Western Insurance Agents Roundtable Discussion Highlights

By | January 5, 2012

Rancho Cordova, Calif.-based WIAA Education & Research Foundation, a nonprofit corporation focused on advancing knowledge of insurance industry professionals, hosted a recent roundtable discussion on the industry and where it’s headed.

The daylong event was attended by 23 insurance industry professionals. The roundtable discussion followed three presentations (as reported on by Insurance Journal) on pricing, technology and distribution.

MarketScout Wholesale’s Glenn Hargrove served as facilitator of the roundtable discussions. During the roundtable discussions, the participants reacted to the opening presentations and offered their own observations and experiences.

The following are highlights of comments made by the participants during the discussions. A list of participants appears at the end.

Economy and Insurance Prices

Rates are flattening.

Demand is not going to be sufficient to bail out the economy.

Insurance rates will not go up because customers can’t afford to pay more and there is too much capacity still.

Carriers will have to get more rate for exposure, higher deductibles, lower limits, restricted coverage, etc. They will look for ways to shift risk to customers.

Big rate increases are unlikely but even small, incremental increases can help a lot.

The high unemployment situation is already having effects on workers’ compensation claims.

Distribution

Changes are happening in distribution. Some surplus lines companies are going direct to large brokers. Large retain brokers no longer own wholesale operations. Geico and others are spending millions to get rid of the middleman.

One big change is growing popularity of exchanges. Exchanges can do more than provide access to markets. Exchanges can provide more than access to markets. They can provide technology, customer service, HR, etc. Exchanges are for small agencies, not larger

Agents and brokers – retail and wholesale– must justify their role in insurance transactions as more and more parties are finding ways to circumvent them.

Consumer Behavior

Customers are living in fear, stretching for every dollar.

Customers may be more willing to take on more risk than to pay more in premium.

Consumers are a lot more educated today but still put price above coverage.

There is a growing disconnect between consumers and many insurance agents and carriers that are not keeping up with the digital marketing revolution.

First wave of digital marketing involved using the personal computer and Internet to shop and research. Now is the second wave of digital marketing—involving mobile devices, social media and more sophisticated search engines that actually favor local and smaller business, including agencies, over large firms.

Face-to-face meetings with clients are important, especially with commercial customers and when implementing a rate increase or coverage change.

Agencies need to understand the best ways to communicate and understand the needs of their customers, whether they are 23 or 53 years old.

Veteran agents may feel customers and young people are too dependent upon email and texting—but that is what the “new blood” prefers.

Agents should be engaging with younger customers “the way they want.”

Agents need to be proactive in finding ways to “touch” clients. Don’t be passive.

Carriers

Carriers are under pressure to improve underwriting.

Carriers will be looking to cut expenses, including agency commissions.

There will be more consolidation in the industry.

Reinsurance pricing will squeeze P/C markets.

P/C industry has come through the recession and a decade of catastrophes in fairly good shape.

Agency Management

Agents and brokers will have to find ways to work with carriers to deliver more rate per exposure.

Agencies need capital to diversify—to fund entry into new markets and new ways to deliver products and to sell more products to one customer.

Agencies that write mostly one class like contractors need to diversify.

It is difficult to get capital to start a new agency.

There could be tremendous opportunity in health insurance brokerage. Given all the changes and rising costs, there is need for true advice and counsel on health coverage.

Doing business strictly by email is frustrating; can’t get calls returned.

For larger agencies one challenge is maintaining the agency culture as the agency spreads out over multiple locations.

Agency size— what’s better, big or small? Large size helps but being entrepreneurial is more important. Being a big agency in a relatively small geographic space could be the ideal.

Things move quickly. Have to move quickly when deciding where to allocate capital.

Challenge is to stay focused on what you do well and “not chase every rabbit.”

Managing money well may be more important for agencies than growth.

Today is full of opportunities for agencies that have the tech expertise, relationships and markets— they can really add value for customers who don’t have the time themselves to figure out insurance.

“Winners” among agencies will figure out how to bring on young talent.

Finding capital for HR or technology is difficult—it’s easier to get capital for roll-ups.

It’s easier to raise $50 million than $500,000.

Regulation

P/C industry should expect more regulation, including federal involvement.

There is some concern that U.S. may follow Solvency II type regulation in Europe, with government dictating insurers’ capital requirements.

California Insurance Commissioner Jones has lots of power and shows no interest in having any dialogue with the industry or letting the industry have input.

In California, industry may be better off going through Legislature than Department of Insurance if it needs something.

Companies are deliberately deciding to commit capital in places other than California due to regulatory climate.

There is some concern that smaller carriers do not have as effective voice as larger carriers do in the regulatory and legislative arena.

Technology

Managers have to change with the times. They have to know how to communicate with today’s employees.

Agencies need to bring in people with tech and social media expertise.

Downsides of technology in the industry include the loss of professionalism and lack of technical insurance knowledge as carrier level. Training at P/C carriers is lacking.

Agencies need to have technical knowledge and coverage analysis because today’s underwriters will not have it.

Some agencies are using social media but they aren’t yet convinced it is effective. It can be part of branding to be a “hip” agency.

Agencies need to be committed to training, teaching new hires.

Technology facilitates what agents and brokers do but it doesn’t replace them.

Roundtable Participants

Participants came from a cross section of the industry – large and small insurance carriers, wholesale and surplus lines firms, small, medium and large independent agencies, a financial consultant and regulatory lawyer. MarketScout, Insurance Journal and the law firm Barger & Wolen were there as participants and in sponsorship capacities.

The participants in the roundtable discussions were:

Peter B. Brown – Senior Vice President, MOC Insurance Services, Farallon Division, San Francisco, Calif.

Steven M. Brown – Partner, Hoffman Brown Company, Sherman Oaks, Calif.

Jay Chase – Executive Vice President, MarketScout, Dallas, Tex.

Martin Fox – CFO, Clovis Insurance Agency, Fresno, Calif.

Jack Galloway – Principal, Barney and Barney, San Diego, Calif.

John Hagerott – Vice President, CNA, Woodland Hills, Calif.

Phil Hakopian – CEO, Cornerstone Insurance, Rancho Cucamonga, Calif.

Glenn Hargrove – President, MarketScout Wholesale, Dallas, Tex.

Robert W. Hogeboom – Partner, Barger & Wolen, Los Angeles, Calif.

Michael Jans – President, Agency Revolution, Bend, Ore.

Richard Kerr – Founder and CEO, MarketScout, Dallas, Tex.

Bill Kleinecke – Vice President, Sutter Insurance Company, Petaluma, Calif.

Tom McCormack – Regional President, Travelers Insurance, Orange, Calif.

John McGraw – Chairman, Pacific Specialty Insurance Company, Menlo Park, Calif.

Mike Morey – COO, Bolton & Company, Pasadena, Calif.

Alan A. Smith Jr. – President and CEO, WIAA Group

Furman K. “Neal” Stanley -Executive Vice President, United Valley, Fresno, Calif.

Jerry Sullivan – Chairman, The Sullivan Group, Los Angeles, Calif.

Douglas Tegen – Managing Director, StoneRidge Advisors, New York, N.Y.

For additional coverage by Insurance Journal, watch:

As the Market Turns, What Is the Broker’s Role?

How Insurance Distribution is Changing

Agency Exchanges: Big Brother for Small Agent

More to come.

For the complete report on the WIAA Insurance Industry Roundtable, visit WIAA here.

Topics Carriers California Agencies Legislation Tech Market Property Casualty Training Development Human Resources

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