Is 2016 the year of the "tipping point" for insurance agents & brokers? As agency owners and marketers face the new year, more and more are recognizing that the world around them has changed...faster than they have. But, solutions to the biggest problems are available. Here are some warnings, along with some sound guidance from some of the industry's top advisors and leaders. We'll start out with a bold prediction from Ernst Young, from their annual P&C Outlook...
QUOTE TO NOTE #1:
"2016 will be a year of ongoing disruptive change. Digital technologies, such as social media, analytics and telematics, will continue to transform the market landscape, recalibrating customer expectations and opening new ways to reach and acquire clients.” Ernst Young, 2016 US property-casualty insurance outlook.
COMMENT: There are two big dangers when experts forecast the future.
- They could be wrong. With the massive changes in consumer behavior and the enormous investment that carriers are making in digital technologies, that's certainly not the case here.
- They're timing could be off. Maybe the "big disruption" is next year, not this year. After all, we've witnessed the migration of consumer activity to the digital world for a good ten years. Does that mean that agents and brokers can twiddle their thumbs for another year? Absolutely not. Those who have made the transition and are effectively connecting with the consumer in the digital world are already seeing the benefit.
QUOTE TO NOTE #2:
"Selling insurance directly to consumers online is the future, but is it really time to give up the agents? As innovation continues to disrupt the insurance industry, more small-business insurers are looking to connect directly with customers to sell coverage online without involving a personal agent or broker." Deloitte: Small Business Insurance In Transition.
COMMENT: Expect to see carriers create more direct-to-consumer channels and relationships. They know they can't wait for the agency force to catch up. (Does it make me crazy that carriers are acting more nimbly than agencies? Count on it!)
QUOTE TO NOTE #3:
"...six in 10 of those we most recently surveyed say they receive no particular service from their agents beyond shopping for coverage." Deloitte: Small Business Insurance In Transition.
COMMENT: What Deloitte is saying in this excellent analysis, is that, while agents deliver personal service - advocacy, guidance, advice, etc. - the economics don't support it. Not the "old school" way. New technology solves that problem.
Overcoming the deficiency in customer-centric service and protection is an imperative for the survival of the independent system.
QUOTE TO NOTE #4:
"With little economic incentive for intermediaries to offer additional services, along with the growing commoditization of small commercial products and greater demand for 24/7 service, small-business coverage appears to be ripe for automation." Deloitte: Small Business Insurance In Transition.
COMMENT: Again, expect carriers to step more and more directly into the consumer relationship.
QUOTE TO NOTE #5:
”There is no question that for the entire industry, the next generation of technology purchases and adoption will be a huge challenge for carriers and agencies,” Patricia A. Borowski, senior vice president of the National Association of Professional Insurance Agents (PIA).
COMMENT: I've known Pat for a good 25 years. She believes in this channel as much as anyone I know, and, generally, thinks its a channel of survivors. She's wise enough to know that we survive by adapting.\
QUOTE TO NOTE #6:
“Leveraging technology for operational advantage will present a tremendous opportunity for those able to invest.” Jeremy Johnson, president and CEO of Lexington Insurance, AIG's Excess & Surplus division.
COMMENT: A common response we encounter is that technology seems expensive. That's especially true if you're adding new technology, not replacing something that's already a line item in the budget. Compared to payroll, technology is cheap. Compared to the results a good tool can deliver, it's even cheaper.
QUOTE TO NOTE #7:
"The survey found that insurance companies are accelerating the shift to a radically different distribution model, where digital plays an increasingly important role in the majority of interactions, and agents’ efforts are being refocused to add more value." Accenture: Reimagining Insurance Distribution.
COMMENT: In my travels through the halls of insurance carriers throughout the US and Canada, frustration with the ability of the agency-brokerage model to deliver customer satisfaction is a common theme. In order for agents to deliver more "value" they will have to re-engage their customers at a deeper level, communicate more effectively, and create a much clearer path and plan to genuine customer protection.
As a bit of a side note - one that we will explore in more depth later - I suggest that agents and brokers consider adjusting their metric of success from one based largely on revenue and margins to a more customer-centric model: one that is based on achieving full and appropriate protection for their clients. In other words, agents should create a workable model on what constitutes a "protected client." How many policies should they have? What policies should they be? What limits should they have?
Approaching full customer protection will deliver extreme levels of retention, policy per customer and loyalty-based referrals.
