The next five years
Moderators: Josh, independent guy
The next five years
Where do you see insurance going in the next five years. What company are you looking forward to working with.
Re: The next five years
I see more multi-channel offerings by the carriers, which will continue to water down the value of the agency channel. As carriers expand policy sales through non agency channels, they will probably start to reduce commissions, which they can do as long as agents are willing to do the same work for less money. Insurance companies are ladies of the evening and, sadly, so are most agents. Therefore, if most agents are willing to continue to sell for companies that reduce commission, the insurance companies win and the agents will proliferate their own demise.
Re: The next five years
I agree with the comments above. We are realigning our agency with insurance companies that do not have multiple distribution channels, value the independent agency system and compensate fairly. Agents need to wake up and fight back if they want to stay in this business or sell their agency.
Re: The next five years
For personal lines, carriers have been doing online distribution for several years now. Right now, it's not generally possible for businesses to go online and buy insurance (except maybe things like Auto with Progressive, or programs like the stuff K&K does).
Do you all see companies starting to offer BOPs, GL, WC online? Right now the application process for businesses through agents is often cumbersome; I mean, many companies will even limit the number of classes that agents can bind without underwriter review, and the least negative answer will kick it to referral. So in order for online distribution of business insurance to expand, the carriers would either have to hire the personnel to ask these questions of applicants, or they'd have to relax their apps.
What could agents do to fight against it? From my experience, many small policyholders are just trying to get legal and do not even want to receive the benefits of an agent's expertise, because to them, that would simply mean explaining why they need to also buy EPLI, Cyber, even Pollution for businesses that wouldn't think they have a pollution exposure. So, given that many small businesses just don't want to hear it, what could agents offer them? And, would agencies, in the end, be better off if that kind of consumer went direct and put the E&O exposure on the carrier?
I've often thought that for this kind of consumer, an agency should ask them to sign an engagement letter that basically limits the scope of service to whatever specific policy they requested. If someone asks for GL and WC to get legal and doesn't want to talk about Cyber (et al), why shouldn't you ask them to sign such a form? Is anyone doing that already?
Do you all see companies starting to offer BOPs, GL, WC online? Right now the application process for businesses through agents is often cumbersome; I mean, many companies will even limit the number of classes that agents can bind without underwriter review, and the least negative answer will kick it to referral. So in order for online distribution of business insurance to expand, the carriers would either have to hire the personnel to ask these questions of applicants, or they'd have to relax their apps.
What could agents do to fight against it? From my experience, many small policyholders are just trying to get legal and do not even want to receive the benefits of an agent's expertise, because to them, that would simply mean explaining why they need to also buy EPLI, Cyber, even Pollution for businesses that wouldn't think they have a pollution exposure. So, given that many small businesses just don't want to hear it, what could agents offer them? And, would agencies, in the end, be better off if that kind of consumer went direct and put the E&O exposure on the carrier?
I've often thought that for this kind of consumer, an agency should ask them to sign an engagement letter that basically limits the scope of service to whatever specific policy they requested. If someone asks for GL and WC to get legal and doesn't want to talk about Cyber (et al), why shouldn't you ask them to sign such a form? Is anyone doing that already?
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d's insurance store
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Re: The next five years
Like many other open ended questions about the future of the independent agency, 3 years, 5 years or 10 years, there are too many variables to give a blanket answer.
For small agencies specializing in personal lines and small commercial, I've forecast before and continue to speculate that the future is one of diminishing returns, as the market place for 'main street' clients shrinks and the upcoming generation of retail insurance buyers turn to their smart phones for what is viewed as a commodity product where differences between companies is thin and price becomes the overriding decision point. I would lump agencies of less than $3 million in premium and mom and pop size shops into this group. I think they can last for at least another 5 years if expenses are kept low and they can keep the client list together with traditional service while client defections are replaced primarily with premium increases. I call it a slow drip from the revenue pipe.
Medium sized agencies that are invested in middle market commercial and supportive personal lines will probably tread water or prosper depending on the business cycle in the industries they specialize in or expand to.
