Safeco Considers New Distribution Channels In Rebound Efforts

Circumventing independent agents. Undermining agents’ sales. These are phrases that don’t set well with Safeco CEO Mike McGavick. And it’s no wonder. Appointed as the man to turn the struggling Seattle-based insurer around, McGavick certainly doesn’t want agents to be upset about what they could construe as the company trying to cut them out of the distribution chain.

“Safeco has been one of the best friends of independent agents in the sector and we plan to continue to be one of their best friends,” McGavick said during a recent interview with Insurance Journal. In fact, the company is hoping innovative independent agents will help in the company’s efforts to expand its distribution system. That’s what McGavick said he meant by comments made after a speech at the Associ-ation of Insurance and Financial Analysts annual conference in San Diego earlier this month.

The Seattle Post-Intelligencer quoted McGavick as saying at the conference, “We are committed to the independent agency system. It’s also in the best interest of Safeco to pursue alternative distribution. …Ten years from now—even if every distribution system we explore is wildly successful—I believe agents will sell more than 90 percent of our insurance products.”

According to McGavick, those alternative distribution system considerations do not currently include a true direct sales approach as utilized by companies like Geico and Progressive. Rather, McGavick said Safeco is considering systems that would include independent agents in the distribution channel. He refers to Safeco’s virtual agents concept as an example. That system takes customers who contact the company directly and puts them in touch with an agent. “Virtual Agent puts agents back into the system,” McGavick said. “It doesn’t take them out of it.”

Still, agents are not the only way to distribute products, McGavick said, and in order to survive, companies like Safeco are going to have to face that reality. But direct sales are “sort of the most extreme form” of that reality. “We think the most promising model for Safeco for the future is agents,” McGavick said. However, McGavick does not rule out that Safeco will ever implement a true direct sales distribution system.

Paul Equale, CEO of the Independent Insurance Agents of America, says he is not concerned about companies such as Safeco pursuing other distribution channels, even if they are direct sales approaches, nor should agents be.

“We certainly understand that companies are going to be experimenting with all kinds of distribution channels,” he said. “We feel very sanguine about the fact that the core business of independent agents is going to remain a solid piece of business.

“The business model of an independent agent is one that will withstand the test of time.

“If an agent feels threatened by a company experimenting in alternative delivery systems he or she needs to redefine their roles.”

Matt Berry Sr., vice president of William Gammon Insurance in Austin, said he is also not concerned about Safeco’s consideration of other avenues to sell insurance products.

“Certainly, our preference would be that we were their exclusive distribution method,” Berry said. “But our concern should be that our distribution method is on equal footing, i.e. that they don’t offer lower rates [through direct sales] …that we can’t access. I don’t mind competing with anyone they want to offer their product to unless they have the opportunity to use different pricing than I do.”

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