Online Competition

[reecon]

Is there a way for captive agents to compete successfully with our own company's online competition? Do we have a future?

[lonestar]

reecon, if you are referring to Farmers Insurance using 21st Century to directly compete against the agency force, I would say your future is not very bright. The problem is, every morning that you choose to open the office, quote and sell policies for FIG, is another day you are providing money(premiums) and helping to enable this kind of backstabbing behavior from FIG.

If you are an Allstate agent, same thing applies in regards to E-surance.

Until a large enough group of captive agents make a stand, there is no reason for the captive companies to play fair with the agents. IMHO.

[yoyowordup]

Independent agents have been fighting this for years. In the old days only Independent agents had Progressive. We built them up to make them a viable "semi-standard" market. Then they started doing their own thing and doing it very well. It didn't (and doesn't) sit well with agents. At any Progressive meeting you can always hear the hush in the audience when anyone asks a question about competing with ourselves.

Then we had to compete with Hartford AARP or Hartford "Business Specialist" agents, Travelers Direct/Costco and a plethora of other carriers who sell online to compete against us. Most insurance companies are always going to offer as many marketing channels as they can to bring in the most business.

Two of my carriers Cincinnati and Auto-Owners have steadfastly maintained that they will NEVER go direct. They are relationship companies and understand the value of an agent. There will always be a need for agents as most clients that actually have a need for advice will understand the value-added.

Look on the bright side, at least you're not a travel agent. They used to be on every corner and have been wiped out by Al Gore's invention.

[d's insurance store]

The success or failure of a captive agent in today's marketplace is almost entirely dependent on your rate competitive positioning. Oh, sure, you'll show up to various company meetings and the suits will tell you that hard work, persistance and the brand name will drive people to you for quotes and it will be your job to convince them of the value proposition to pay more for the perception of valued service...but we all know you can count those successful sales pursuits on one hand.

Fact is, almost every major carrier, independent and captive, is now looking for ways to circumvent an agent sales model. And, the marketplace is shrinking as the product becomes more and more thought of as just another commodity like a carton of milk or box of cereal.

Survival as a retail insurance insurance agency focused on personal lines is getting trickier and trickier. Service and rates are key and you have to convince a smaller potential pool of prospects of the virtures of doing business with you. The current generation of smart phone owners just isn't inclined to pursue the services of that 'trusted insurance advisor'. Yeah, you can impliment the so called systems of web exposure, email and social media campaigns and behavior modification of your staff (if you have any) to encourage upselling and referrals, and in some cases those work, but it will still be an uphill climb.

Better you should learn refrigeration repair. It probably has a better long term future.

[lonestar]

d's ins store, great response! On that thought, do you think the days are numbered for us IA's? I think we can all agree that IA's will surely outlive the captive model, but how many more years do you think we have as agents to earn a living?

[d's insurance store]

d's ins store, great response! On that thought, do you think the days are numbered for us IA's? I think we can all agree that IA's will surely outlive the captive model, but how many more years do you think we have as agents to earn a living?

I don't see the smaller, 'boutique' retail agency dabbling in all lines...mostly personal, some commercial, some life/health as a growth segment. I think, depending on the number of files in the cabinets, the age of the clients and the ability to get referrals from existing clients, this type of agency can survive for another decade or so, contingent on the income needs of the owner/broker. All of my feedback indicators from industry people speak of what I'll call 'treading water'...meaning relatively stable income with premium increases making up for lost clients.

In fact, when I put the question out to people like marketing reps and company underwriters, the story doesn't change even for most larger agencies...steady, no real growth for those engaged in the personal lines/small commercial marketplace.

As the business model contracts, an agency with limited needs for growing income can exist for as long as the rent gets paid and food is on the table for the owner/broker.

Those 'doing well' or 'holding up', at least in my view, tend to be stable, but starting from higher client counts...you know...mainstreet agencies that were started back in the '60's or '70's by Mom and Dad and growing during the massive expansion years and now passed down to Junior and his sister who have added email and a web site, but still basically run the same business model that through retention inertia, continues to pay the bills.

