Battle with Direct Writers

Independent insurance agents and their carrier partners face strong headwinds in their efforts to maintain their dominance among distribution channels due to increased competition and evolving consumer expectations, according to new research.

According to the J.D. Power 2020 U.S. Independent Agent Performance and Satisfaction Study, “misalignment and poor execution” continue to undermine agent-based carriers in their ongoing battle with direct-to-consumer insurers as the channel of choice among modern personal lines insurance consumers.

The study suggests that the trends have been highlighted by the COVID-19 pandemic. More than one-third (36%) of agents say they were unaware of their carriers’ efforts during the pandemic. The study suggests that agents, too, have been falling short during the pandemic. Only 42% of independent agent customers say they were contacted to help manage their policy costs during the crisis vs. 52% of direct customers who say the same.

“The effects of COVID-19 have highlighted the importance of personalized insurance as consumers seek help navigating their way through this period,” said Tom Super, head of property/casualty insurance intelligence at J.D. Power. “Ironically, in many instances it was direct-based carriers, which have made a concerted effort in recent years to emulate the high-touch and high-quality agent experience, that were able to step up and deliver during this crisis.”

Beyond COVID, the study revealed what drives agent satisfaction when it comes to their personal lines carriers. Satisfaction among independent agents is highest among carriers with diversified product offerings, such as enabling agents to offer flexible design and onboarding or enabling them to offer product bundling. Fewer than half (43%) of independent agents indicate receiving this level of support from insurers. Agents said that digital support could improve their satisfaction.

Digital channels are independent agents’ preferred means of communication with insurers, with email and online dashboards leading the way. Specific digital tools that drive agent satisfaction focus on sales and product training, and identification of cross-sell opportunities. Though these digital offerings are associated with high levels of agent satisfaction, they are used by fewer than 60% of agents.

The study also revealed that cost efficiency is not linked to agent satisfaction. The notion that simply paying agents a higher commission translates to higher agent satisfaction and improved business outcomes is not true. Many of the top-performing agent-based insurers have been able to maintain expense discipline while also delivering on agent expectations, according to the results.

The J.D. Power study, now in its third year gathered 1,817 evaluations of personal lines insurers with which agents had placed policies during the prior 12 months, and was developed in alliance with the Independent Insurance Agents & Brokers of America (IIABA).