Ernst Young predicts a turbulent year for the industry in 2016. In this series, we've examined their forecasts and recommendations on technology, pricing and commissions. And we’ve shared the impact those issues will have on the retail agent and broker in 2016. Clearly, they represent very big issues. But everything pales in comparison to the growing gap the independent channel has in meeting customer expectations.
Even if we get our technology right, our pricing right, our commissions right, the system unravels at the point that customers aren’t satisfied.
As new choices arise - and they are at a record pace - the core question for the independent agent-broker system is, “Will they still choose us?”
EY Quote: Services in other digitally enabled industries are causing consumers to demand more personalized experiences from insurers. With the greater opportunity for comparison shopping on the web, the impact will likely be significant.
WHAT THIS MEANS FOR AGENTS AND BROKERS.
Consumers are being trained. Not by us. By other industries. They’re learning how to research, compare features and pricing...and they are learning new ways to buy. At their convenience. And armed with knowledge.
Consumers are sitting in the power seat now. Loyalty can't be taken for granted. It must be earned.
In their Global Outlook for 2016, Ernst Young mention the word, “customer” 34 times. Clearly, satisfying the customer is at the heart of a lot EY’s thinking. They rate “customer expectations” an 8 on their 1-10 scale.
We rate "customer expecations" a 10. Here’s why:
1. Much of the gap between the customer and the industry is the agent’s responsibility, if not their fault.
In an incisive report by Deloitte Consulting they reported “that six in 10 of those we most recently surveyed say they receive no particular service from their agents beyond shopping for coverage.”
60%?! That's a dangerous sign. And a very dangerous signal to the marketplace. Our value proposition is on thin ice.
As much as advocates of our channel rail on GEICO, I've seen both their online and offline customer communications. While we're the ones heralding the value of relationship, (and it's very hard to have a relationship with a gecko OR with a cubicle worker you'll never talk to again), GEICO is putting serious effort into crafting carefully designed communications to their customer. They offer advice. They offer guidance. And, they do their best at creating a perceived sense of relationship.
(Whaddya wanna bet the average insurance consumer could more accurately describe the characteristics of the gecko than they could their own agent or broker? And whaddya wanna bet they have positive feelings towards that green little charmer? No personal service? Maybe it's light. But GEICO's resources attract talent, and they are very smart people in their marketing department.)
Shopping for coverage may be the bare minimum of what the consumer expects from their insurance experience. And, as the power balance shifts firmly in the direction of the consumer, the bare minimum will not be enough to earn their loyalty.
2. Independent carriers know that consumers are getting restless. They know that, in particular, the gap between the industry and the millennials is dangerously wide.
They are not waiting for agents to close that gap. They’ll attempt to do it on their own. Many of your best carriers will also be your competitors, if they are not already. No sense wailing about that. They're first obligation is to their shareholders and their customers.
The fact that many mega-carriers are pivoting faster than allegedly nimble small businesses - agencies and brokerages - demonstrates how desperate the situation has become.
(On a side note: many, a growing number of agencies have made the commitment to marketing in the modern age. My recommendation to carriers is that they should invest in the percentage of the agency force that is embracing the modern, connected era - the age of the consumer. Invest in the eagles, as they say. Eat the turkeys for Thanksgiving.)
EY Quote: By providing services that build on the customer experience and changing expectations, insurers can foster stronger, more holistic relationships with clients and ultimately improve policy retention and generate higher margins.
WHAT THIS MEANS FOR AGENTS AND BROKERS.
Carriers, increasingly distressed with agents’ inability to out-market competitors, will establish more competitive, alternative channels of their own. They will increasingly see agency-broker clients as their own.
EY further states: “…customer expectations and behaviors are evolving at a rapid pace, often faster than traditional mechanisms can react. Driven by their interactions in other digitally enabled industries, such as retail and banking, property-casualty customers are increasingly demanding a more sophisticated and personalized experience.” (Italics mine.)
While the agent-broker channel has been steadily losing marketshare to rapidly growing direct competitors, they can expect their own carriers to continue to invest in customer satisfaction through their own, digitally-intensive offerings.
As Accenture recently pointed out in its report, Reimagining Insurance Distribution, “Leading insurers are taking customer intimacy to a whole new level. 63% prioritize the use of customer data for needs based selling.”
EY Quote: Customers are increasingly looking to their insurance partners for risk advice, not just insurance products…By providing services that build on the customer experience and changing expectations, insurers can foster stronger, more holistic relationships with clients and ultimately improve policy retention and generate higher margins.
WHAT THIS MEANS FOR AGENTS AND BROKERS.
Put simply, the time has come for the channel to fulfill it’s promise: to be in a relationship with the customer base. And that relationship must deliver both the protection they need and the confidence that they have the protection they need.
Deloitte recently pointed out that “close to half indicated they are ready to eliminate the intermediary for a relatively small discount.” This demonstrates just how tenuous this relationship is.
ACTION PLAN FOR AGENTS AND BROKERS:
Agents and brokers must wake up to the widening gap between customer expectations and the ability of current practice to meet those expectations. They further must expect their own carriers to aggressively attempt to invest in alternative and competing channels to satisfy their own needs in the marketplace.
Action item #1: Become irreplaceable. The agent-broker has one unique distinction that simply can’t be replicated elsewhere: relationship. Excellent product, and, even, advice and guidance, may be available in other channels. But mass distributors can never replace the confidence a customer earns from a “real person being there.”
Unfortunately, research shows that, while the agent relationship is “sticky,” it is dramatically underperforming, with six out of 10 of consumers reporting that the agent is not doing more than selling the policy and disappearing for a year. Agents and brokers must re-commit to the inherent strength in the channel by finding ways to be consistently and positively present in the lives of their customers and marketplace.
Insurance products are easily replaceable. Relationships are not.
Action item #2: Add value. Agents and brokers must deliver a consistent stream of value-rich communications to their customers, including advice on safety and protection. Agency culture must move from being reactionary to quote requests, to guiding customers to the best possible decisions.
Considerable research demonstrates that customers with better protection lean towards higher loyalty. Further, they express that loyalty with the bottom line decisions that matter to the firm’s financial health: more referrals, longer retention and more policies.
Loyal customers reward. With more referrals. Longer retention. More policies.
Action item #3: Invest in communication and marketing technology. Deloitte has pointed out that agents have “little economic incentives…to offer additional services” such as advocacy and advice. It is, at least, safe to say, that, for personal and small commercial lines, the personal delivery of advocacy and advice is expensive and that their economic payback is, at least, a “long game.”
However, the relative absence of differentiating guidance is threatening overall customer loyalty. But, modern technology permits agents to reach out with highly personalized, customized communications. While carriers are investing in data mining to achieve deeper customer intimacy, the agency or brokerage has immediate access to comprehensive customer information in their agency-broker management system. Modern communication platforms can tap that information and automatically reach out to customers, with meaningful advice and value.
What can’t be done manually, can be done with technology.
Next installment: Mergers & Acquisitions
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