Why should the retail agency system survive?

Posted by Michael Jans on 2/13/14 5:30 PM

Why should the retail agency system survive?

Roughly a year ago, a top carrier executive introduced me to a roomful of agency owners as a “passionate advocate for the insurance agent.” 

I’d like to qualify that.

For twenty years, a lot of agency owners have credited me with making them rich. Or turning them into millionaires. Or saving their agency...so they could go on to dominate their marketplace.

For many years, my mother wondered exactly what I did for a living. I never said, “I make insurance agents rich,” as my career choice.

She, after all, devoted her life to feeding the hungry, helping the disabled, visiting the sick and elderly, supporting the most at-risk. While she has been gone for several years, her picture still sits above my computer and her eyes bore into mine, asking, “What difference did you make in the world today?”

She was, admittedly, more interested in lifting people out of poverty than lifting people into wealth. (I did “pay my dues” in that regard, having run non-profits for about twenty years of my career.) 

Today, unabashedly, I do synthesize and share the tools and skills that agency owners need to dominate their marketplace. I believe, again, unabashedly, in business. That business is fundamental to value. Fundamental to the elimination of poverty. That, in fact, it’s central to the best of “the American way of life” that my mother wanted for all citizens.

And, it’s perfectly delightful to me if you choose to use what I share and make a boatload of money.

In fact, were she still alive, my mother would tell you that insurance money saved her home after the sudden death of my father. And she would tell you that good advice matters. And she would agree with me: that the best insurance delivery system ever created was and still is the agency system. 

BUT...and this is important...not all consumers agree. In fact, more and more of them flat out disagree. 

And this is an argument that consumers usually win. (UNLESS something happens...and I’ll get to that in a minute.)

First, let me qualify the “agency advocacy” I’ve been credited with. I believe in insurance agents because I believe they represent the best system for the consumer. 

So, if you’re reading between the lines, I’m a consumer advocate first. An agent advocate second.

And the consumer base is telling us something: “EARN my business. Make yourself IRRESTIBLE. Be WORTHY of my relationship. But, never, ever, ever take me for granted.”

How are they communicating this? 

They way consumers do. By consuming elsewhere.

Let’s look at the numbers:

That’s right. 80% of Private Passenger (New) Auto taking a bloody nose-dive to 63% in 7 years?!  

But, you say, haven’t we been holding our own in total volume written? At first glance, you may say, “yes!” This chart shows that the independent channel writes as much overall auto in 2012 as it did in 1995.  BUT...look closer...

...what you’ll discover is this: that the independent channel shows a steady erosion in market share since 2005, the “birth-date” of the consumers declared comfort with insurance internet purchase. While it may not look like much on that chart, it represents almost 10% of the independent channel’s percentage of market share. (And the bleeding is even more on the captive side.)  

Where is this business going? To the direct channel, of course, which, over the 17 year period virtually doubled their share.

Does this signal doom for the retail agent? As I’m known to do, I’ll risk offending many of my friends in leadership positions in the industry. When McKinsey declared a, "...gradual shift in the value that carriers and consumers....place on...local agents, which is increasingly calling into question what role they will play in the future," far too many so-called industry leaders looked for holes in McKinsey’s analysis. Far too many accused them of shoddy research or faulty conclusions.

McKinsey or not, consumer behavior is consumer behavior. Put McKinsey’s conclusions aside...and draw your own.

The consumer is saying something to us. Again, they’re demanding we EARN their business. Is that too much to ask? And how do we do that? By being superior students and practitioners of business. By delivering value so great that it goes unquestioned. 

And, now, more than ever, that means challenging our own status quo – and re-inventing the way that insurance agencies and brokerages are being run.

After all, our status quo IS being challenged. And the consumer is responding. The only way to win them back – and create the future we desire – is to challenge the old ways. 

And I think you’ll quickly discover that many of those old ways should be thrown out.  

In response to my fundamental question: Why should the retail agent survive? It’s because it’s the best system ever invented. But, unless we convince the consuming public of that, that’s just a nice story with a tragic ending. 

Whether we like it or not, a growing piece of the consuming pie is quite happy (Yes, “happy” – as measured by the Customer Satisfaction Index) purchasing their insurance elsewhere. (And, yes, new research shows that small businesses are open to purchasing online, also – and I’ll report on that shortly.)

The field is open for the agency owner who can innovate their way back into the heart of the consumer. (And, incidentally, while it can be argued that the effective use of technology got us into this mess, the effective use of technology can get us out of it.)

If you’d like to learn more about changing trends in consumer behavior...AND get your hands on a summary Action Plan for success, please download a copy of my 2014 State of the Industry Report. Click to edit your new post...

Topics: Insurance Brokers

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