“What you currently get paid for, you may do for free, or be totally taken out of. What you currently do for free may be the only way you get paid!”Although he was referring to the advent of the microchip, his message is just as applicable to the digital disruption occurring today. Primarily, agencies get paid for the risk-transfer mechanism they provide (e.g., insurance). They transfer the risk from the individual or business to the insurance carrier. Once the insurance is purchased and placed, the service they provide is reactive. In essence, most agencies are pass-through middlemen that respond to the needs of the insured but that otherwise add no real value. These days, digital technology is rapidly assuming many of the functions and responsibilities for which agents used to be compensated, namely the purchase and placement of coverages, along with reactive service. This makes it easier than ever for customers, especially personal lines and small commercial lines, to buy and service most of their needs via their desktop, laptop or other digital device, with little or no human contact. This trend continues to accelerate at lightning speed. So what are agencies doing now “for free” that may be their primary source of compensation in the future? I believe the answer lies in so-called value-added services and tools. These mainly involve providing risk advice that outlines ways to control the client’s true cost of risk, improves the client's risk profile with the marketplace and protects their assets. The insurance carriers are spending hundreds of millions of dollars on digital platforms. Why? For one thing, today’s consumers are demanding it. Furthermore, it costs the carriers less to do business digitally than personally. There is a staggering cost difference between transactions handled on the phone vs. online. The use of insurance carrier service centers is also altering the way agencies operate. Originally, I wasn’t a fan. However, the carriers have invested significantly in technology and training, and I now urge agencies to put 25% to 50% of their personal lines and small commercial lines into a service center. See also: How Technology Drives a ‘New Normal’ By the way, the bottom 50% of your customers probably generate less than 10% of your commission income. This frees up resources so that you can provide a great customer experience to your best customers. I’m referring to your A and B accounts, the top 20% that generate 80% of your revenue — not the bottom 50%. I realize this isn’t for everybody, but if you don’t know your 80/20 numbers (discussed in depth in Chapter 4), you can’t even begin to make a valid decision about which accounts to place with a service center. It’s also crucial to remember that once the account moves to the service center, it’s moved! It’s gone. It’s no longer in your agency. One of my research contacts said that if he were an agency owner he’d transfer as many transactions and expenses as possible to the carriers. And I agree with him. This frees the resources, agents and agencies needed to focus exclusively on risk assessment and transfers, asset protection and risk management planning. In my discussions with insurance carriers over the years, I’ve found that 54% of incoming phone calls to the service centers are agency personnel calling on behalf of the client. Keep in mind, the client either has been given the service center’s toll-free number to call directly for assistance or the client's call is automatically routed to the center. And yet many agencies continue to service the accounts they’ve moved to a service center. This makes no sense! Once the account is moved, it’s moved. You need to be focused on the clients you’ve kept in-house. See also: Secret to Finding Top Technology Talent Embracing technology also means getting serious about using all of the capabilities of your agency’s automation system. My content partner in the Better Way Agency program is Angela Adams, CEO of Angela Adams Consulting. She’s unequivocally the best in the industry when it comes to the internal operations of agencies and maximizing their automation systems. I’m constantly questioning her about the use of technology and automation within agencies. Recently, she shared with me that the average agency uses only about 20% of the capabilities of its internal and carrier-provided technology. That’s about the same percentage of agencies that are active in an automation vendors user’s group. I find that incredible! Learning from others is one of the best and easiest ways to maximize your system. How else — and when — are you going to do it? If you’re behind the technological curve, your time to catch up is rapidly running out. With the proliferation of ever-evolving technology, more and more of the routine service items and transactions that keep everyone “so busy” are being handled digitally, outside of the agency. Therefore, to stay relevant and not become obsolete, agencies and their teams will need to pivot from handling transactions to providing risk advice and insurance solutions.
Embrace Tech Before It Replaces You
What are agencies doing now for free that may be their primary source of compensation in the future?