What Does the Future of the Agency System Look Like?

The demise of the independent agent has been predicted ad nauseam, however arguably the most hotly debated version came from a 2013 McKinsey report with a section entitled “The End of an Era for the Local Insurance Agent.” When Bryan Falchuk’s new book, “The Future of Insurance,” came out this summer, I wanted to seek him out because he once worked for McKinsey several years prior to that report.

“McKinsey was wrong,” according to Falchuk, an industry veteran with stints at Liberty Mutual, Beazley, and Hiscox USA, among others. “The report discussed how the marketing landscape was changing but then stated that a smaller group of agents will prosper and made no distinction between exclusive agents and independent agents.”

Falchuk’s book focuses more on carriers, so I wanted to discuss what agents are facing today.

“Agents are facing not one but two disruptions,” he said. “The first is the rise of new digital distribution platforms such as Lemonade, Root, Hippo, Next, and Vault.”

The second disruption, and just as important, is a new generation of agencies — young agents who become frustrated when they first enter the business and move on to start agencies of their own.

“This disruption is not a threat to the agency system as much as it is a signal that the current model must change,” he said. “Agents today must lead with sales and service and can’t just be record keepers.”

Falchuk said there is also a lot of “hand-wringing” over who owns the customer. “That question is based on fear, and decisions being made based on fear, results in bad decisions,” he says. Agents must understand the expectations of today’s customers which have now become demands.

“All of us can’t just pay lip service to listening to customers. Sadly, too many agents still do not want to get out of the way of customers getting the attention and help they expect, wherever that help comes from.” Below are three strategies Falchuk outlined for agents.

“First, the reality is that the pandemic has changed every aspect of our lives, as human beings, as consumers and as industry professionals,” he says. “It has forced both structural changes and accelerated the speed with which the marketplace is evolving.” Everyone is becoming Zoom-savvy. Everyone is discovering ways to become more efficient. “Going forward, agents cannot prohibit remote work but must instead find ways to adapt to it.”

Second, agents need to play both offense and defense, Falchuk said. “Defense is about catching up.” Agents should ask themselves, am I really listening to my clients? When an agency loses a client, ask the individual or business why? “Believe me, it is not just because of price,” he noted. “If you hear something, do something.”

On offense, it’s about looking ahead. “Ask about benefits at work, what are the financial advisers and prospects telling them?” It is also reimagining the future. “Our country did not hesitate to go to the moon, did not think to ask why it was not possible,” he said. Everything today is being rethought. That includes everything from travel to how and when to go out to restaurants. Car ownership is changing, he said. “Do I really need two cars?”

Finally, agents should take note of the budget process, Falchuk added.

“With greater scrutiny on vendor services and understanding their data security protocols and privacy policies, insurers are discovering they can renegotiate with their checkbooks and so can agents,” he said. The same is true on budgeting. “It used to be that you would put off something if it has not been budgeted. With the market changing so fast, if an initiative is mission critical and the money is available, it’s the smart move to take action quickly.”