Diminishing Role of the Agent for P&C Insurance

[FurriePrincess]

A number of companies offer some variation on the new replacement. Many, however, have exclusions for fire, theft and larceny.

[QuoteClicker]

...................................................

[CSP]

People who use direct writers don't need insurance agents, until they mess things up and want help. Inadequate coverage, no coverage, wrong coverage, you name it, they know more than an insurance agent, they don't need or want your help until its too late.

[AgencyEquity]

Even though more consumers are buying auto insurance direct it would be hard, next to impossible to replace the services that an actual agent can provide. The business that agents seem to be losing to internet purchases is that of the younger consumer. This type of consumer may be uneducated in how insurance works and unknowingly purchase a minimum coverage policy. A consumer that has assets and possibly a business will definitely stay with using an agent. Everyday I see ads and commercials for cheap auto insurance. These companies do an injustice every time they sell someone a minimum coverage policy.

While younger people do use the internet more and do more on it, please keep in mind, these "younger people" are 50 and younger as the internet has been around in it's current form for close to 20 years now. The issue is, what can be purchased online. Simple lower premium type policies that are standardized can be purchased online, such as a personal auto policy. If someone wants to go online do that, that is part of our marketplace and the more market options there are, the better the people are. Keep in mind, most agencies don't even want that single auto account that is going to cost them more to service it than commissions they recieve on it. The more sophisticad consumers who have more to protect are going to use an agent. The businesses have no choice but to use an agent, they need the advice and the services that come with an agency, also the carriers want an agent in place to make sure proper due dilligence and underwriting is being attended to. I say kudos to the marketplace as consumer have many options, but the agent is still too valuable in most cases for the agent to continue to exist.

[AnMarieB]

According to comScore's 2010 Online Auto Insurance Report, 78% of online insurance shoppers ended up purchasing their auto insurance offline.

[ottonsure]

Howdy! I've been in the non-standard auto insurance business for more than 25 years. My experience is mostly in Texas, but I've spent time out west as well. The auto insurance market is segmentized. Most of you are posting about the middle and upper class customer that is plugged into the internet and social networking. That is NOT the area of growth for the auto market and hasn't been for a long time.

Here in Texas ,and many other states, tremendous growth is being seen in the Hispanic market (legal and illegal). My company alone writes in excess of $40 million in annual premium with more than 80% of that to Hispanics. All of it is through independent agents that specialize in auto insurance. I have agents with more than 25 branch locations and each averages about $1 million in annual premium, not to mention agency fees that can add another 25% to that total.

If you're going to lock yourself into traditional standard/preferred auto insurance then you are doomed. There is little or no growth there.

Otto

[AgencyEquity]

If you're going to lock yourself into traditional standard/preferred auto insurance then you are doomed. There is little or no growth there.

Otto

Otto,
What do you base that statement on? What kind of data do you have to backup such statement? I personally like clients who know how to pay their bills without coming into the office and handing me cash every month!

[d's insurance store]

I think Otto is right on...there are vastly different markets for different population segments and they can all be viable. I'm in California and easily acknowledge the market of which Otto speaks.

I don't participate in it in a major way, in part because it's a tad outside of my brick and mortar reach and I don't speak fluent Spanish, but when I visit the Hispanic Supermarket that has an insurance vendor stuck in an alcove and see the present and potential clients waiting patiently for an agent, clutching documents and money, it's easy to see that segment as a viable marketplace.

So, I would conclude that at least in that particular and growing segment, there's certainly a need for an agent, along with the need and profitability of servicing that population as they wish, and if that means very little web and email contact, and very few tweets and smart phone blasts, and the acceptence and dealing with cash, then so be it.

Money ends up being made when the client is accommodated with their needs and not the needs or desires of the vendor.

[ottonsure]

AgencyEquity, I base my commentary on real world experience. I remember that when my dad started his agency back in the 1960's, independent agents controlled the personal lines market. By the 70's the majority of personal lines business was shifting to the direct writers with little marketing response from the likes of Crum & Forster; the St. Paul Fire & Marine; and Aetna. Today those vaunted companies of the past are gone and Allstate, State Farm et.al. own the personal lines markets.

If an agent wants to pursue personal lines as a basis for his/her business then that agent MUST look to the only demographic that is not being well served by the direct writers. Yes there are challenges there, but there is money to be made as well...and lots of it!

Otto

[AgencyEquity]

I guess my "real world" experience is very different than your "real world" experience, I see have seen Agencies who used to do the "non-standard" market either go out of business or shift to preferred risks. The reality is, your world is very different than my world, demographics are different across the entire USA. What may be hot in your area, may not be in another state or county. Finally, the industry is huge, non-standard auto is probably less than 1% of our entire industry, you make it sound like it's our entire industry!

[sacman]

In my state, State Farm and AmFam have a combined personal lines market share of about 45%.
The next highest company is 4%, and Allstate is 2%. So even though those two companies have a large market share, there is a LOT of business available to the personal lines agent in both the standard and non-standard market share.
Locally, I am taking business from State Farm, Allstate, AMFAM & Farmers on a regular, consistent basis. Heck, I even have a couple of Farmers agent and one Allstate agent that refer business to me.
My agency is about 75% standard and 25% non-standard. I prefer the standard business because, in my personal experience, there is less service work and the retention is better.
That is NOT to say that one is better than the other.
That is the beauty of this business, you can focus your agency on whatever market you prefer and still make a comfortable living. I don't sell health insurance, I refer that business to a friend that only does health. I don't write much in commercial lines, but I have a friend that prefers commercial lines to personal lines and we feed referrals/business back and forth to each other. Am I leaving money on the table by not doing commercial, sure, but I really enjoy the personal lines side and chose to concentrate my efforts there.

There IS a lot of business and money to be made in the non-standard market, if that is market you chose to concentrate on. Open any yellow page phone book and you will see full page ads for SR-22 filings and low rates for high risk drivers.
BUT, there is a LOT of business and money to be made in the standard market as well. Hell, Farmers and Allstate agents are leaving in droves across the country. That should tell us something about what is happening in the captive agent system.

[mica.cooper]

I continue to scratch my head as to why anyone still has State Farm for an insurance company. After the Katrina engineering report fiasco, does anybody trust them? I really expected to see a lot of heads roll and some people actually go to jail.

[ottonsure]

^^^How does the above contribute to the discussion? Is this forum moderated??

Otto