Independent insurance agents’ strengths in customer service and risk management could be challenged by changing consumer behaviors, new technologies and the evolving competitive landscape, according to a new report by Accenture.
The report is based on a survey of more than 1,100 U.S. independent property/ casualty (P/C) insurance agents, who were asked to rate the relative importance of a range of issues.
The agents who were surveyed see the increase in insurance carriers’ direct sales via the online channel as a serious competitive threat, with 39 percent of respondents citing such direct solutions as their greatest source of competition.
Nearly three-quarters (71 percent) of the agents said that threat takes the form of lower prices, while 48 percent see better brand recognition and more effective marketing as key elements of the competitive threat.
When asked about the most important digital capabilities, “web-based service and claims” were rated the highest by agents, followed by “web-based quoting.”
Survey respondents placed a relatively low priority on mobile and social media capabilities.
“Changing consumer behavior and the continued rise of the direct channel are threatening agents’ dominance of insurance distribution,” said Erik Sandquist, managing director for Accenture Distribution and Marketing Services in North America. “So are new insurance players – with new distribution models – that are making a determined effort to entice customers away from agents.”
New Business vs. Retention
The survey indicates that agents place a higher priority on keeping and servicing existing customers than on finding new business. When asked to rate the most critical operational competencies, agents put “retaining customers” at the top of the list, followed by “servicing customers;” “attracting new customers” was ranked only third.
In ranking the value of information available to them, the agents placed the highest value on insights into existing customers, while ranking qualified lead lists last.
However, when agents were asked what they would do with more staff, they rated finding new business highest among priorities, followed closely by cross-selling and up-selling new business.
“Independent agents, as a group, carry enormous weight within the P/C insurance business, representing more than half of total premiums written in the industry,” said Michael Lyman, global senior managing director for Insurance within Accenture Strategy. “It is understandable that they are focused on keeping existing customers, especially in light of capital constraints that make it challenging for most agencies to add sales capabilities to grow their business.”
Lyman said that new technologies can make agency operations more efficient, but they can also be used to create new digitally driven market opportunities to boost reach to new customers. “The question is how to make these technologies both affordable and easy for agencies to use,” he said.
Despite their strong focus on customers, agents downplay their ability to provide differentiated and superior advisory services as a competitive advantage. They viewed access to competitive products, improved customer experience and better brand recognition as more important sources of competitive advantage than the advisory services they could offer to customers.
Sandquist said that a recent Accenture personal lines consumer survey showed that insurance carrier websites and web search engines have surpassed independent agents as consumers’ preferred source of information about insurance products and prices.
However, insurance consumers “trust the advice provided by independent agents more than any other source,” he said.
Value of Alliances
The report also indicates that many independent agents join others in an association, alliance or cluster, but while small businesses in other industries may do this to bolster their limited resources or to network with peers, insurance agents’ goals are principally to enhance access to carriers and to increase their commission. Membership in these groups can give agents greater power to negotiate with carriers than they would have on their own, and Accenture’s survey reveals that this is more important to them than support in operational areas such as marketing, agency management systems, technology and 24/7 call centers.
“Agents need additional capabilities to compete in the future as confirmed by our survey,” said Lyman. “It is also clear that they are not seeking to develop these capabilities with the help of industry associations, nor to adopt them from carriers. By sharing investments, independent agents can benefit from economies of scale and cost-efficiently access a broad set of core operational capabilities such as agency management systems, customer management solutions and digital technologies, which could help them both improve efficiencies and take share from online competitors with more effective digital channels of their own.”
Accenture surveyed 1,158 independent agents in the U.S. in mid-2014. Accenture is a global management consulting, technology services and outsourcing company.