QUOTE TO NOTE #8:
"Today, nearly two-thirds of carriers are giving high priority to refocusing their physical channels to those stages of the sales process where they can add the greatest value. They want agents and brokers, for example, to increase their cross-selling and sell more profitable products. They also place a high value on agents improving their advisory skills with regard to complex products, and enhancing their sales interactions with customers across multiple channels." Accenture: Reimagining Insurance Distribution.
QUOTE TO NOTE #9:
“There are 40,000 agencies in the US, and you could absolutely imagine them shrinking by a quarter..." Ellen Carney, Forrester Research.
COMMENT: Forrester's Insurance Analyst is responding to the emergence of alternative distribution models. If consumers do not perceive that the agent is adding value, more of them will turn to self-managed purchasing, as they have done in so many other industries. (Watch this space for a guest blog from Ellen, and possibly a future podcast.)
QUOTE TO NOTE #10:
"Carriers are also targeting a different set of skills when they recruit agents for the omnichannel era. For example, 50 percent of survey respondents expect that their agents, in three years’ time, will be able to use digital and social media effectively for marketing, prospecting and lead qualification. They will also screen new candidates for their ability and willingness to cross-sell, provide complex advice and build a strong rapport with customers." Accenture: Reimagining Insurance Distribution.
COMMENT: Three years. Not three years to start. Three years to be effective. The race is on.
QUOTE TO NOTE #11:
"Those insurance agents who embrace new technology and find better ways to engage with the consumer will always find opportunity." Steve Anderson, Insurance Technology Expert.
COMMENT: Steve is one of the channel's great advocates and a serious proponent of effective technology. I pulled this quote from his insightful article on machine learning in the insurance industry.
QUOTE TO NOTE #12:
"One cannot lose sight of the fact that despite that, agents do need to recognize and respond to the ever-evolving insurance marketplace. That evolution, today, starts and ends with the adaptation of technology. What has already happened in the personal lines sector will no doubt flow into commercial lines and certainly, those agents that prepare, create and adapt to technology will also be the ones that prevail and prosper.” Michael Sillat, CEO and president of WKFC Underwriting Managers.
COMMENT: Michael isn't pulling any punches here. New technologies tend to attract visionaries and tech enthusiasts. Modern digital marketing and related technologies are no longer new, and established, more conservative agencies and brokerages who see the financial benefit of deeper customer relations are moving rapidly to adoption. Others will be left behind.
QUOTE TO NOTE #13:
"Beginning marketers think that great marketing is all about "How much can I get?" Advanced marketers know that great marketing is all about, "How much can I give?" Michael Jans. (Okay...I threw a bone to the author of the blog, me. But it's a pretty good bone!)
COMMENT: Marketing tends to get a bad rap. To be effective, clearly, the marketer - insurance marketer or otherwise - must be able to get attention and persuade action. The amateur marketers stop there. Attention. Persuasion. The serious marketers - the ones who are int it for the long game - know that value creation must start at the beginning. It starts when the prospect first meets you. Digitally or otherwise. And it must continue throughout the relationship. After all, value through relationship, that's what makes relationships rich, deep and long.
And, ultimately, isn't that what the promise of the agency-broker channel is? To deliver more value through relationship than the customer can get anywhere else? Those how can deliver on that promise will win. Today's technology lets you multiply your reach to a larger audience. And, the best lets you deepen that reach - one customer at a time.
SUMMARY. I did struggle with what to call this post. After I reviewed the comments and quotes that I'd been filing to share, I wondered if some agents and brokers might think the overall tone was too sobering. Too apocalyptic.
For those who cling to the past, I suspect that's true.
I don't blame them. For many who have enjoyed this industry for two or three or more generations, they'll recognize that it has presented challenges and demanded changes.
The changes demanded of insurance marketers today are not simply incremental. And they're no longer optional.
Today's consumer demands them. They have more choices than ever before.
And in 2016, they'll have even more.
The changes required of today's agency start with technology. But they also require new skills.
Above all, they require a fundamental reassessment of what this channel represents. Of what its essential promise is to the consumer.
In spite of the demands for new technology, new skills and a renewed commitment to the customer, the good news is worth celebrating.
Modern technologies do exist, and they re-invigorate the connection between the agency and the customer. They solve the fundamental problem.
That's good for the agency. It's also good for the consumer.
Your relationship with them matters. When the trust is deep, the guidance is respected.
Modern communication technology can reconnect you deeply with your customers and marketplace. And it can re-establish the agent and broker in the place of respect they deserve.
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