Large agencies with production staff, conduits to high premium commercial and benefits and specialized personal lines will continue to do well.
The trouble with this kind of forecasting is just the velocity of change. Fifteen years ago, the Yellow Pages was still the primary driver of ringing phones in a personal lines environment. Ten years ago that started to drop off. Today it's a dead medium. Ask me in '99 about agency promotion and I'd wax eloquent about telephone book theories. Pose the same question in '04 and I'd be mentioning the fall off in YP returns. Now I'd just laugh at you if you brought up YP advertising for insurance. Ten years ago, an agency principal with some computer and internet smarts could pursue a self directed SEO campaign for their web site. Internet leads tended to attract the tech savvy of consumers who really wanted an on line quote. Now PPC for insurance in major metropolitan areas costs upwards of $60 for a click and that only buys you a set of eyeballs. And don't get me started about the futility of buying internet insurance leads.
A yardstick that I use for potential success in the personal lines and small commercial arena is Michael Jans from Washington State who has a business dedicated to dealing with agency owners who pay him for various consultative services to promote agency success. Years ago, I would get direct mail flyers and packets put together by him and his staff on a twice a month basis promoting his programs. Then he continued the direct mail and augmented it with on line promotions in order to get agency owners on board. Then the frequency of his appeals slowed down and now I rarely hear from him. From this I conclude that he is casting a more concentrated net designed to appeal not to the smaller agencies, but those agencies with staff and cashflow and premium that can pay for his upscale services. The fact that I've dropped off his sales funnel radar is indication to me at least, that the smaller agency is a dying breed.
As for practicing 'defensive' insurance selling by forcing the small commercial prospect to sign a declaration of understanding for a $1000 annual premium policy...really, see things from their standpoint. A landlord is forcing CGL on them as a tenant and maybe they feel a need to protect their desks and chairs and computers, but for a commission return of $100 to $200 for a mono line client whom you're hoping to pick up some personal lines business if they're not already GEICO loyalists, just how much trouble can you put them through, especially knowing that the local Allstate or State Farm agent down the street will gladly write the BOP (so long as it's a listed risk category) for minimum premium without the hassle just to satisfy their policy count requirements?
As the owner of a small agency, I still feel this is not a long term business model. Other's no doubt will feel differently. It really has become a 'go big or go home' world.
For small agencies specializing in personal lines and small commercial, I've forecast before and continue to speculate that the future is one of diminishing returns, as the market place for 'main street' clients shrinks and the upcoming generation of retail insurance buyers turn to their smart phones for what is viewed as a commodity product where differences between companies is thin and price becomes the overriding decision point. I would lump agencies of less than $3 million in premium and mom and pop size shops into this group. I think they can last for at least another 5 years if expenses are kept low and they can keep the client list together with traditional service while client defections are replaced primarily with premium increases. I call it a slow drip from the revenue pipe.
Medium sized agencies that are invested in middle market commercial and supportive personal lines will probably tread water or prosper depending on the business cycle in the industries they specialize in or expand to.
Large agencies with production staff, conduits to high premium commercial and benefits and specialized personal lines will continue to do well.
The trouble with this kind of forecasting is just the velocity of change. Fifteen years ago, the Yellow Pages was still the primary driver of ringing phones in a personal lines environment. Ten years ago that started to drop off. Today it's a dead medium. Ask me in '99 about agency promotion and I'd wax eloquent about telephone book theories. Pose the same question in '04 and I'd be mentioning the fall off in YP returns. Now I'd just laugh at you if you brought up YP advertising for insurance. Ten years ago, an agency principal with some computer and internet smarts could pursue a self directed SEO campaign for their web site. Internet leads tended to attract the tech savvy of consumers who really wanted an on line quote. Now PPC for insurance in major metropolitan areas costs upwards of $60 for a click and that only buys you a set of eyeballs. And don't get me started about the futility of buying internet insurance leads.
