Agents Have Opportunity To Dominate

Insurance consumers have spoken, and theyre choosing independentagents loud and clear.

Some well-quoted “industry observers” didnt believe inindependent agents. The Internet was supposed to replace agents.Wrapped up in pretty surveys and research, all that jabber fromexperts, consumer advocates, dot-coms, critics and pundits was justthat–chatter and babble. One Web sites slogan was, “The Industry isHistory.” (Guess whos history now?)

Look at the facts: Independent agents are clearly the best wayto market insurance to the public. Theyre the true consumeradvocates and have the resources to match the right coverage to theclients circumstances, period.

And the best news is that independent agents right now have anexcellent, history-making opportunity to expand even more. Why? Theenvironment!

Lets look at the environment in which agents are working.

The property-casualty insurance industry is a mess. The marketisnt merely hard–its cement. Even before Sept. 11, the U.S. p-cindustry in 2001 was headed for a 112 combined ratio; it wound upat 116. And the projection for 2002 isnt much better.

As if the aftershocks of Sept. 11 werent bad enough, ourindustry now faces even more challenges, such as:

A lack of confidence in big business (look at WorldCom, Enron,Tyco, etc).

A depressed, and depressing, stock market.

Asbestos and mold claims.

Rising medical inflation.

A multitude of major industry lines that are estimated to beunder-reserved.

Just plain lousy underwriting in the 1990s that has led tosignificant carrier balance-sheet issues.

It is, indeed, the “perfect storm” for the p-c industry, butindependent agents are the safe harbor as trusted, professionaladvisors.

In this chaotic environment, consumers will choose independentagents, because only agents offer choice, personal service, andexpertise. They represent more than 45,000 points of sale aroundthe country. They know their carriers well. They focus onsatisfying the customer, not the company.

Their channel competes on expenses with other so-called“low-cost” alternatives. And independent agents already haveleverage, as they control more than 90 percent of commercial linesand a third of personal lines.

As a new CEO, Ive been traveling and meeting with many of ouragent customers. Ive noticed some common strengths amongparticularly successful organizations. Here are some observationsabout those agencies:

Leadership: Any business, small or large, needsprofessional leadership, setting strategic direction. This gets allemployees aligned, engaged and excited about where the organizationis going. Employees need to see where they fit into theorganization's future.

For many agents, this is a difficult area because by naturetheyre very tactically focused. Theyre the great marketer andsalesperson in the agency. While thats important, successfulagencies are strategically focused as well.

Agency work is hectic; everybody is living in the moment,solving client issues. But a leader must take a long-term view.

It certainly is difficult to master all the skills necessary toeffectively manage the agency on a day-to-day basis, much lessthink about the three-to-five year plan. Thats what it takes,however, to be the best. I challenge agency owners to takeadvantage of the support offered by trade associations in thisarea.

Agents can review material provided in the “Best Practices”program offered by the Independent Insurance Agents and Brokers ofAmerica, or the “Value Difference” program from the NationalAssociation of Professional Insurance Agents, both based inAlexandria, Va.

Technology: A great technology strategy is anagency owners key to efficiency gains. Leveraging automation bycreating effective processes is the enabler. This will allow anagency to deliver on its vision, drive cost out, and recreate ormodify the infrastructure where its delivering value for theorganization rather than simply delivering paper.

For example, technology means independent agents can provide24/7 service, leveling the playing field with captive and directwriting competitors. In addition, by taking advantage of onlinefunctionality, agents can streamline paperwork and eliminateredundant tasks. This allows more time for CSRs to focus onproviding more value to their customers through creative problemsolving and consultative services.

Bottom line, agents need to insist that their carriers get outof the way, and design systems that make the carrier “invisible”and the agency “visible” in the transaction process.

Successful agents develop and implement a strategy aroundcontinually and proactively updating hardware and software.Unfortunately, many agents are simply reacting to the need toupdate.

Agents can learn more about technology as a strategy by visitingIIABAs Web site (www.independentagent.com),and reviewing pieces provided by the Agents Council forTechnology.

Brand Management: Brand is the most valuableasset any business has to manage. Brand touches everything theorganization does, from signage and awnings to the quality of theemployees, to the way the telephone is answered.

Brand is the relationship customers have with the agency. With astrong brand, customers will never leave–theyll stay in times ofcontroversy (such as when premiums are rising), theyll refer theagency to others, and theyll be more likely to buy moreproducts.

