None of these old school brick and mortar companies, i.e. Liberty, Allstate, Hartford, Farmers can grow organically because they squeeze their captive and/or independent agents to death by lowering commission and chasing internet (bad) direct business. So, they lose market share little by little every year, until they buy up policies from smaller rivals every few years. through an acquisition. Then their senior leadership gets in front of shareholders and state “we’re growing”….The industry is starving for innovation and the only companies that have truly grown in the past 10 years are Progressive and Geico. Kudos to their management staff.
My thought was “internet direct business is not inherently bad – it’s the UW guidelines in place which allows the “bad” risks to be incepted that’s the real problem.”
If you accept 100% of internet business – sure, that’s bad. If you only accept 20% of it as the other 80% doesn’t meet your UW guidelines, that’ll end up being good risks to insure.
Progressive and GEICO also have a lot more freedom in pricing and UW without agents. If they decide a certain segment is no longer profitable, they can jack up rates or cut policies as they see fit with worrying about disgruntled agents. If they’re able to succeed with just a slick interface and faceless customer service, what value do agents really bring to personal auto?
Agents bring value when they pull business into these carriers that are part of the agent’s circle of influence. Most of the auto business wouldn’t go to a SF or Allstate, if it were not for the relationship the agent has with the customer. Unfortunately, the model is now… penetrate their circle of influence, get the business you never would have received and then dump the agent in a few years and repeat the cycle over and over. The problem is the quality of the agent diminishes over time until they’re no more than used car sales people.
Progressive uses agents extensively – just independent, and there is a different relationship there. Agents must serve some positive role, as GEICO has been aggressively increasing their number of on-the-ground agents over the last several years.
July 18, 2021 at 12:57 pm
Blue says:
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State Farm and Progressive both use agents. I also feel there is a difference between commercial and personal. I would say personal lines is a much easier path for by passing the agent. Commercial insurance is different. More complex with bigger numbers. Some classes of business are more difficult than others and for those an underwriter needs boots on the ground sorta speak. I think this is why in commercial insurance you are seeing more and more niche agencies. That is the ideal situation.
Over the years, our agency has had individual contracts with the following carriers purchased by Liberty Mutual: American States, American Ambassador, Commercial Union, General Accident, Hawkeye Security, Ohio Casualty, Peerless, State Auto, and Western Casualty & Surety.
10 years ago in my state, Progressive was the “residual market” of commercial and personal auto. Now my PAP is with Prog. They embraced technology early on, while other carriers still think computers are a (um-hum) passing fad.
It will be interesting to see if the State Auto employees embrace the politically-correct culture at Liberty Mutual. I had a chance to work at LM and passed.
None of these old school brick and mortar companies, i.e. Liberty, Allstate, Hartford, Farmers can grow organically because they squeeze their captive and/or independent agents to death by lowering commission and chasing internet (bad) direct business. So, they lose market share little by little every year, until they buy up policies from smaller rivals every few years. through an acquisition. Then their senior leadership gets in front of shareholders and state “we’re growing”….The industry is starving for innovation and the only companies that have truly grown in the past 10 years are Progressive and Geico. Kudos to their management staff.
Pardon my asking, but if internet direct business is “bad” as you say, then why are Progressive and Geico doing so well with it?
My thought was “internet direct business is not inherently bad – it’s the UW guidelines in place which allows the “bad” risks to be incepted that’s the real problem.”
If you accept 100% of internet business – sure, that’s bad. If you only accept 20% of it as the other 80% doesn’t meet your UW guidelines, that’ll end up being good risks to insure.
Progressive and GEICO also have a lot more freedom in pricing and UW without agents. If they decide a certain segment is no longer profitable, they can jack up rates or cut policies as they see fit with worrying about disgruntled agents. If they’re able to succeed with just a slick interface and faceless customer service, what value do agents really bring to personal auto?
Agents bring value when they pull business into these carriers that are part of the agent’s circle of influence. Most of the auto business wouldn’t go to a SF or Allstate, if it were not for the relationship the agent has with the customer. Unfortunately, the model is now… penetrate their circle of influence, get the business you never would have received and then dump the agent in a few years and repeat the cycle over and over. The problem is the quality of the agent diminishes over time until they’re no more than used car sales people.
Progressive uses agents extensively – just independent, and there is a different relationship there. Agents must serve some positive role, as GEICO has been aggressively increasing their number of on-the-ground agents over the last several years.
State Farm and Progressive both use agents. I also feel there is a difference between commercial and personal. I would say personal lines is a much easier path for by passing the agent. Commercial insurance is different. More complex with bigger numbers. Some classes of business are more difficult than others and for those an underwriter needs boots on the ground sorta speak. I think this is why in commercial insurance you are seeing more and more niche agencies. That is the ideal situation.
Over the years, our agency has had individual contracts with the following carriers purchased by Liberty Mutual: American States, American Ambassador, Commercial Union, General Accident, Hawkeye Security, Ohio Casualty, Peerless, State Auto, and Western Casualty & Surety.
Even though you may not have had the carrier in your stable, add a biggie to your list: WAUSAU. The train depot is gone!
10 years ago in my state, Progressive was the “residual market” of commercial and personal auto. Now my PAP is with Prog. They embraced technology early on, while other carriers still think computers are a (um-hum) passing fad.
It will be interesting to see if the State Auto employees embrace the politically-correct culture at Liberty Mutual. I had a chance to work at LM and passed.
How will this affect the state auto retirees pensions?