These are just my opinions and as always, your mileage may vary and your views may differ. I'm not trying to convert anyone to my religion.

[mccluney]

R: d's insurance store.

D's comments very astute. As an long time commercial underwriter now agent/broker. Unfortunately, I agree with every word D has commented on. The agents that will last longer will need to be very efficient and cold call-prospect-cold call and to do so will knowledge for the market segments being pursued. And those agents better be prepared to provide answers to any insurance question asked of them.

[Pathwayinsurance]

Is there a way for captive agents to compete successfully with our own company's online competition? Do we have a future?

Insurance companies are paying close attention to the GEICO model of writing business direct. Agents need to implement aggressive marketing tactics To overcome the TV ($1 billion) budget this company has at their disposal.

What is The only compelling Proposition that GEICO can talk about?

Price.

Agents on the other hand can talk about a variety Of different services that can be offered versus a cheap price, a local agent clients can meet with versus a toll free number (and the guarantee that you would never speak with the same CSR twice when buying insurance direct) for customer service.

The local angle is just one advantage, there are many other advantage agents bring to the table.

[d's insurance store]

Insurance companies are paying close attention to the GEICO model of writing business direct. Agents need to implement aggressive marketing tactics To overcome the TV ($1 billion) budget this company has at their disposal.

What is The only compelling Proposition that GEICO can talk about?

Price.

Agents on the other hand can talk about a variety Of different services that can be offered versus a cheap price, a local agent clients can meet with versus a toll free number (and the guarantee that you would never speak with the same CSR twice when buying insurance direct) for customer service.

The local angle is just one advantage, there are many other advantage agents bring to the table.

You can scream 'value' all you want. Overwhelming trends indicate that the personal lines insurance product has been positioned as a commodity product by large segments of the insurance buying public. The GEICO/Progressive model emphasizing price is just one reason.

In no way am I forecasting the death of a market segment that will still and always want a personal touch for their insurance needs, it's just a shrinking piece of the pie that does not bode well for the licensed agent who wishes to embark on a new main street agency business venture, starting from scratch.

Personal lines insurance buyers have for years been separating into two groups...those who need higher limits of coverage and those just wishing to 'get by' with minimums. There's no longer a real place in our industry where a thougtful conversation takes place over the merits of 25/50 or 50/100 Aubo BI limits...the consumer has dictated that 250/500 is where they want to be if there are assets that need to be protected or 15/30 if the consumer is living a brick/board/beanbag lifestyle.

Technology advances and consumer demands and just plain marketplace changes are what will turn the smaller, boutique, main street insurance retailer into a dinosaur marching towards the tar pits in the coming decade.

[William Graham]

I have always found D's postings to be insightful and interesting.

while I think the market trend that he has identified for on line competition competition to grow is valid.

it is my view that on line companies will always be a smaller end of the overall market place because its growth will stall out. One reason is that no commission guarantees only one thing - no help to the consumer. We see almost daily new clients who are frustrated with their on line service. Another reason is that without car inspections or other services that agencies provide that bring value to the insurance companies - on line companies will have higher underwriting losses. These losses will keep the price advantage of no commission companies in line with the non-standard companies. we currently have several non-standard companies that regularly beat Geico or Progressive. However, non-standard business is expensive to service as Geico or Progressive have found i.e. as they raise rates - folks who went there on price have little loyalty-- they will shop again.

Moreover, the bread and butter of an agency is not the non standard business- where on line competition has been most successful -- it is the preferred book - with multiple lines within a single household- as service & policies becomes more complex online competition is less of a factor for obvious reasons.