Smart agency owners manage their brand well. They talkconstantly with their customers and employees aboutperformance–uncovering what their customers value, and why theyvalue those factors. They align all their marketing and advertisingaround consistent messages. They are proud of their employees,showing them off in marketing materials. Brand should be leveragedas a competitive differentiation.

I strongly encourage agents to join “Trusted Choice,” IIABAsconsumer-marketing brand. Our company is a founding member ofTrusted Choice because we know the power and the opportunity of theindependent agency distribution channel. Trusted Choice will make asignificant contribution to increasing agent market share.

Consumers want choice, competitive prices, comprehensiveproducts, advocacy at the time of a claim, and some services afterhours. Independent agents offer exactly those things, but consumersdont realize it.

Why should our distribution channel remain the best-kept secretin insurance? Trusted Choice agents are part of a nationalfranchise with advertising and public relations designed to drivequalified new customers to their Web site with a consumer-testedbrand name, logo and tagline.

Great Strategic Partners: Independent agentsare strong, but only as strong as their carrier partners, so theyshould choose prudently.

What should they look for in a company? A good balance sheet;consistency, stability, and a sense of focus about the market;underwriters who know what theyre doing; and a company thatsupports the independent agent, not the agents competition.

I think many agents have forgotten the importance of this latterpoint. Independent agents should choose carriers that treat theagent as the customer–for example, investing in technology tosupport agents rather than compete with them. If theyre going toplay in our distribution channel, carriers should position theindependent agent, not the carrier itself, to sell any way thecustomer wants to buy. Thats true commitment.

Agents should beware of fair-weather friends. Multi-distributioncompanies arent solely committed to independent agents success.They justify their actions by saying theyre “offering the consumerchoices,” but theyre taking profits derived from agents andredirecting them into distribution systems that compete withagents.

Its really no surprise that regional independent agency carriersin recent years have been the fastest-growing distribution channelin homeowners and commercial lines, and the second-fastest channelbehind direct response in private-passenger auto. Why? Regionalcarriers call the independent agent the customer. They competeeffectively in expense management, know the market, and dontcompete against their agents.

Agents also should align with carriers supporting the IIABA andPIA. These organizations have created important partnerships withcompanies to help agents run more successful practices, understandtechnology, attract and keep great employees, and fight forinsurance legislation and regulation thats good for the consumerand fair for our industry.

Creating a Great Place to Work: People aredisillusioned about working at large firms, and thus many youngpeople coming out of school are attracted to relatively smalleroutfits and the chance to one day own a piece of the business.

An independent agency ought to be the place to work in thecommunity. Successful agents I meet understand this, and have plansin place to be the employer of choice. For example, they engageemployees in decisions that affect their work, create flextime orwork-from-home programs for some employees, and commit to ongoingeducation to assist employees in gaining new skills.

Agents can run a business that provides a professional yetlight, fun and rewarding environment, where everyone has the chanceto excel.

An agencys staff should focus on improving customer serviceevery day. Owners should embrace good ideas from employees, andshare information with them so they know where they stand. Ownersshould thank the staff for their work, celebrate success, alloweveryone a chance to deliver on the brand promise and vision, andbe proud of the franchise.

Any business can always use a shot in the arm. New blood isimportant. Agents looking to hire excellent new talent should checkout InVEST, which educates high school and community collegestudents about insurance and risk management. Most students go onto work at agencies or carriers. Agents can even start a class intheir area. (For information, check www.InVESTprogram.org.)

What a great time to be an independent agent! The future couldntbe brighter for staring down cranky old critics, crushing thecompetition, and surfing an awesome wave in a tumultuous insurancestorm. Independent agents are very well positioned to grow marketshare. Consumers want choice, expertise and advocacy–onlyindependent agents can deliver. Lets grab the opportunity!

Tom Van Berkel is CEO of Main Street America Group in Keene,N.H., a holding company for independent agency carriers NationalGrange Mutual Insurance and Old Dominion Insurance, whichcollectively write more than $600 million in premium exclusivelythrough independent agents. He can be reached at [email protected].

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, September 23,2002. Copyright 2002 by The National Underwriter Company in theserial publication. All rights reserved.Copyright in this articleas an independent work may be held by the author.