Disintermediation won't be easy in the personal-lines market, at least among many of those who work with agents today, with one in four auto policyholders and one in five homeowners surveyed by Deloitte Research indicating they would not buy without their agent or some other intermediary—period.

However, while Deloitte's “Voice of the Personal Lines Insurance Consumer” surveys found that a significant number of the auto and homeowners' insurance buyers queried who currently use agents cannot do without an intermediary, many respondents indicated they are at least open to the idea of buying direct from an insurer, given the proper price incentives and services.

Indeed, when those who used an agent were asked what would be their preferred way to purchase a new insurance policy, 22 percent of auto respondents and 20 percent of homeowners said buying direct from an insurer instead would be their top option.

In addition, when this segment was asked if the price of coverage was relatively equal, how likely would they be to change auto insurers to buy over the Internet without an agent or broker, 9 percent of auto respondents said they would be very likely and 17 percent would be likely to do so. Among homeowners, 8 percent who used an agent said they would be very likely, while 19 percent would be likely to buy direct over the Web instead.

On the other hand, the potential for channel changing is not a one-way street. Indeed, the openness of respondents who now buy direct to use an agent in their next renewal was even more pronounced. Among direct-buying homeowner respondents, 39 percent said their top preference the next time they purchase a new policy was to work with an agent or some other intermediary—a sentiment echoed by 30 percent of auto respondents.

When asked if the price of coverage was relatively equal, how likely would they be to change insurers to work with an insurance agent or broker rather than shop and buy on their own, 9 percent of auto respondents who had bought direct said they would be very likely to switch channels, with 20 percent likely to switch. Asked the same question, 15 percent of homeowners said they would be very likely to go with an agent, while 21 percent would be likely to choose an agent.

What specifically might prompt consumers to switch channels?

Since price in general was by far the biggest decision point cited by the overall sample of 2,160 respondents (54 percent of auto buyers and 45 percent of homeowners said price was extremely influential, while another 28 percent and 30 percent, respectively, characterized it as very influential in their purchase decision), it's only natural that a majority of those buying through an agent (56 percent of auto respondents and 58 percent of homeowners' consumers) said they used an intermediary to secure a better price. Similarly, about 55 percent of each sample said an agent would get them more coverage for the same price.

These feelings were stronger among those who said they work with an agency representing more than one carrier. Seventy-five percent of both samples said their independent agent can deliver a better price, while 70 percent of auto buyers and 74 percent of homeowners believe their independent agent can get them more coverage for the same price.

Therefore, demonstrating to agency buyers that they can save significant money on their premiums if they bypassed their intermediaries and went directly to insurers would appear to be the first challenge facing direct carriers. The question is how these prospects would define “significant.”

Indeed, of those with agents who would consider buying direct, it came down to how much the respondent could save on their auto or homeowners' insurance premium. From these survey samples, it appears that recruiting such channel-changers won't come cheap.

About 23 percent of auto buyers and 21 percent of homeowners said they would not abandon their agent and buy direct unless they could save more than 20 percent on their premium. Around 15 percent of both samples would go direct for a price difference of 16-20 percent, with 20 percent willing to consider a shift for 11-15 percent in savings. About 15 percent would drop their agent for a price cut of 6-10 percent, while just a handful (around 5 percent) would go direct if they could save 5 percent or less on their premium.

In looking at another aspect of cost—value for the premium dollar—about 62 percent of those now using agents would consider buying direct if they could get more coverage for the same price.

Still, while price is important, it's not the sole factor respondents cited when asked why they work with an agent, noting the support and services agents can provide as well. They cited the belief that an agent would more clearly explain their coverage (a little over 80 percent of both samples), could identify all of their potential losses and make sure they are covered (75 percent), as well as be their advocate to help get claims paid quickly and fairly (75 percent).

In addition, 70-75 percent of respondents said agents would give them more objective advice, better represent their interests, and take care of all their insurance needs beyond either auto or homeowners' coverage. Seventy percent of both groups said it would be more convenient to buy coverage through an agent.

