Tag Archives: agencies

Of Independent Agents, Heirloom Tomatoes

I was recently chatting with someone who insisted that we needed to sell directly to consumers to be successful…you know, like Progressive.

Progressive is where I cut my teeth on insurance, but it’s been years, so I grabbed the annual report:

Policies in force from Progressive's 2019 annual report.

Source: Progressive’s 2019 annual report

Yup, of the plain old auto policies in force, 47% were sold through independent agents.

My friend and I also had a nice chat about farmers markets. You know, where, at least pre-COVID, people would walk around with their “Shop Local” reusable bags and buy $5.99-a-pound heirloom tomatoes?

Shop local, but not for insurance?

Turns out we’re oversimplifying again.

Tomatoes come in varieties, insurance buyers don’t. There is no such thing as a direct consumer or an agency consumer.

This is kind of crushing if you’re proud of the insurance company you work for:

If you ask the first 10 people you find in the street who their insurer is, maybe four will give you an accurate answer. (Unless you’re standing outside an insurance convention, back when we used to have those). Another three will give you the name of a company they used to be insured with, or whose commercial they last saw. The last three will give you the name of an agency, which they may not actually be insured through. These numbers are approximate, of course, but they are close.

Even more dispiriting is if you choose 10 of your own customers and ask the same question….and get roughly the same set of answers.

Uh-oh. So, customers don’t care enough to remember who they bought insurance from?

This isn’t to blame consumers. Quick, last time you went to the emergency room for yourself or a loved one, what was the name of the medical professional who was most involved in your treatment?

Yeah, most of us have no idea, and it’s not because a medical emergency isn’t important. It’s just that the name doesn’t stick because it generally doesn’t matter – so long as the ER is staffed correctly, there’s someone to treat you. Similarly, so long as you’re insured, you’re fine. (Until you have a claim, which most customers won’t most years, and then fingers crossed…)

This lack of recollection also means that there are very few customers marching around insisting that they purchase insurance from a carrier that sells directly vs. through an agent.

Rather, people are just looking for what fits best in their lives.

People buy insurance based on the experience they are looking for and what’s easily available to them, at the point they want to buy in the context of their own lives.

  • It might be the web search that they can do at 3am when they’re endlessly rocking the baby.
  • It could be the person they can call who can explain what the heck they need to buy to make sure they’re covered if they hit a deer again this year.
  • It could be the person who can switch around the day their payment is withdrawn when they take a new job and payday changes.
  • It could be the friend they golf with who can explain what they need now that their general contracting business is expanding.

Note that none of these are specifically the purview of an agency or direct-to-consumer business.

There are agents with fantastic digital presence serving that 3am customer, and there are salespeople from direct-to-consumer businesses playing in the local charity golf tournament.

Yeah, the specifics of your economics just don’t matter to your customers, only whether you can provide what they want at a competitive price.

The economics of agency and direct businesses have different patterns, but aren’t that different overall.

No, it’s not cheaper to sell directly. And it’s not cheaper to sell through agents.

How can that be?

Well, you have to reach, sell to and service customers somehow, and that either costs Google Adwords and web development and call centers or it costs commission and co-marketing.

Again, consumers couldn’t give one whit about the line items in your acquisition or operational expense. They just know how they want to be served, and they want the cheapest prices they can find, too.

If Facebook suddenly started giving insurance advertising away as a social good, direct-to-consumer insurance would get cheaper. Customers would migrate that way, some agents would start accepting less commission to stay afloat and other agents would deploy sophisticated Facebook advertising campaigns. Net/net, you end up in the same place, where the pricing algorithms might be different but price levels are pretty much the same for a given consumer in either channel.

The reverse is true, too. Should digital advertising double in price, direct prices will increase, agents can ask for more commission, etc.

That’s not to say that the economic gambles aren’t different – upfront acquisition expense then work to maintain retention vs a more or less level commission year after year – just that the cost of customer acquisition to lifetime value is close to the same for a given product and segment.

