO.
How many times as agents have we seen facesheets where the current agent has clearly cut corners in coverage to try to keep the premium low or minimize a rate increase.

Heck I often take business from Geico and Progressive, sell higher limits and explain why it is important, and still end up saving the customer money.
Personal lines insurance is only a commodity to those agents that ONLY sell on price to customers that only purchase based on price, and there always has and always will be those agents/people. Once the agent explains the difference between price and value and HAVING coverage and BEING covered the majority of consumers will understand that they need an agent to offer them professional service and guidance. Those consumers are the ones that agents want to build an agency around anyway. If there only concern is price, they won't be around long anyway so why turn it into a commodity in order get a policy for six months then lose itwhen somebody else savings them 50 cents.

If you don't like that personal lines is becoming a commodity - don't treat it like one.
I realize that there is a lot of advertising trying to treat it like a commodity, it is our job to convince the consumer otherwise. I REFUSE to sell minimun limits, if my price is higher than somebody else and I lose the business, so be it.
bjwestner
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Re: Diminishing Role of the Agent for P&C Insurance

Post by bjwestner »

I'm glad that you do not sell minimum limits sacman - I work in claims and see it all the time with other carriers. Fortunately the company that I work for is all agent driven business so there are not many minimum limit policies. When these people hit my insureds, my insureds are usually screwed though and are forced to use their own coverage and usually never end up seeing their deductible back.

I noticed that Liberty Mutual is selling an interesting product where if your vehicle is totaled, they will pay for the cost of the same model but one year newer.
sankykid
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Re: Diminishing Role of the Agent for P&C Insurance

Post by sankykid »

There will always be a segment of the population that wants to buy insurance online, especially auto insurance. The size of this segment as a percentage of the general population is fixed and saturation is not far off. Barring another technical, social, or some other type of major shift or change, agents should rest easily. Good agents that is.
mica.cooper
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Re: Diminishing Role of the Agent for P&C Insurance

Post by mica.cooper »

bjwestner,

This type of coverage is auto replacement, commonly available in countries outside the USA. There are two types, same value, and new. Same value pays for the cost to replace a vehicle, so not just the value but the sales tax, missed work, etc. New does the same thing but allows you to total a 2000 and purchase a 2011 new vehicle with zero out of pocket.

I have not seen replacement coverage available online or through a US carrier.
KPIA
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Re: Diminishing Role of the Agent for P&C Insurance

Post by KPIA »

mica.cooper wrote:bjwestner,

This type of coverage is auto replacement, commonly available in countries outside the USA. There are two types, same value, and new. Same value pays for the cost to replace a vehicle, so not just the value but the sales tax, missed work, etc. New does the same thing but allows you to total a 2000 and purchase a 2011 new vehicle with zero out of pocket.

I have not seen replacement coverage available online or through a US carrier.
Wow, that is ripe for abuse. Want a new car with no payments but a higher insurance premium? Easy to see the incentive to total your car. Yeah, yeah, I get the Captain Obvious Award...
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