Over the long term, the Independent Agents major competiton is with captive agents not on line companies for the preferred book. We are a small start up IA-- 3years old. We were a captive agency for 22 years. First year was slow as I had to deal with a non-compete and to learn all of our new companies. But we have been doubling up our GWP every 12 months since then. We are on a pace to get to $1.2 million in GWP after 5 years in the IA business. this is 80 % preferred personal lines. It took me 16 years as a captive to get to $1.2 million which where I stalled out on growth as a captive.
I bring all of this up as an example because we have been what I regard as successfull in opening a new insurance agency - success does not come easy but it is not rocket science nor impossible to do.

[Courtney]

The key is to dominate on a local level. People in your community would rather relate to a name and face than a big brand alone. You've got to pick your battles and get in front of your community on a personal level in a way the parent company can't.

[d's insurance store]

=
Moreover, the bread and butter of an agency is not the non standard business- where on line competition has been most successful -- it is the preferred book - with multiple lines within a single household- as service & policies becomes more complex online competition is less of a factor for obvious reasons.

Over the long term, the Independent Agents major competiton is with captive agents not on line companies for the preferred book. We are a small start up IA-- 3years old. We were a captive agency for 22 years. First year was slow as I had to deal with a non-compete and to learn all of our new companies. But we have been doubling up our GWP every 12 months since then. We are on a pace to get to $1.2 million in GWP after 5 years in the IA business. this is 80 % preferred personal lines. It took me 16 years as a captive to get to $1.2 million which where I stalled out on growth as a captive.
I bring all of this up as an example because we have been what I regard as successfull in opening a new insurance agency - success does not come easy but it is not rocket science nor impossible to do.

And I sincerely applaud your success, but your revealation of agency revenue supports what I've referenced earlier and that is that by industry standards, a $1.2 million agency is considered small. It may well provide you as owner a lifestyle and living standard that works just fine, and really, I'm not diminishing your start from scratch efforts, but you've created a business that with some assumptions about your market can provide you with what you need and can likely last for a very long time, but take your figures and transfer them to a large urban area with the resulting higher costs for everything from food to housing to commercial rent and wages and you'll find that commission revenue for that size book doesn't buy a whole heckuvalot of upscale lifestyle. Yes, you can argue that being located in a different area would likely mean higher premiums and a larger prospect base, but for each of us, the revenue and net income figures are very personalized in our needs and expectations.

You've relatively recently launched from a restrictive captive environment, where it's highly likely the emphasis was on life and other financial products and the bread and butter P&C personal and small commercial lines was viewed by corporate managers as merely an entrance to the highly profitable financial lines. Having come from that same background, only far longer than you, I can see where you feel other captives are your prime source of competition. With the benefit of a tad more experience, I respectfully submit that the competition remains the challenge of the changing marketplace that evolves over the next decade, when the new generation of retail insurance buyers stumbles into the marketplace, unencumbered by rituals of the past where the Main Street Trusted Insurance Advisor or one of the very familiar captive offices was the ONLY place to get the insurance product and we were living in a world without instant technology expectations and a lack of information about the mysterious insurance products. There was a time when we all were keepers of information, stored in our thick rate manuals. Now there are no secrets. We have to learn to live with this brave new world.

[Robert742]

Particularly among auto insurance shoppers, price is almost always the deciding factor leading to the purchase. It seems every auto insurance company now markets showing the large amount of money saved annually by customers switching to their company. Even Amica, a direct company always emphasizing its high level of customer satisfaction, advertises based on savings.

Although all companies promise savings, the companies gaining the most market share over the last two decades, Geico and Progressive, have done it, not only by extensive advertising, but by offering low rates to the majority of people contacting them for quotes.

Agents chasing after insurance shoppers will live or die on price. Agents insuring customers with companies providing uncompetitive rates will be vulnerable to the constant solicitation by competing companies through various media. Your customer may think you are a great agent representing a great company, but a lot of people are willing to switch and risk mediocre service to save hundreds of dollars a year.