See also: A Quarantine Dispatch on the Insurtech Trio

Finally, you can’t disintermediate a channel without somehow paying for the services that channel provides.

This is why “traditional broker-based insurance incumbents” (a term from Lemonade’s recent quarterly earnings call) as a pejorative is just, well, silly.

Where there are old monopolies, sure, you can squeeze costs out of a channel quite a bit (see Warby Parker). And if consumer shopping tastes change, you can replace a channel. Well, some small fraction of a channel in big markets where consumers have lots of different preferences (see Allbirds and Rothys), or nearly the entire channel if those preferences replace older shopping patterns (Netflix).

But, when there is variety in consumer preferences, those customers can be served in multiple ways by different channels. When the channels don’t just provide acquisition, but also counsel, peace of mind and simplification of product complexity (which is a topic for another day…), you can’t just replace them without paying to serve the same functions somehow.

And that’s why direct vs agency is a silly fight – neither channel maps cleanly to customer preferences, and they both have their advantages and disadvantages.

Like so many other things in life, your success depends on how well your goals and your actions align.

The companies that succeed are not those that are dogmatically direct or agency for no good reason.

They are the companies that know specifically which insurance buyers they are serving, how those customers want to be served AND how to build profitable insurance operations.

That, after all, is what supports both your customers and your channel in the long run.

It’s not about us; it’s about them.

5 Ways AI Helps on Client Service

Artificial intelligence has become a hot topic in the insurance industry as the push to modernize the agency with digital solutions reaches a fevered pitch. Especially now, as our society and business operations adapt to a global pandemic, agencies are scrambling to leverage technology and analytics to make smarter decisions for their clients and their own business.

For many independent agencies, however, AI still feels like a theoretical concept — a capability reserved for and only accessible to big companies with deep pockets. But the reality is, AI has tangible benefits for even the smallest independent agencies when it comes to improving client services and strategic business growth. And, it’s more accessible than many might think. 

Leveraging AI can enable better business strategy for agencies of all sizes, today and in a post-pandemic environment. With AI, agencies can:

  1. Better advise clients. Now more than ever, insureds are looking to their insurance agents for risk management, stability and reassurance. With AI, agents can draw on industry insights to better understand the risks their clients face, provide more relevant, data-driven advice and do so with confidence. With the right tools, agents can look at data about similar individuals, businesses or industries and spot trends early to offer coverage suggestions. For example, the demand for business interruption insurance has risen sharply since the pandemic began. By leveraging AI, agents can see these potential risks coming down the pike and can make sure their clients are protected.
  2. Accurately predict risk. For years, actuarial services have attempted to quantify the economic value of risk to help carriers and agencies arrive at appropriate levels of coverage and premium costs. But today, AI provides a much more insightful and accurate risk assessment. By delving into industry-wide historical data, AI tools can arrive at a more accurate risk value based on real, documented data rather than conjecture. This allows the industry to set premium rates accordingly so that insureds get the coverage they need at a price that’s competitive and makes sense. 
  3. Find business opportunities. Without AI, agencies must rely on hunch, experience and clients to find and address new opportunities. AI technologies let agencies quantitatively analyze client needs, market dynamics and carrier appetite. Based on this insight, agencies can make smarter, faster and more confident business decisions to spur growth. For example, with industry intelligence, agencies can identify valuable opportunities to upsell coverage, identify new clients and expand into new markets based on carrier appetite for certain types of policies in specific geographies. 
  4. Improve agency efficiency. Digitizing processes to eliminate rote, manual tasks not only improves agency productivity and performance, but also client relations. When agents can spend less time pushing paper and more time talking with clients to better understand their needs and provide expert advice, everyone wins. AI can help drive this efficiency with predictive and automated workflows that can make many common insurance processes move faster. 
  5. Enhance client relations. While many agencies fear that AI and other technologies might take away from the personal relationships they’ve built with clients, AI can actually do the opposite. By automating processes and surfacing data-driven insights, AI can give agents more time to spend in meaningful conversations with their clients, providing informed counsel on how best to protect their assets. AI can also improve one of the most frustrating processes for clients — claims processing — to deliver a better experience. For example, we can now automate the submission process by using AI to analyze damage photos and natural language processing of the description of the claim submitted to rapidly assess the probability of fraud. Below a certain threshold, the claim may be automatically and instantaneously paid. This accelerates the process, delivering a more positive experience for the individual or business submitting the claim.