A yardstick that I use for potential success in the personal lines and small commercial arena is Michael Jans from Washington State who has a business dedicated to dealing with agency owners who pay him for various consultative services to promote agency success. Years ago, I would get direct mail flyers and packets put together by him and his staff on a twice a month basis promoting his programs. Then he continued the direct mail and augmented it with on line promotions in order to get agency owners on board. Then the frequency of his appeals slowed down and now I rarely hear from him. From this I conclude that he is casting a more concentrated net designed to appeal not to the smaller agencies, but those agencies with staff and cashflow and premium that can pay for his upscale services. The fact that I've dropped off his sales funnel radar is indication to me at least, that the smaller agency is a dying breed.
As for practicing 'defensive' insurance selling by forcing the small commercial prospect to sign a declaration of understanding for a $1000 annual premium policy...really, see things from their standpoint. A landlord is forcing CGL on them as a tenant and maybe they feel a need to protect their desks and chairs and computers, but for a commission return of $100 to $200 for a mono line client whom you're hoping to pick up some personal lines business if they're not already GEICO loyalists, just how much trouble can you put them through, especially knowing that the local Allstate or State Farm agent down the street will gladly write the BOP (so long as it's a listed risk category) for minimum premium without the hassle just to satisfy their policy count requirements?
As the owner of a small agency, I still feel this is not a long term business model. Other's no doubt will feel differently. It really has become a 'go big or go home' world.
Re: The next five years
Re: The next five years
by randrew54 » Fri Oct 03, 2014 11:42 am
I agree with the comments above. We are realigning our agency with insurance companies that do not have multiple distribution channels, value the independent agency system and compensate fairly. Agents need to wake up and fight back if they want to stay in this business or sell their agency.
Re: The next five years
by lonestar » Tue Sep 30, 2014 11:04 am
I see more multi-channel offerings by the carriers, which will continue to water down the value of the agency channel. As carriers expand policy sales through non agency channels, they will probably start to reduce commissions, which they can do as long as agents are willing to do the same work for less money. Insurance companies are ladies of the evening and, sadly, so are most agents. Therefore, if most agents are willing to continue to sell for companies that reduce commission, the insurance companies win and the agents will proliferate their own demise
I do agree some with the both of you. I do feel like we as agents, need to take a stand. When it comes to carriers multi-channel offerings.
The bigger issue to me is, agents selling thier books to the banking industry. When bank comes in and offesr 3-6 times the vaule of an agency. It makes it hard for an owner to walk from that offer. However it also opens the door for carriers to look multi-channel offerings.
An agency has a limtied reach, however a bank has wider reach and that is more attractive to the carriers
by randrew54 » Fri Oct 03, 2014 11:42 am
I agree with the comments above. We are realigning our agency with insurance companies that do not have multiple distribution channels, value the independent agency system and compensate fairly. Agents need to wake up and fight back if they want to stay in this business or sell their agency.
Re: The next five years
by lonestar » Tue Sep 30, 2014 11:04 am
I see more multi-channel offerings by the carriers, which will continue to water down the value of the agency channel. As carriers expand policy sales through non agency channels, they will probably start to reduce commissions, which they can do as long as agents are willing to do the same work for less money. Insurance companies are ladies of the evening and, sadly, so are most agents. Therefore, if most agents are willing to continue to sell for companies that reduce commission, the insurance companies win and the agents will proliferate their own demise
I do agree some with the both of you. I do feel like we as agents, need to take a stand. When it comes to carriers multi-channel offerings.
The bigger issue to me is, agents selling thier books to the banking industry. When bank comes in and offesr 3-6 times the vaule of an agency. It makes it hard for an owner to walk from that offer. However it also opens the door for carriers to look multi-channel offerings.
An agency has a limtied reach, however a bank has wider reach and that is more attractive to the carriers
Re: The next five years
This is interesting.. If you are looking to CYA, that's fine. I have seen it done in the past. Mr. so and so, we talked about the following coverages, you elected not buy.. But how dose fix the issuejobhunter wrote:For personal lines, carriers have been doing online distribution for several years now. Right now, it's not generally possible for businesses to go online and buy insurance (except maybe things like Auto with Progressive, or programs like the stuff K&K does).
