The recent announcements of Walmart and Overstock.com entering the insurance sales game have elicited a huge response from the insurance industry. Some agents have expressed concern and frustration at the notion that their way of doing business may no longer be relevant, while others acknowledge the industry is changing and that they must change with it.
“This comment is for the agents – don’t laugh this is scary stuff. The lizard was considered a low end company for a long time. I see them in a lot of quality households now with higher limits coverage at half or less of what most carriers are selling it for. Their claims service is getting good marks too so you can’t pick on them for that either. This is a legit threat to the agency model as we know it. The carriers need to get more aggressive and the agents need to step up their game or sell the agency,”said one commenter on the Walmart announcement on InsuranceJournal.com.
Another poster disagreed, saying: “This has little to no effect on the independent agent. More competition for the Geicos and Progressives of the world. Give the customer a great deal on their auto only and let the customer find out the hard way that their now monoline home is being non-renewed or going up 25 percent in premium because they took their auto policy away. The educated consumer is with the IA (independent agent). This is not our competition.”
Readers also reacted strongly to Overstock.com’s foray into selling home, auto and small commercial lines insurance through a partnership with Insuritas, a provider of private-label insurance agencies.
Agents were particularly irked by Insuritas’ CEO Jeff Chesky’s comments.
“Consumers don’t want a relationship with an agent or even a carrier…The traditional agency system doesn’t make sense to customers. The relationship has gone digital,” Chesky said in the InsuranceJournal.com article.
The problem with that model, said one reader and commenter, is that not all insurance products are the same: “There are different market segments out there; there are also hundreds of different types of insurance policy types. Some people want to do things online, others have more sophisticated needs and demand professional expertise. This is especially true with higher net-worth personal lines and almost all of commercial lines.”
The National Association of Professional Insurance Agents (PIA) released a statement refuting Chesky’s comments as well and pointed to research from a 2011 survey it did that found consumers do in fact want a relationship with their insurance provider. Findings from PIA’s two online surveys of 1,819 respondents included:
- 67 percent of customers would like to be contacted by their insurance company, agent or agency every six months or less to inquire about changes in their life or circumstances, which could trigger the need for coverage changes.
- 63 percent of customers would like to be contacted by their insurance company, agent or agency every six months or less for a general review of their coverages and costs and if they are paying too much or missing needed coverages.
- 73 percent of customers would like to hear from their current insurance provider more often than just at renewal.
“Some of the erroneous claims made about agents – that the agency system is dead and consumers don’t want relationships with agents – we don’t agree with and have actual consumer data that is completely contrary to these claims,” says PIA president and CEO Mike Becker.
PIA is currently conducting an updated survey that it plans to release later this year. Becker says that while selling insurance online has only grown since 2011 and is an important tool for agents, consumers still want the services agents provide.
PIA also disagrees with the message that insurance is a commodity.
“[Insurance] is very complex and it’s very personal – it’s a not a one size fits all environment,” Becker says.
Bill Wilson, education director for the Independent Insurance Agents and Brokers of America — the Big “I” — agrees.
“Most of the advertising you see makes apples to apples comparisons but they are talking about the major types of coverage. No one is talking about individual perils or exclusions that restrict coverage on a policy,” he says. “The people talking the loudest are the ones talking about price.”
Wilson says helping agents educate consumers on why insurance isn’t a commodity and why the relationship is so important has become a major focus for the Big “I” and was largely motivated by a McKinsey report released last year titled, “Agents of the Future: The Evolution of Property and Casualty Insurance Distribution.” The report detailed how personal lines insurance is becoming commoditized – particularly auto insurance – and claimed that the traditional agent model is beginning to “unravel.”
“There has been a gradual shift in value that carriers and customers (both retail and small business) place on many activities traditionally performed by local agents, which is increasingly calling into question what role they will play in the future,” the report begins.
Wilson says the Big “I” has been working on “the other side of the story.” There is now a section on the Big “I”’s website called “Is Insurance a Commodity?” that provides resources, educational opportunities including webinars, along with links to discussions and tools agents can use to help prove their value.
“The reality is most consumers don’t have the training and background to be able to read and compare policy coverages,” says Wilson. “We have to get the message out to consumers that agents have the expertise and that has value. The biggest value is the independent agent owns them… and at claim time the best advocate besides your attorney is your agent who can advocate on your behalf. I don’t think you will get that kind of advocacy from Jake at State Farm with his khakis.”
Are Carriers Contributing to the ‘Dying Agent’ Outlook?
InsuranceJournal.com readers also expressed dismay that carriers that work with independent agents, like Safeco and Travelers, would agree to these models that could take business away from the independent agent distribution model. “Will independent agents continue to sell Safeco and Travelers’ products, or will they refuse to do business with carriers that are apparently seeking to undermine the independent agency system and turn insurance into a commodity available at Walmart? I wonder what these carriers are telling their agents…’blah blah blah, increasing our brand awareness, blah blah, blah…’ Sound about right?,” said one commenter.