See also: How AI Can Stop Workers’ Comp Fraud  

As digital modernization becomes imperative for agencies, AI is proving to be a crucial ingredient for delivering the level of service that clients expect and for driving agency growth. By scaling AI implementation, agencies can not only keep pace with their peers but also offer innovative solutions that give them a competitive advantage, positioning agents as confident and dependable risk advisers in an increasingly uncertain environment.

Keeping Businesses Going in a Crisis

Global financial markets are fluctuating, daily operations for businesses across industries have been disrupted and masses of the workforce are being grounded from travel and urged to work from home because of the coronavirus. This is an unprecedented situation, and the quick changes can overwhelm businesses.

Insurance agents likewise face challenges, including dealing with any staff and workplace issues and sharing guidance and advice with clients. The key to enduring the coronavirus or any other crisis is developing and activating a crisis management plan. Plans should focus on transparency; factual communication; aggressive planning; operations; and people management. 

Aggressively creating a plan

Failing to prepare can harm a business’s reputation and financial wellbeing. Crises, as evidenced by the coronavirus, unfold quickly. This is why being aggressive is key for businesses—always expect the unexpected. 

When creating crisis plans, business leaders need to imagine the worst possible scenarios and work backward. What’s the worst thing that could happen? How would we respond? What steps would be necessary to rebuild? Asking these questions leads to a well-rounded plan. 

Business leaders must know whom to contact, whether it’s their clients, partners or employees in the event of a crisis. All contact information should be up to date and on-hand for quick communication to avoid last-minute scrambling during a stressful time. 

Crisis plans can’t be created in a bubble. They become meaningless if people aren’t aware of them. All employees need to know how their company plans to respond and regularly perform drills to boost confidence that the plan can be executed without a hitch. Performing due diligence can lead to better results and consistency when the time comes.

See also: COVID-19: Moral Imperative for the Insurance Industry  

Considering impacts on business and people

When developing crisis plans, consider all scenarios—related to health, weather or personnel crises–and their potential impact on business operations. Running through scenarios, no matter how realistic, is a great exercise.

Communicating factual information

The World Health Organization has referred to the coronavirus as not only a pandemic but an “infodemic,” because of the rapid spread of misinformation and speculation online. It’s the responsibility of business leaders to maintain clear, factual communication with employees and clients during a crisis.

Before sharing information or guidance with clients or staff, leaders must ensure that it’s coming from an official, credible source like the Centers for Disease Control and Prevention or the World Health Organization. Business leaders should also:

  • Know the best way to reach employees, clients or other interested parties in the event of an emergency. Think about the most common methods and channels of communication at your business and develop a mix of communication and content that will be most effective and efficient–internal or external email, social media, press releases, newsletters, etc.
  • Not rush communications. Business leaders should maintain regular communication throughout a crisis, but it needs to be factual. Employees and clients alike shouldn’t be kept waiting, but rushing to get statements out can lead to unclear messaging, increased uncertainty and the spread of false information. Take enough time to make sure that all statements are clear, factual and approved by legal advisers before release. Leaders may be tempted to respond immediately, but quickly sharing false information can be dangerous.  

See also: Will COVID-19 Disrupt Insurtech?  

Ultimately, business leaders need to avoid feeding into fear, despite the uncertainty inherent in a crisis. Laying the groundwork for crisis responses can be incredibly beneficial for companies, their people and their clients in the long term.

How Agents Are Adapting to COVID-19

Lockdowns, mandatory work from home, social distancing – the coronavirus pandemic has upended lives across the US. With no definitive end in sight and officials closing restaurants, bars and non-essential businesses in cities and towns across the country, most small businesses are feeling the economic impact and wondering, does my insurance cover this?