Do you all see companies starting to offer BOPs, GL, WC online? Right now the application process for businesses through agents is often cumbersome; I mean, many companies will even limit the number of classes that agents can bind without underwriter review, and the least negative answer will kick it to referral. So in order for online distribution of business insurance to expand, the carriers would either have to hire the personnel to ask these questions of applicants, or they'd have to relax their apps.
What could agents do to fight against it? From my experience, many small policyholders are just trying to get legal and do not even want to receive the benefits of an agent's expertise, because to them, that would simply mean explaining why they need to also buy EPLI, Cyber, even Pollution for businesses that wouldn't think they have a pollution exposure. So, given that many small businesses just don't want to hear it, what could agents offer them? And, would agencies, in the end, be better off if that kind of consumer went direct and put the E&O exposure on the carrier?
I've often thought that for this kind of consumer, an agency should ask them to sign an engagement letter that basically limits the scope of service to whatever specific policy they requested. If someone asks for GL and WC to get legal and doesn't want to talk about Cyber (et al), why shouldn't you ask them to sign such a form? Is anyone doing that already?
Re: The next five years
I agree with this in theory, but the reality is that small agencies with limited market access are in a real bind.randrew54 wrote:I agree with the comments above. We are realigning our agency with insurance companies that do not have multiple distribution channels, value the independent agency system and compensate fairly. Agents need to wake up and fight back if they want to stay in this business or sell their agency.
I give my Employers Comp rep a hard time about selling through ADP - I can count a handful of times that I have lost comp deals that I might have won, if not for an ADP rep quoting a "pay as you go" policy through Employers. To my mind, distributing your product through a payroll rep is just as bad as a carrier going direct. But what am I going to do? Employers is competitive in my targeted classes and zip codes and without them, I'd probably lose even more deals. So I suck it up and continue to submit and bind......
The next five years
Speaking of the crystal ball for the next 5 years... Apparently Hartford agrees with the proposition that small commercial business has also become a commodity. They have decided to discontinue sending policies to agents. We are now forced to either push PDFs on our Hartford customers or act as printing presses for the 200 page BOPs, etc.
Hartford may save a few bucks on postage and printing. But I wonder if agents will be so put off by this tactic that they will simply place the business elsewhere. Every agent that I have spoken with is very upset with Hartford's unilateral decision to stick them with the printing bill. Penny wise and pound foolish?
Hartford may save a few bucks on postage and printing. But I wonder if agents will be so put off by this tactic that they will simply place the business elsewhere. Every agent that I have spoken with is very upset with Hartford's unilateral decision to stick them with the printing bill. Penny wise and pound foolish?
Re: The next five years
I don't agree that this is penny wise and pound foolish. A handful of our commercial markets have gone this route already. I see no problem with emailing policies via pdf to my customers. I know the company is doing it to save on postage, but the way I frame it to my customers is that it's a more eco-friendly method of distribution. If you think about it, printing out hundreds of thousands of policies for a consumer who will likely never read it is incredibly wasteful. If you don't mind my asking, why do you have an issue with this?ins-atty wrote:Speaking of the crystal ball for the next 5 years... Apparently Hartford agrees with the proposition that small commercial business has also become a commodity. They have decided to discontinue sending policies to agents. We are now forced to either push PDFs on our Hartford customers or act as printing presses for the 200 page BOPs, etc.
Hartford may save a few bucks on postage and printing. But I wonder if agents will be so put off by this tactic that they will simply place the business elsewhere. Every agent that I have spoken with is very upset with Hartford's unilateral decision to stick them with the printing bill. Penny wise and pound foolish?
Re: The next five years
Most insureds are spending thousands of dollars with us for their insurance. I think the least we could do is give them a paper copy of their insurance policies.
