Editor's note: This article first appeared on EnhancedInsurance.com and is reprinted here with their permission. Click here for the original post.
When I started in insurance, clerks wore sleeve protectors to keep from ruining their shirts with the ink from carbon paper.
Things were about to change drastically for insurance offices. Even at that time of Sean Connery giving way to Roger Moore, agencies were outsourcing part of the sales process.
My title was “special agent” for one of the largest stock companies. Being called a “special agent” at the dawn of the James Bond movie franchise made the title sound extra special, but it carried no 007 privileges. My job was to go with the local independent agent to assist him with sales, both commercial and personal.
In many instances, the agent knew almost nothing about commercial coverage and my knowledge was extremely important. The insurance company paid my expenses, because I was bringing the agent’s business in our corporate doors.
Over the years, agents have outsourced more and more of their sales process. Agents have outsourced sales leads prospecting to lead generators. They have also taken advantage of company service centers, which upsell and account-round, selling home insurance to those who only have auto insurance through the agency — on the agent’s behalf. Companies charge agents 1% to 2% for this help.
Other companies have facilitated direct sales for agents, when clients are referred to them by the agent. Hartford commercial has had their “warm leads” program, and many other companies sell personal auto and home for agents through the Internet.
However, the newest development on the horizon is the digital insurance store. This easy to execute attachment to the agent’s existing website allows clients to purchase insurance policies and an array of financial products 24 hours a day, seven days a week.
I’ve introduced the 212 insurance agents in our Insurance Partners aggregation to this new concept, but are other agencies ready to take this step?
Why are agents looking for new answers?
Consider these headlines:
“Insurance Via Internet Is Squeezing Agents” – New York Times 1/18/2015
“Google Wants to Sell You Insurance” – Wall Street Journal 1/8/2015
“Overstock.com Brings Insurance Sales to Retail Site” – Insurance Journal 5/19/2014
“Walmart to Offer Auto Insurance” – Money CNN 4/30/2014
“IKEA Now Sells Insurance” – Fast Company 10/9/2014
Some of the above headlines represent wishful thinking by marketers who apparently haven’t studied the history of Sears and Allstate. Few people realize that Sears had been selling the Allstate tire brand for a few years before it created Allstate Insurance Company. For decades, Sears sold Allstate Insurance through direct mail and in booths at their retail stores. Sears divested the insurance company in stages and ended their relationship with Allstate in 1995. Allstate which has sold through a captive agent field force since the early days now makes eSurance (built on line to sell on line) offers available for direct to consumer purchases of P&C products in direct competition with their own agents.
It is clear, though, that the insurance-buying public wants to buy policies on their terms in their own time. Obviously there is little that can be done to impact the cost of claims and ultimate premiums, so companies are seeking to differentiate themselves by varying their distribution methods. Some have taken the debatable position that the Internet is the ultimate delivery mechanism — viewed as having broader reach with a lower cost of distribution.
The dawn of digital insurance distribution – competitive threat or massive opportunity?
All of the new distribution models mentioned above (Overstock, Google, IKEA, Walmart), are using some form of digital product distribution to reach their target audience – many who are now agents’ clients.
The mega company, Metropolitan, historically had four distribution channels: direct, career agents, independent agents, and group sales. They now have added online sales beginning with auto through Google Compare.
More surprising is Mercury Insurance taking part in Google Compare’s initiative. Mercury Insurance has had an industry reputation as one of the staunchest backers of independent agents. In today’s world supporting only agents is perceived by some as too limiting, so the multi-channel distribution models are gaining ground.
Also challenging agents for business are websites like PolicyGenius. Sites like this cause the old guard like me to cringe. Obviously, some insurance is better than no insurance, but the simplistic approach to the sale of renters insurance on PolicyGenius will no doubt give a false sense of security to many while leaving huge coverage gaps. It’s highly probable this site will sell a great deal of insurance. In fairness, their site is no more overly simplified than GEICO’s online auto site.
It seems clear in the face of these competitive threats that the independent agent can’t continue to market as they have in the past without losing market share.
What's really happening in the market
Most of the noise in the “digital space” is around single product offers and opportunities for consumers to “get a quote”, most principally for auto insurance. Many of the offerings are “direct to consumer” attempting to circumvent traditional agent distribution. Some quote comparison sites simply direct traffic to multiple carrier websites for consumers to purchase products, while some generate leads for agents to call. Most of the clients that agents deal with probably want to actually “get a policy.”
Delivery of a policy requires not just a quote mechanism, but an underwriting, binding, issue, billing, premium, and policy administration effort. Customers eventually need more products than auto insurance, which means they will look to their “trusted advisor” agent. But they will work with the agent only if the agent can offer to fill more of their insurance and personal protection needs in a way the customer wants. That experience would couple the desire to purchase on the web with an agent’s experience, product knowledge, and ready counsel.
Agents need to go beyond their traditional roles as sellers of auto insurance because auto is fast becoming more commoditized. Instead, they should consider offering an array of product solutions (a portfolio approach). They need to offer a customer-focused wrapper, 24/7 access to all products, policies, premiums, payment information, access to documents, claim forms, and customer care call centers.
We have recommended to our over 200 Insurance Partner member agencies that they implement the GBO/Insur IQ digital store platform to deliver a private labeled, digital purchase and customer service experience that clients can access through each agent’s site. We selected GBO/Insur IQ because it is one of the only digital insurance distribution platforms specifically developed to support traditional P&C agents. Like Cielostar (Minneapolis, MN) who supports agents for digital distribution of group employee benefits, GBO/IQ compares favorably versus other digital distributors who are seemingly trying to disintermediate agents, i.e. GEICO Direct, MetLife Direct, AIG Direct, and Policy Genius — to name a few.
GBO/Insur IQ delivers a digital insurance and personal protection product marketplace, with familiar “shopping cart” technology, packed with a variety of Life, A&H and P&C insurance products that are conducive to Internet sales. Each agent will alert his customer base about the availability of product through their website. That consumer can browse, research, and purchase products from multiple carriers through a simple and intuitive process. GBO allows agents to offer a comprehensive suite of insurance products. Their platform will also service their customer base in a customized insurance “store” that is open 24/7 not only for sales, but also account self-service. GBO agents are available for calls during normal office hours, and the retail agent can be as involved in the process as the customer would like.
Products now available through GBO include: dental, vision, accident, disability, critical illness, ID theft, pre-paid legal, term life, short-term medial, hospital cash, travel assistance, event liability and cancellation, and pet insurance, with an increasing number of participating carriers and products in the pipeline.
Agents will remain strong by doing what they do best and using intelligent outsourcing to compliment their abilities.
Jim Holm is the CEO of Enhancedinsurance.com. He is a five-decade insurance industry veteran.