By George Nordhaus
We certainly have seen changes in the way insurance is sold. I have been around the independent insurance arena as a marketing consultant for more than 40 years, and am pleased to be able to share my decade-by-decade historical perspective on the development of insurance agency marketing, as well as my thoughts on the agency of today and tomorrow.
During the 1960s:
? Agency business was very personal. Agents knew their company representatives and there was not much moving around on the part of insurer employees.
? There were two major associations: IIAA and PIA. PIA had been formed for agencies representing mutual insurers vs. stock insurers for IIAA.
? As agents began to represent both mutual and stock companies, that "difference" in sales philosophy began to disappear. The "Big I" ad campaign was "Your independent agent serves you first," featuring spokesman Raymond Burr, became the dominant influence in the industry.
? Big I agents used an advertising tie-in kit as fodder for local ads.
? The independent agent's major competitors were the national captive players, particularly State Farm and Allstate. The value proposition for independent agencies was, "We represent a broad range of insurance companies, not just one. We can give you a choice."
? The first agency management system, American Agency Management Bureau, was introduced into the Florida IIAA by Tom Johnson, perhaps the most renowned association manager in history. AAMB eventually became AMS.
During the 1970s:
? National captive players thrived. TV advertising was the medium of choice. Even independent agencies were able to buy TV time on local channels.
? In a research study conducted by State Farm, the persistency of business was directly tied to the number policies that an insured had with the carrier. Over a 10-year period, the retention rate was 20 percent for one policy to up to 90 percent for three or more. Agencies began to focus on rounding and multi-policy marketing strategies.
? Direct mail became the key marketing medium. For the first time, telemarketing began to catch on. Agencies hired salespeople to make phone calls in the evenings. Expiration or X dating, first instituted by the national captive players, became the major sales program.
? Agency automation usage was spreading, but still primarily designed and used for bookkeeping, with very little use for marketing. Applied Systems entered the picture, and soon AMS and Applied garnered over 95 percent of the marketplace.
During the 1980s:
? The first commercial telemarketing firms began to flourish.
? IIAA began to cut back on its ad program for economic reasons
? Banks began to expand their insurance services, with agents trying every way to stop the movement.
? Agencies struggled to find ways to use their automation systems for sales and marketing purposes.
? The exodus of national insurers from the scene eventually resulted in only 8 national companies. Regional insurers, however, flourished, in large part because of expansion of cooperative advertising programs with their agencies.
During the 1990s:
? Price emerged as THE method of selling insurance, giving some aware agencies a good opportunity to back away by establishing themselves as risk managers, total-account managing services and trusted insurance advisors.
? The Internet began to play an increasingly important part in marketing, with e-mail becoming the communications tool of choice.
? Independent agencies jumped into the fray, establishing "brochure-like" Web sites.
? Agents tried to obtain leads and prospects from Internet searchers.
? The complexities of search engine optimization were far too much for independent agents to understand and effectively utilize.
? On-line sellers like GEICO and Progressive, and direct response carriers in general, turned the Internet into an effective tool and became a major threat to independent agencies. By the end of the decade, this truth became evident: "Every prospect, every customer of every agency knew that he or she could buy insurance from someone else and pay less in the process."
During the 2000s:
? T he age of advanced communications began in the first two years of the decade. By 2008, more than one billion Internet devices were in use, with no end in sight.
? More than 80 percent of first-time auto insurance buyers access the Internet for pricing and coverage, and 44 percent of those buy directly online.
? Independent agencies recognized the need to change their marketing approach to appeal to Gen X and Gen Y..
? The continual advance of new communications and technology likeFacebook, MySpace, Linkedin, Plaxo and Twitter brought entirely new ways to communicate and market Insurance and financial products.
Today, we're only in the beginning stages of social networking and already it is obvious that many purchases (especially insurance) will be discussed in depth with their 'friends" by the coming generation of twitter-type communicators. It has become increasingly important for agencies to have full and complete information about its clients and prospects. Systems must be able to effectively segment the market to tailor products and services to specific market niches.
As we near the end of this decade, there is much opportunity on the horizon for the independent insurance agency community. Successful agencies will look to the past for guidance, the present for benchmarking, and the future for change. No longer can agents just wait for the phone to ring and sell products. Although the independent agency channel is viable for decades to come, it will need to embrace new ideas in the areas of marketing, communications, and technologies.