It’s long been known that insurance agents demonstrate their value to customers during crises, whether that’s a personal crisis, such as a car accident, or a community crisis, such as a major storm. During these times, agents are advisers providing much needed guidance to worried clients. Now, with the unprecedented uncertainty surrounding the coronavirus, businesses are wondering if they have enough protection to help them weather this storm. Agents are advocates helping customers with the information they need, and are friends, providing comfort and support and a receptive ear to those who need a sounding board. 

Even if their physical locations close, agents need to be accessible to their clients. Agents have to have instant access to policy files. They need to maintain constant communication. And they need to implement solutions that handle routine matters, so they have more time to focus on their clients’ unique needs.

Here are three ways agents have adapted to continue to provide the service their clients require. 

1. Taking their agencies to the cloud. 

Most agency management systems are set up to work in the cloud – giving agents access to their customer files. Many agencies have been using these capabilities easily, with no disruption to their normal course of business. Agencies that are not set up should contact their vendor representatives to ensure they have all of the functions needed to continue business outside of the office.

Agencies are also using other cloud-based solutions that make it easier to process new business, claims and endorsements outside of the normal office setup. Automated quoting solutions that obtain multiple carrier quotes from a single-form submission eliminate the need to go to and resubmit the same information on multiple carriers’ websites. Online portals give customers instant access to their policies so they have the information at their fingertips and can file claims online. 

See also: Coronavirus: What Should Insurers Do?  

2. Extending communications beyond email and phone.

Every minute there seems to be a new coronavirus development. With things constantly in flux, customers will continue to have questions and want answers as quickly as possible. Agencies are making sure clients know how to reach them, especially since clients have gone mobile.  Some agents are using social platforms such as Twitter, LinkedIn and Facebook to share updates that are helpful for all customers. One good idea: If many of the questions are repetitive, consider adding a Frequently Asked Questions page to your agency website that can be promoted on social media. Other agencies are using text for simple questions that can be answered quickly. 

In a crisis, it’s also important to implement face-to-face communication tools to maintain relationships with clients. Social distancing doesn’t have to prevent you from meeting with customers. Take your conversations to the virtual world, using solutions like Skype or Zoom to maintain personal interactions.

3. Business doesn’t stop, and innovation can’t stop. 

With the world in chaos, the temptation may be to focus on stabilizing business, maintaining the status quo. But as agencies adapt and implement different processes to keep operations going, agencies should be using all tools at their disposal. Technological solutions, like automated quoting, that help with routine, time-consuming tasks can have a long-term effect in not only helping agencies through a crisis but better serving clients in the future. For example, some agencies are taking advantage of on-demand webinar platforms to host Q&A sessions where a variety of business owners can get advice on their most pressing queries. This can be a powerful tool in building long-term client relationships.

See also: How Coronavirus Is Cutting Connections 

It’s important for agencies to think about the changes they are making now as advancements that go beyond the crisis. Many of the improvements that agencies are currently making in real time can have significant benefits to efficiency and growth when things return to normal leading to an overall stronger agency dynamic.

These are uncertain times, and we don’t know how long the coronavirus pandemic will last. Taking the necessary steps now ensures that agencies continue providing their clients with critical customer service. When the pandemic subsides, many of these learnings and changes can be continued as the marketplace returns to normal.

Tough Questions for Agencies

It was the ARM Partners Conference in New Orleans on April 18, 2012. I was to speak on change. The attendees, many with bloodshot eyes, were slowly filling the room. The program was the first of the morning. Slow and bloodshot are part of the culture of early a.m. in The Big Easy.

I placed a trash can in front of the group and a bottle of baby aspirins on the podium. I explained that “my intention today is to create chest pains, because chest pains change behavior. If the chest pains get too serious, take a baby aspirin and place it under your tongue. If I upset your already queasy stomach, you can throw up in the garbage can.”

Nervous laughter followed.

