Independent agents are still a force to be reckoned with in theproperty and casualty sector, as customers overwhelmingly prefer todo business with an agent. Accenture's recent survey of U.S. property andcasualty customers confirms this trend, despite growinginterest in digital and other “direct” experiences available to thepersonal lines customer. A substantial majority of thesecustomers prefer working with an independent agent because of theexpertise they provide, as well as the agent's ability to help themcompare multiple brands and find the best value.

Clearly, the strong value proposition of the independentagent—access to advice, product range, carrier choice, andlocalized personal service—is still very compelling tocustomers. Yet, without substantial attention to improving thecustomer experience, independent agents are vulnerable todistribution advances in both the direct and exclusive agencychannels.

This is not an easy task. The agency market is highlyfragmented, largely local and is made up of companies run by smallbusiness entrepreneurs. As a result, the industrygenerally can suffer from a lack of skill, scale, scopeand access to capital. Carriers with a significant independentagency channel, however, can enhance the effectiveness oftheir independent agent partners by pursuing two keystrategies: First, to become a preferred carrier across alarger number of agencies, and, second, to build a high-performanceagency network that thrives on the carrier's strengths.

The aim of any agency value proposition is to increase loyaltyamong independent agents, enough to achieve a preferred carrierposition with a large number of agencies. Follow these 8 steps tobecome carriers of choice:

1. Increase ease of doing business. A keybenefit that independent agents bring to their customers is findingthe best coverage for the right price. As a result, agents'access to competitive product structures and price is a standardfeature in any successful relationship between the carrier and theindependent agent. This relationship can be strengthened whencarriers develop efficient and effective application, quoting andbinding processes, giving agents, licensed sales professionals andcustomer service representatives a strong incentive to “prefer”particular carriers. Agents understand the advantage of beingable to close four transactions per hour rather than three, makingtransaction throughput correlate directly with commissionrevenue.

2. Provide specialized knowledge andskills. Insurers can create affinity with independentagents by offering them better product intelligence, transactionsupport and collaboration options. These include quick, efficientand straightforward ways to educate agents on a range of products(auto and home) and help them sell more sophisticated products togrow their customer base.

3. Support effective agencyoperations. Carriers have long provided agencies withportals, interfaces, and business process support to help increasesales. Extending these offerings to help agencies run their ownbusinesses, rather than just selling products, will tighten thecarrier-agent relationship. For example, insurance agenciesspend significant amounts on technology infrastructure, IT help,office equipment, tax services and employee benefits. Insurerscan provide economy of scale to agencies, using the power of theirlarge agent network to efficiently meet agent needs.

4. Clearly define customer ownership. Customerownership is a key issue in independent agency/carrierrelationships. Disputes over customer ownership can inhibitefficient and constructive agent-customerinteractions. Carriers today are increasingly driving agentsout of key customer interactions, such as first notice of loss, butagents also are growing wary of sharing customer datawith carriers. Many agents guard data as a way to leave theiroptions open in retaining an existing customer, by moving thatcustomer to a competing carrier. To repair the lack of trustthat has troubled the industry in recent years, carriers can helpagents engage customers with more insightful messaging, and supportagents' efforts to remain accessible and relevant to customers atall times.

5. Enable key agent-customerinteractions. As monitoring and alert services become more prevalentacross both commercial and personal lines, carriers have anopportunity to empower agents to more directly assist customerswhen issues arise. The increase in usage-based auto insurance inpersonal lines, for example, will create a market for additionalservices, such as vehicle theft tracking, automated emergencyresponse, and vehicle wellness alerts. These services help todifferentiate commoditized products but also create additionalcustomer interactions for agents to help mitigate and respond topersonal losses. They also create important customer data thatcarriers can analyze to alert and engage independent agents inproviding new customer services.

6. Provide unique customer servicecapabilities. Agents are likely to place greaterworth in after-hours and peak-hour service support if theseservices are provided on behalf of the agency, rather than thecarrier. For example, contact centers that act as a true extensionof high-performing or promising agencies will bolster agencyloyalty and provide a more coherent customerexperience. Channel and performance analytics are helpingcarriers reliably identify top agencies and agency/customerrelationships. These insights can create a strong win/winvalue proposition.

7. Embrace third-party distributioncapabilities. The independent agent market is filledwith alliances, clusters and commission clubs that exist primarilyto give agencies access to key insurance markets and additionalservices that support their operations. While these thirdparties offer some benefit to both agencies (in the form ofincreased commissions) and carriers in the form of bundleddistribution entities) they have not been successful in providingthe vast majority of agencies with the scale, skill, scope andcapital that enable growth. Carriers can create an industryutility that both solves some of the operational inefficienciesinherent in the independent agent market and enables long-termgrowth beyond just a near-term commission boost.

8. Improve claims servicescoordination. Engaging with a customer during a lossis the most compelling moment for agents to provide tangiblesupport for their customers. Though carriers are taking morecontrol over the claims process to ensure that specific firstnotice of loss rules of engagement are followed, providing amechanism for independent agents to play a role in the claimsprocess is critical. It not only enhances the customerexperience, it allows agents to engage with customers during a keymoment of truth and to act as an advocate forthem. Collaboration tools can enable insurers to give agentsgreater insights about claims outcomes, helping agents to mitigateadverse reactions. This creates a positive customer experienceand gives agents stronger ownership of the customerrelationship.

Despite significant investment—and much progress—over the pastdecade by carriers intent on establishing an alternative directdistribution channel, the agency distribution channel remains thedominant interface between consumers and insurance carriers.Carriers hoping to increase profitable growth should invest increating preferred relationships with agency partners, helping thembecome more effective at sales and retention.

In Part II, posting on April 8, the authors discuss how carriers can establish ahigh-performance agency network.