Another reader of the Overstock announcement expressed similar sentiments:
“More cheapening of the insurance process for the consumer and the agents. I hope the agents that work with these ‘major insurance carriers’ begin choosing other carriers for their business who are committed to their distribution channel and let Travelers, Safeco and others work with Walmart and other retail establishments…I’ll bet Burger King has a bunch of folks they could send them… a Whopper my way and homeowners insurance please!”
One agent disagrees with these opinions. Laura Sherman, partner at Baldwin, Krystyn, Sherman Partners, an agency in Florida that focuses mainly on the high-net worth segment, says she sees the carriers’ decisions differently because Insuritas and Tranzutary Insurance Solutions – which operates AutoInsurance.com – are in fact independent agents.
“I think [these carriers] are trying to increase their market share. Safeco’s goal is to be the number one choice for independent agents and this is an independent agency. I look at this as supporting this channel,” she says.
Edward Higgins, vice president of Thousand Islands Agency in Clayton, N.Y., says it makes sense that these carriers are trying to pick up more market share and these companies have had varying degrees of success with similar programs. He says agents shouldn’t look at it as impeding their business, however.
“I view them as a competitor but not one that I am afraid of,” says Higgins. “I know I bring a distinction to the marketplace.”
Sherman says Safeco President Matt Nickerson addressed its agents about the partnerships via e-mail because the carrier had received a lot of feedback. Safeco wouldn’t comment on the e-mail or its feedback from agents, but sent this statement to Insurance Journal:
“Safeco Insurance sells personal lines insurance products exclusively through independent agents, and many agents have unique marketing and distribution models. Two of our independent agents, Banc Insurance (Insuritas) with Overstock.com and TZ insurance (autoinsurance.com with Walmart), have developed exclusive relationships with these retailers to market personal insurance products to customers. Safeco’s relationship with these agents gives us an opportunity to grow our business, build brand awareness and increase consumer consideration for Safeco Insurance, ultimately benefiting all of Safeco’s independent agency partners.”
So What Can Agents Do?
It is easy to understand how the doom and gloom theories for the industry continue to perpetuate as younger generations increasingly turn to direct sales sites and supposedly care less and less about a personal relationship with an agent. In a poll conducted by Insurance Journal, 64 percent of 148 respondents aged 25-44 said they do not currently have a relationship with an independent agent, with 36 percent citing as a reason that they don’t see the need or benefit of using one and 19 percent saying it is easier to buy directly online. Close to 11 percent of respondents said it would make their insurance more expensive and 26 percent cited all of the aforementioned reasons.
However, only 28.2 percent said they wouldn’t consider using an agent in the future, while 27.9 percent of respondents said they would consider using an agent, and 28.2 percent said they didn’t know – suggesting there is plenty of untapped market potential in this demographic. Nearly fifty percent of respondents had never experienced a claim.
Baldwin, Krystyn, Sherman Partners’ Sherman says the young consumers’ attitude changes as their lives become more complicated and their assets become more important to protect.
“Young people are very price conscious and are not interested in being educated on insurance versus price,” she says. “[When they are younger] they have to buy auto insurance and are looking for the lowest price. But then they buy a house, have children and they want to protect that nest egg. One bad car accident with inadequate coverage limits can deteriorate that asset base.”
However, Sherman says agents have to change the way they operate if they want to capture this segment of business.
“It is crucial for us to reinvent ourselves,” she says. “Agents should absolutely be increasing their digital presence and meet clients where they want to find our products. You need to be flexible with how you communicate – whether it’s a text, call or e-mail. And deliver a deeper experience so you make sure clients see your value.”
One of the reasons direct writers like Progressive and Geico have captured so much of the personal lines market share, says Thousand Islands Agency’s Higgins, is because they have optimized the online experience for customers.
“Agents that are selling online need to realize that going online has to have its own characteristics: it must be fast, it must be easy and it has to be fun,” he says. “Those who have been successful have captured those three things.”
Higgins has worked extensively on educating agents about why they need an online presence and how they can reach the online consumers. He is a member of the Big “I”’s Virtual University staff and also a past chairman for the Agent Council for Technology, as well as former state president for the Big “I.” He says his message to agents has been that merely being online is not an effective marketing tool, and neither is the old way of selling insurance.
“Agents need to be more and more aware of the fact that the purchasing experience is changing and we need to change the experience consumers have – give them more ways to access us; make sure websites are mobile; and be available 24/7 – provide those hooks that are available through the other sites,” he says. “Agents need to recognize that the world is not going to stay the same and opening up your front door and selling insurance is not the way it is anymore.”
Higgins says he is optimistic that as the industry evolves, those customers who have assets to protect will recognize what insurance agents have to offer.
“It is not about the price of coverage but making sure you have the right coverage,” he says.
Sherman agrees that technology is crucial to the future existence of the industry, but that it is not all that matters, particularly in certain segments like high net worth where clients have more at stake. She says focusing on a niche and building a brand of service will be vital to the independent agent’s survival.
“We have to evolve as an industry and those who don’t will become extinct. I think that behind the technology we have to make sure we have the people there to provide the great counsel and education,” she says. “It’s a very powerful combination – more so than the direct writers and call centers of the world.”