Trust was also a big factor for a large segment of these respondents, as four in 10 among both samples said they use an agent because they don't trust insurers to deal with them fairly.

Among other motivating factors cited, about half of the respondents using agents said they might buy direct from a carrier if the insurer more clearly explained their coverage, offered more expert advice, took care of all their insurance needs beyond just auto or homeowners' coverage, and if it were easier and more convenient to buy straight from the company. However, fewer than one in five cited any of these factors as extremely or very influential in their decision whether to go direct.

Another obstacle facing carriers looking to sell direct to consumers is the fact that satisfaction and loyalty indicators were very high among respondents who work with agents. Nine out of 10 auto consumers surveyed are either very satisfied (47 percent) or at least satisfied (42 percent) with their current agent—a result echoed by respondents with homeowners' policies. As a result, four in 10 auto and homeowner respondents had been with the same agency for over a decade.

One interesting finding was that a large segment of respondents using agents were not aware whether their intermediary is independent or exclusive to their current carrier.

Among auto respondents, half said their intermediary only represents their current insurer, and 21 percent said their agent is independent and sells coverage for multiple carriers. But 30 percent said they did not know whether their current agent represents just their current insurer or additional carriers as well. This finding was even more pronounced among homeowner respondents, as 39 percent said they don't know whether their agent represents just one or multiple carriers, while 38 percent work with exclusive agents and 23 percent with independents.

However, those who do recognize their agents are independent producers were the most enthusiastic about the benefits their intermediary has to offer, while their expectations of what independent agents can deliver in terms of price and service were the highest recorded in the survey. This would indicate that it would serve independent agents well to make sure their clients realize they represent multiple carriers and to explain what advantages that might present for buyers.

So, why do certain respondents prefer to deal directly with a carrier, without an agent?

Price and convenience are two key factors. About 60 percent of direct personal-lines buyers responding to the surveys indicated they believe that intermediaries just add cost to the transaction, while two out of three auto respondents (and 59 percent of homeowners) believe that buying direct would get them a better price. In addition, 75 percent of auto buyers said it's more convenient to buy direct, a view echoed by 70 percent of homeowner respondents—with about one-third of each sample strongly agreeing on this point.

However, on a wide array of additional factors—from whether insurers will manage claims fairly, cover all their exposures or handle all of their insurance needs beyond a single policy—direct-buyer respondents were less enthusiastic about the benefits of going direct than were those who had bought through agents.

Among these two survey samples, younger respondents were more likely to buy direct, perhaps in part because of their generation's greater proclivity to live their social lives and conduct their business online.

One critical point is that the surveys revealed a flipside to the coin on the trust factor cited earlier, as around four out of 10 in both the auto and homeowner samples said one reason they buy direct is because they don't trust agents to objectively represent their interests.

Could this be residual fallout from the contingency-fee controversy of a few years ago, prompting some consumers to wonder where the independent agent's loyalty ultimately lies—with the client or the carrier? In any case, the industry definitely has trust issues to overcome and reputational risk challenges to manage.

Still, no matter how consumers buy personal-lines insurance, the surveys found that consumers are keen on accessing information and dealing with carriers in a variety of ways. In my next blog I'll address the fact that respondents in both surveys indicated that the ability to interact with insurers over a multitude of channels—in person or on the phone; over the Internet or via applications on their mobile smartphones—will be a major consideration when they make their next personal-lines policy purchase, regardless of how or from whom they buy their coverage.

(We welcome your feedback and questions throughout this series of articles. You may download the full report on “The Voice of the Personal Lines Insurance Consumer” from Deloitte Research at http://www.deloitte.com/view/en_US/us/Industries/Insurance-Financial-Services/a0f93dffd16f5310VgnVCM2000001b56f00aRCRD.htm.)

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Channel Changers: Can Consumers Be Convinced to Switch?

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