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 suggest 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 suggest 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 reveals 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 finds 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.
Independent agents are focused on alignment with carriers, according to the study. Among independent agents, overall satisfaction with carriers that demonstrate better market alignment, as shown by providing adequate support for targeted markets, is 126 points higher (on a 1,000-point scale) than with those carriers that do not provide adequate support to targeted markets.
The J.D. Power study, now in its third year, was developed in alliance with the Independent Insurance Agents & Brokers of America (IIABA). It evaluates the evolving role of independent agents in P/C insurance distribution, general business outlook, management strategy and overall satisfaction with personal lines and commercial lines insurers in the U.S.
Super said independent agents and their carriers “should use this as a learning experience and redouble efforts toward improved alignment, execution and efficiency to drive more beneficial customer outcomes.”
Following are other selected personal lines findings of the 2020 study:
- Progressive wields influence on independent agent growth: While independent agents write 58% of all P/C insurance policies, their market share is falling, particularly in personal lines auto, in which independent agents write just 31% of all policies. Notably, Progressive’s agency channel accounts for 52% of all personal lines’ growth among independent agents, solidifying its growth across both direct and agent channels.
- Traditional agents face competition from virtual agents: More than three-fourths (81%) of consumers say they would be open to working with virtual insurance agents to perform core insurance activities. J.D. Power says that traditional agency distribution is increasingly threatened by technological innovation that is helping to close the gap on expertise by leveraging data and machine learning.
In the results of agents ranking carriers on, Auto-Owners Insurance ranked highest among personal lines with an overall satisfaction score of 816. Safeco (761) ranks second and Chubb (755) ranks third.
The 2020 U.S. Independent Agent Performance and Satisfaction Study surveyed P/C insurance independent agents and gathered 1,817 evaluations of personal lines insurers with which agents had placed policies during the prior 12 months. The study was fielded in two waves: September through November 2019 and July through September 2020.
Source: J.D. Power
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