An early slide included two quotes. The first: “Fat, dumb, and happy, commercial banks are being quickly replaced as financial intermediaries.” (Time magazine, June 28, 1993, Bernard Baurnohl). Agencies, not just bankers, needed that warning. The second quote was from Peter Drucker: “Whom the gods wish to destroy, they send 40 years of success.” That one was because recurring revenue from renewals makes many agents too comfortable.

As John F. Kennedy said, “There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.”

See also: Are You a Manager or a Leader?  

How would your agency look if your marketing and sales were audited to see how well you were taking advantage of your opportunities? Is your organization about performance, sales, marketing, customer intimacy OR the daily transactions and the comfort of your staff and yourself?

Auditors are tough: One with the Centers for Disease Control and Prevention in Atlanta said, “When the war is over, the auditor steps onto the battlefield and bayonets the survivors.”

Is your agency and your team bruised and bloodied from battles of yesterday or up and running forward into the future? Will the marketplace, the ultimate arbiter of success, bayonet you or reward you? Are you the past or the future?

Max DePree says, “The first role of the leader is to define reality.” The following questions may help you begin to define your starting point for tomorrow:

  1. Do you and your team share understanding of and commit to the vision, values, mission and objectives established for your future? Will each of you and all of you be accountable for your performance and results? Are these your X commandments or X suggestions? Are these right for the world as it is and as it will be?
  2. Is the marketplace you serve or hope to serve in decline, level or in ascendancy? If your answer is in decline or “flat lining,” can you find new products to offer your existing clients? Can you offer your existing products to new clients or, even better, can you offer new products (services) to new clients?
  3. Is your team compatible with the market niches you serve? If you are blessed with some really experienced and wise baby boomers, will they be right for the Gen X and Gen Y that is your tomorrow? Will your English-speaking producers be right for a Laotian population? Will your clients shop producers based on their knowledge or their cultural/gender compatibility?
  4. How will you sell in a non-verbal world? Is your delivery process (sales and service) of choice the preference of your clients and prospective clients? Are they comfortable with what and how you do business? Are you comfortable with what and how they want the relationship to be? CAN YOU ADAPT TO THEIR FUTURE?
  5. What products, important today, might not be available tomorrow for you to sell? Is the National Flood Insurance Program sustainable, for instance, or will its vulnerability to adverse selection ultimately cause it to collapse? Will auto liability coverage be needed with self-driving cars? Will Gen Ys prefer private ownership of cars or Uber or public transportation? Will they have the appetite for home ownership that we had? Will your community survive? Will coastal properties be readily available, or will global warming have moved them all off of the coast?
  6. What new opportunities might be available to you that are not in your “briefcase” today?
  7. Will the advances in technology allow you to do more with your clients and prospects more efficiently/effectively? In a virtual world, might 7.5% commission be adequate where today you are blessed with 12%? Who will dictate commission levels in the future – you or your clients? Will carriers determine your commissions on what you need or what the market is willing to pay? Could you sell effectively with full disclosure of commission or quotes net of commission?
  8. What will the world of retail – malls and Main Street — be like tomorrow? Will all the action be on the banks of the Amazon?
  9. Will the government finally move to a single payer healthcare system? Will your local doctors now satisfy their needs through their network versus as individual business owners? Will they be entrepreneurs or employees? Will they be in the business of business and the business of medicine, or will they specialize in only medicine?
  10. In the future must you be “too big to fail,” or will you be too small to succeed?

I don’t know the answers. I don’t even know the questions that are appropriate for tomorrow. Your future doesn’t depend on me. It depends on you. What do you know? What should you know? What will you do? Can you be profitable regardless of what the market is willing to pay?

See also: 5 Transformational Changes for Clients  

About 20 years ago, I was speaking to an agency conference and talked with one of the attendees. He was over 75, very traditional, successful, conservative and very comfortable in his ways. I asked if his exit from his agency by death or retirement would increase or decrease the value of his agency. His response was immediate, “Boy, you done gone from preaching to meddling.”

I now offer you the same question – are you and the agency you own or work with ready, willing and able to move from yesterday and today into tomorrow?

REALLY???

It’s your future.