You don’t need to get too deep into conversation these days to find out people are afraid. Given changes in business, the economy and government, many individuals feel they don’t know what or who to trust. These changes, I believe, can actually work to the benefit of independent insurance agents and brokers.
The economic crisis we’ve faced over the past year or so is forcing attitude and paradigm shifts on a broad scale. The “bigger-is-better” mentality is being reevaluated by businesses, government and individuals. Institutions have crumbled, or nearly so. Firms that were once giants in industry and finance — auto makers, banks, securities dealers — are downsizing and retooling the scale of their own operations.
Smaller, less diversified entities with conservative business plans appear to be more stable. Even Lloyds, our industry go-to source for placement of highly specialized business, has taken on an extremely cautious approach, reducing to 5 percent the amount of assets held in equities. As its London chairman, Lord Peter Levene said, “It’s boring, and boring is good.”
As some people pare back their levels of personal consumption, they are often shifting where they do business. People are becoming more and more disenchanted with impersonal giants. For instance, there is a rethinking underway of the efficacy of the “financial services supermarket.” I speak from personal experience. I recently switched my agency’s accounts to local bank that could deliver more personal service and greater yield. In short, they could better execute on their promises.
That’s key. In many cases, many people have lost faith in institutions to make good on their promises just because they are big. When that faith is eroded, what do we do? We gravitate to that which we know — local businesses and people that can provide what we need.
In today’s environment the value of personal relationships soar. Nobody fosters these better than insurance agents. And it doesn’t matter how big or small the operation happens to be.
Consumer interest is measured by what I call the “pointy tip of the spear” — the one or two people customers deal with. This equalizes entity size disparity. As an insurance agent, agency principal or CSR, you’re the one the customer trusts in their daily dealings, whether you’re in a five-person agency or 1,000-person agency.
Customers will increasingly demand more value, better choices and more personalized services — in short, everything that differentiates us from our competitors.
While the insurance business is taking a hit in this financial environment, it and Main Street agents are largely holding their own because of prudent management and sensible oversight. This provides our distribution system a unique opportunity. There is a lot of displaced talent out there — talented and educated individuals who lost their jobs and who could well migrate to insurance sales.
Think about it: insurance sales have a relatively low barrier to entry. What better time is there for us to attract a great number of talented people — people with an entrepreneurial spirit who became disenchanted with their ability to explore and grow within larger firms?
Making Our Own Future
While opportunities exist, so do hurdles.
Perhaps the largest external challenge that could affect our success involves federal legislation. We always get frustrated when Washington does things slowly. What many of us find to be more frustrating and scary is when Washington does something too quickly — like passing a stimulus package nobody has read or calling to revamp federal regulation for the entire financial industry, without pausing to note the stability of the state-regulated insurance business.
We need to continually remind our policymakers that it’s the Feds who failed in their oversight, not the states. It’s very easy for us to get lost in the sauce.
As we’re focused on potential Federal regulation and its effect, we must, at the same time, continue support for common-sense state-based reforms. The National Insurance Producer Registry (NIPR) is one example of such state-based action. The NAIC’s Producer Licensing Model Act has made interstate licensing much easier.
The system has been built and is fully funded — without any economic stimulus or bailout. We must continue to support producer licensing and overcome any barriers to full implementation of the NIPR.
Internally, we must position ourselves for success as independent agents and brokers. We need to do things like trim expenses, maximize our use of technology and make our marketing work amid the advertising clutter, particularly in personal lines.
This is no small task. It’s something that’s difficult for all Main Street agents. We have to distinguish ourselves as the go-to professionals, who provide their clients with the choices in insurance coverages they need to protect their lives and livelihoods.
To the extent we accomplish these things, we’ll continue to reap the benefits that come from delivering focused, responsive service to local businesses and individuals with whom we live and work. America is returning to Main Street — which is where we have always been.
Auerbach is principal of E & K Agency in Eatontown, New Jersey
Editor’s Note: This article appeared in the May 18 issue of Insurance Journal
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