The good news for agents is most customers renew their insurance without shopping for better rates. Most people don't want to bother with their insurance, unless they have a compelling reason to do so. If your company has a large rate increase, call your customer and give them options to lower their rate. If they like you, and think you are doing your best for them, they will want to find a reason to stay with you. Maybe they will call one competitor promising to save them a lot of money, only to find out there is just a small savings. They'll stay with you and decide all the companies advertising about saving people hundreds of dollars are BS. Most people don't want to change insurance companies. How else do you think Allstate is still the second largest auto insurer in the US? It's inertia, not competitive pricing.

Agents, independent and captive, have a future because they (or at least the ones knowing how) can reach and sell to the majority of auto & home insurance customers reluctant to shop and call an insurance company. Even customers buying direct like the availability of a local agent, and I don't see the captives eliminating their entire agent force, though there may be attrition, reduced profits, and cannibalization of their customers.

[William Graham]

D's

appreciate your thoughts- certainly something to ponder-- to clarify we are a small - 2 agent no staff office. Our expectations may be more limited than many others. But it is a niche that we are comfortable - we have no expectations to become a mega agency in either size, staff or locations. Our agency is based on personal service to people we know who know & trust us to look out for their best interest.
How this relates to the market as a whole- I am not sure- but I think it is an option that will remain viable for a very long time. When we left the captive arena, I elected to join a cluster -- it seemed to be a successful vehicle to enable a small focus, personal service agency. There has been an explosion of these cluster/groups compared to 25-30 years ago when I first looked at joining the insurance industry. SIAA, the group I joined, has over 4000 member agencies. these numbers seem to reflect a somewhat different perspective of the current marketplace.
I am a baby boomer -- the younger generations may be more likely to shift their shopping and service to some internet based paradigm ? to the exclusion of personal service agencies? I don't know--- it is something to be mindful of -- but the beauty of Adam Smith's invisible hand - is that the marketplace belongs to those who can adapt & meet the demand as it evolves. There is not just one solution - except in Washington, DC

[Pathwayinsurance]

Insurance companies are paying close attention to the GEICO model of writing business direct. Agents need to implement aggressive marketing tactics To overcome the TV ($1 billion) budget this company has at their disposal.

What is The only compelling Proposition that GEICO can talk about?

Price.

Agents on the other hand can talk about a variety Of different services that can be offered versus a cheap price, a local agent clients can meet with versus a toll free number (and the guarantee that you would never speak with the same CSR twice when buying insurance direct) for customer service.

The local angle is just one advantage, there are many other advantage agents bring to the table.

You can scream 'value' all you want. Overwhelming trends indicate that the personal lines insurance product has been positioned as a commodity product by large segments of the insurance buying public. The GEICO/Progressive model emphasizing price is just one reason.

In no way am I forecasting the death of a market segment that will still and always want a personal touch for their insurance needs, it's just a shrinking piece of the pie that does not bode well for the licensed agent who wishes to embark on a new main street agency business venture, starting from scratch.

Personal lines insurance buyers have for years been separating into two groups...those who need higher limits of coverage and those just wishing to 'get by' with minimums. There's no longer a real place in our industry where a thougtful conversation takes place over the merits of 25/50 or 50/100 Aubo BI limits...the consumer has dictated that 250/500 is where they want to be if there are assets that need to be protected or 15/30 if the consumer is living a brick/board/beanbag lifestyle.

Technology advances and consumer demands and just plain marketplace changes are what will turn the smaller, boutique, main street insurance retailer into a dinosaur marching towards the tar pits in the coming decade.

I believe you are incorrect in your assumption. Clients do want value. You just need To take steps to educate them on why they need value. To give an example, how many people Feel irritated when they call to ask a question on The cable bill, phone bill, credit card To be connected to an individual the barely speaks English?

Companies employ customer service representatives in foreign countries because the wages are less.

The same principle applies when folks purchase insurance from Geico. For example if you purchase insurance from Geico And you need assistance on your car insurance policy You make a telephone call to a toll-free number. It's quite likely that you would never speak to the same CSR twice.

Clients really want familiarity, They want a relationship, Not a stranger. What we have to do as agents is to properly educate clients on The role and importance of the local agent.