When I started covering the independent agency beat for NU back in 1981, there was a lot of talk about agents going the way of the milkman or the buggy-whip maker. I didn’t believe that back then—and I still don’t anticipate seeing agents disappear anytime soon.
But that isn’t to say agents don’t have to work a lot harder these days to secure their role in the distribution chain, in terms of convincing both their carriers and customers about the added value they bring to the table.
There are already many consumers buying personal lines direct from carriers via the Internet. And while few business owners purchase their commercial coverage today without having an independent agent or broker serve as an intermediary, that could change in the not-so-distant future, as a number of insurers are at least starting to consider that option, while some have already taken the plunge.
Indeed, as noted in my last blog, participants in a pair of small-business consumer focus groups run on behalf of Deloitte’s Center for Financial Services earlier this year indicated that under the right circumstances and given the potential for a significant premium discount, they might be willing to buy commercial coverage without an independent agent or broker by their side.
I heard firsthand testimony about these challenges last month while moderating a pair of panels discussing agency-company relations, during the annual Insurance Leadership Forum co-hosted by the New York Insurance Association and the Professional Insurance Agents of New York. One panel featured a group of carrier executives, followed by a panel of independent agents, each discussing their take on how an agent could stand out with an insurer as a business partner, and vice versa.
I have to admit I had a sense of déjà vu while the panelists offered their views, as well as when I listened to the laments, hopes and frustrations of attendees from both sides of the fence during breaks and meals. I’ve been hearing talk for three decades now about how to repair, restore and strengthen the often precarious “partnership” between insurers and their independent agents.
While there are some new realities to deal with—mostly involving technology issues—the way to improve agency-company relations isn’t rocket science. A few years ago, when I was still the Editor in Chief at NU, a producer survey co-sponsored with Deloitte laid out what needs to be done. And from what I heard at this conference, not a lot has changed in terms of what each side expects from the other.
Agents want carriers that will be committed to markets and not suddenly abandon them when times get tough. They want to be given the benefit of the doubt if an unusually large loss from an otherwise good account skews their loss ratio for the year.
They want a competitively priced product and a fair shake for their clients when a claim is filed, because they know they are the ones who will look bad if a carrier gives the runaround to a policyholder with a legitimate claim.
They also want a two-way partnership—a chance to have some input on a company’s strategy in a particular line or region. They seek a genuine dialogue when a carrier representative visits, and not just to be handed what one agent during a break between panels characterized as “my marching orders, take it or leave it.”
They appreciate the benefits new technologies have brought to insurance in underwriting, claims, marketing and communications. But they also want insurance to remain a people business, in which the red flags raised or decisions rendered by automated systems can be explained to clients in a reasonable manner, with flesh-and-blood individuals available and empowered to grant appeals in special cases.
As for insurers, they expect to see a commitment from their agents as well—not just in delivering a sufficient volume of business but in placing a profitable book with them. Moving business around annually for a small price savings does not spell “partnership” for most carriers.
Many insurers, particularly on the commercial side, also expect their partners to go beyond mere policy-peddling and to be consultative advisors for clients when it comes to risk management and loss control. This lowers frequency, keeps severity under control and enables producers to deliver a higher-quality book of business to their carriers while offering additional value to the client.
Carriers expect ongoing organic growth from their agencies. At times, they see an agency with a large book of business essentially living off renewals and not being particularly aggressive about expansion. That puts the carrier in a tough spot—not wanting to alienate a solid producer but also seeking agencies that will bring more new business on board each year to grow the overall pie.
For any partnership to succeed, an agency perpetuation plan is necessary to reassure carriers that should a key principal leave for any reason—retirement, illness or even death—a smooth transition will take place so their valuable book of business is in good hands.
In a related concern, carriers worry about the aging of the independent agency force in general and look to partner with those that are proactively working to bring new blood into the sales and service end of the business.
Last but not least, many insurers expect their partner agencies to be on the cutting edge with technology—especially on social media. The goal should be for an agency (as well as an insurer, for that matter) to become part of the client’s everyday life beyond the obvious touch points of renewals and claims, which could spur cross-selling and improve retention rates. Some carriers are willing to provide training to help get their distribution partners up to speed in this area and even offer packages of material to distribute to clients via various social-media channels, so agents don’t have to reinvent the wheel.
Unfortunately, carriers and agents don’t always walk the walk, even if they talk the talk, on doing what it takes to improve relations. I heard complaints at the conference about carriers that urge agents, in effect, to “do as I say, not as I do” when it comes to forming and maintaining a partnership. And to be fair, carriers often echo the same complaints about the unreliability of agency loyalty.
In the end, independent agency carriers and their producers can only make a formidable team and stave off irrelevance and disintermediation if they work together to retain the loyalty of those who keep them both in business—their clients.