The 100-plus year-old independent agency distribution system is expanding, according to Future One’s 2012 Agency Universe Study. The number of independent agencies, it states, has recently increased to 38,500.
Still, some voices claim that the agency business, as we know it, is past its sell-by date. Hardly. Just because sales are made via other channels, some without agents, it doesn’t mean that independents are obsolete. After all, agents and brokers held a virtual monopoly in the distribution chain for decades, so any channel that eschews them impacts their market share. There are countless consumers and businesses for independents, captives, and direct marketers to insure, both online and off; there’s plenty for everybody. That’s the good news. The bad news is that your individual agency’s survival is never assured. So, here’s some stuff to watch out for in 2013.
Online marketing is the main reason why independents worry about their future. Almost every insurance conference, publication, and vendor berates attendees, readers, and prospects about its threat. Of course, digital/mobile marketing is where commerce is ultimately headed, but it’s not a panacea for every problem facing independent agents. Rather, it’s a channel that grows wider every day — but not so wide that all traditional techniques are passé. During this past presidential campaign, nearly twice as much was spent on direct mail versus Internet marketing [according to the Oct. 12, 2012, Washington Post]. So join in the digital conversation, but recognize that online rivals aren’t your only concern.
Aggressive Baby Boomers
The average age of today’s independent agency owner is pushing 60. This means that many principals are logically thinking about retirement — maybe not tomorrow, but soon. If these baby boomers don’t have a perpetuation plan in place, then selling their agency to finance their retirement is approaching the top of their to-do list. So if your office is competing with a retirement-minded agency owner, watch out. These guys can be aggressive in building up their book before selling it, making them tougher competitors than ever.
Agency networks and franchises sign up new members every month. Members gain greater carrier representation and enjoy various support services. Agencies that take maximum advantage of their added markets can become instant local powerhouses of production. So watch out as a small office can jump from white noise to a cacophony almost overnight.
Wholesale clubs, car makers, and various retail chains have promoted insurance sales to their customers for years — via email, direct mail, in-store brochures, etc. But MetLife has taken it to a whole new level. They now sell term life policies (up to $25,000 in coverage) in Snoopy-adorned packaging, at some 200 Wal-Mart stores in South Carolina and Georgia [according to the Oct. 19, 2012, Bloomberg BusinessWeek]. Selling policies in a box, literally off the shelf is a bold move, inasmuch as it’s the exact opposite of digital marketing. If this experiment is successful, what other boxed policies are next?
This isn’t a new concern, but today’s technology makes it well worth watching. While some carriers are fully dedicated to the independent agency system, others employ whichever distribution system generates the most efficient results, as long as it doesn’t overly cannibalize their agency force. Look for continued and potential competition from companies you may represent.
The agency business, like other legacy industries, is facing endless encroachment from an endless number of rivals and competitive methodologies. It’s the nature of innovative capitalism. So, be innovative back. Grow by being as aggressive and creative as your skill set and budget allows. Here’s to making 2013 your smartest, luckiest, and most successful year ever.
About Alan L. Shulman
Alan Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter. He is also the author of the many tools posted on the Agency Ideas Instant Download Store. Phone: 800-724-1435. Email: firstname.lastname@example.org. Website: www.agencyideas.com.