A New Model for Agents and Brokers
Not quite a decade ago, a colleague and I did some consulting on innovation for the CEO of one of the biggest personal lines insurers, and he expressed great frustration with his agent force. "Every time I try something new, even when it's going to benefit the agent channel, they turn around and kick me in the [crotch]," he said.
In the years since, I've watched the power of agents and brokers only grow -- just look at how much valuations for agencies and brokerages have been climbing and at the much slower increases for carriers. And agents and brokers have mostly guarded the model that has let so many prosper for so long: They get paid commissions on product sales, rather than being paid for advice, and are rewarded for building and then maintaining a book of business rather than primarily for continually adding clients.
Certainly, the industry's push for digital innovation has led to more cooperation. In particular, insurers are trying to make themselves easier to work with, if only to try to become the carrier of choice for independent agents. But is that really the best we can do?
Bill Walrath thinks not.
Bill, now working as an independent adviser, has a long history of growing distribution networks across the U.S. He has also become a frequent author at ITL. (His recent articles can be found here.) So, I sat down with Bill recently to discuss whether there's a better way.
His vision includes the need for insurers to become easier for agents to work with, in particular to seamlessly handle the busy work of issuing insurance cards, changing payment dates, etc. so agents can spend more time with clients and prospects. But the vision extends much further.
He notes that insurers spend loads of money buying data about customers even though most of it is of dubious accuracy. Agents have accurate information; why not pay them for it?
He also argues for moving toward a model where agents and brokers charge for advice. Everyone seems to agree that the advice is where the value is provided, so why not be explicit about the value and stop hiding pay inside product sales?
Change will surely be slow. Agents have control, and they're doing well in the current model. But opportunities are there for improvement -- even if they likely won't play out as my old client would wish.
P.S. The full interview is here Enjoy.