Are you truly independent?

May 21, 2007

Given today’s business environment, is it possible for independent agents to truly be “independent?”

When we talk about an independent agent, we simply think of a producer who has access to many different carriers. That agent is not limited to the product of one company and can provide his or her customers with a variety of markets to find coverages that best suit their needs and budgets.

Yet is it possible to provide customers with the best fit; that is, the product or products that provide the coverages they need at the price they want?

More likely than not, market changes and advancements in technology have limited what it means to be independent.

There are three specific factors that affect agents’ ability to remain truly independent:

1. Dependence on technology.

2. Large carriers are answerable to stockholders.

3. Inferior management skills/ structure.

Testing technology

Technology makes insurance industry businesses faster and more efficient. Policies can be bound in minutes, not days. Multiple quotes can be offered instantly. Standard office technology, such as a rater and agency management systems, are essential for any successful agency, and technology has proven to be the great equalizer.

However, there are hidden disadvantages to the dependency on technology. One such drawback is the free flow of data between agencies and companies. Due to privacy regulations, insurance companies cannot take leads and quote them directly. Instead, they use third-party administrators to verify motor vehicle records or loss histories.

Those companies then sell allegedly “clean” or “scrubbed” data back to insurers. While third-party companies do not divulge a customer’s name, they do obtain enough data to let carriers know about the person who resides in east Los Angeles who drives a blue Ford Bronco. Such a profile can only fit a few customers.

Agents should ask their carriers whether they buy consumer data from third-party administrators. Also ask whether their affiliates or parent companies do. Follow the data trail to see where it goes. That will tell agencies how many entities have access to their client data.

Public company pressures

Most large carriers, as well as many smaller ones, are now publicly traded, with the exception of a few family contenders. The moment a company becomes public, there is only one goal: To increase stock value. While this is a fair way to maintain capitalism, it creates a ruckus for independents because the shareholders care about only one thing: Worth.

While an independent agency might have been an integral part of the success of the company up until now, it is replaceable by direct departments, agency acquisitions, the Internet, etc.

Agencies should ask companies straight out, “Am I an integral part of your company’s future?” Being public means someone can easily look into what a company plans to do. Agencies would be smart to do so.

Educational needs

Most agents landed in insurance by accident. Children speak of wanting to be astronauts, doctors, even lawyers. How many want to grow up to be independent insurance agents?

Usually, after some time working for someone else, agents discovered they were good at sales and/or customer service, and decided to open their own agencies. For most, this left them with no time or energy to go to college and study business administration. They learned at the school of the street.

However, companies that compete with independent agencies can hire college graduates, and have the infrastructure and discipline independent agencies often lack to carry well-crafted plans forward. Agencies should ask their carriers if they are willing to help to provide training and recommendations on how to improve.

Agents should sit down and write an achievable business plan, then accomplish their goals. Trade groups also can help.

How can agents remain independent? They should choose their partners carefully and ask lots of questions. As challenging as business is today, there still is a bright future ahead for independent agencies, so long as they actively seek ways in which to improve the customer experience and opportunities for their employees.

From This Issue

Insurance Journal West May 21, 2007
May 21, 2007
Insurance Journal West Magazine

Program Directory, Vol. I; Single State Specialists

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