Aside from Hartford, I haven't seen any other standard markets discontinue sending policies. The only carriers to go the PDF route to my knowledge are the specialty carriers like USLI and Philadelphia. Curiously, if you place your business through Hartford's service center, they mail hard copy policies to the insured. Hartford thinks the PDF route is wonderful, except for the business they handle directly.
Although most insurance companies like to refer to their policies as "products," they are not products in the true sense of the word. It's not like our customers can get a whiff of the that new car smell or get a chance to play with their latest smartphone gadget. The paper policies are all we can give them to put their hands around.
I think at the very least, an insurance company should give their customers the right to a hard copy of their policy without forcing their agents to act as printing presses. It they want to give the insured a "paperless" discount, fine.
Aside from Hartford, I haven't seen any other standard markets discontinue sending policies. The only carriers to go the PDF route to my knowledge are the specialty carriers like USLI and Philadelphia. Curiously, if you place your business through Hartford's service center, they mail hard copy policies to the insured. Hartford thinks the PDF route is wonderful, except for the business they handle directly.
Although most insurance companies like to refer to their policies as "products," they are not products in the true sense of the word. It's not like our customers can get a whiff of the that new car smell or get a chance to play with their latest smartphone gadget. The paper policies are all we can give them to put their hands around.
I think at the very least, an insurance company should give their customers the right to a hard copy of their policy without forcing their agents to act as printing presses. It they want to give the insured a "paperless" discount, fine.
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mightyquinn
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Re: The next five years
I don't know what universe you are living in but our clients do not want paper policies and none of our carriers issue paper policies. We send the policies to our clients by email and save a copy in our cloud should they need a coy later.
Come to think of it, what agencies or insurers still use paper for anything? Most of us are digitalized / virtualized and paperless.
Come to think of it, what agencies or insurers still use paper for anything? Most of us are digitalized / virtualized and paperless.
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Re: The next five years
Quinn:
I'm living in the universe of standard insurers including Travelers, LIberty Mutual, Chubb, Grange, CNA, Erie, Zurich, State Auto, Hanover, Allied, and others who issue physical policies for accounts with five or six figure premiums. Perhaps you are living in the universe of specialty and surplus lines insurers who don't.
I'm not against PDFs; I'm against taking away physical policies from the agents and insureds who want them. I know as agents we can simply print them out. But I believe most agents don't have the proper equipment to churn out policies 200 pages a pop.
I'm living in the universe of standard insurers including Travelers, LIberty Mutual, Chubb, Grange, CNA, Erie, Zurich, State Auto, Hanover, Allied, and others who issue physical policies for accounts with five or six figure premiums. Perhaps you are living in the universe of specialty and surplus lines insurers who don't.
I'm not against PDFs; I'm against taking away physical policies from the agents and insureds who want them. I know as agents we can simply print them out. But I believe most agents don't have the proper equipment to churn out policies 200 pages a pop.
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mccluney
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Re: The next five years
Gee, the last time I looked at CA Dept of Ins regulations, clients must receive a hard copy of their policies and endorsements. If this regulation has changed, it will save me a lot of money for those client policies sent to me by e-mail from companies.
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yoyowordup
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Re: The next five years
I don't want hard copies of policies!!
I am a small 7 person agency and we went "less-paper" in 2007. We have no filing cabinets. I want PDF's whenever possible. We email our clients their PDF and politely ask them if they want a hard copy. Very few clients want hard copy.
If you're talking about a $50,000 client, yes we print the policy and put it in a binder with tabs and hand deliver it etc etc. But clients with BOPS don't want them and they're not going to read them anyway.
Any forward thinking technologically advanced agency would email policies to clients whenever possible.
I am a small 7 person agency and we went "less-paper" in 2007. We have no filing cabinets. I want PDF's whenever possible. We email our clients their PDF and politely ask them if they want a hard copy. Very few clients want hard copy.
If you're talking about a $50,000 client, yes we print the policy and put it in a binder with tabs and hand deliver it etc etc. But clients with BOPS don't want them and they're not going to read them anyway.
Any forward thinking technologically advanced agency would email policies to clients whenever possible.