Conning's recent study on property-casualty insurance distribution made some pretty obvious observations about its competition: specifically, that Web aggregators are giving traditional agents and brokers a run for their money by allowing prospects to get quotes directly online. However, the report observes that this same system't built-in flaw is that most aggregator transactions are one-and-done deals that don't yield repeat business. On the other hand, banks — the other “threat” in the Conning report — are leveraging both the ability to compare rates on the Web and building relationships with customers to ensure repeat business.

I've been around long enough to remember the pre-Gramm-Leach-Bliley days when everyone was worried about banks stealing business from independent agents. For the most part, that threat has proven unfounded. While biggies like Wells Fargo are aggressively pursuing agencies and brokerages for acquisitions — a trend that will probably increase as struggling financial institutions seek diversification in profitable businesses — banks, like direct writers, can't really offer policyholders the service and relationship that agents can.

However, a while back another Conning study shed light on something that could be a more insidious threat to the independent insurance distribution system: property-casualty companies offshoring not only the “no-brainer” back-office functions they've been doing for 20 years, but “services requiring higher levels of intellectual capital,” including actuarial, claims and underwriting.

This study indicates that the number of service providers offering such high-level functions are expected to grow over the next 5 years, from 33 percent to 58 percent. Moreover, formerly “cheap labor” countries like India are being bumped out by emerging economies where labor is even cheaper, like Russia, the Dominican Republic, Argentina and South Africa.

And although it wouldn't seem that the services provided by independent agents would lend themselves to offshoring, one of the service areas offshore providers will be expanding over the next 5 years is customer relationship analysis — pretty sophisticated stuff for foreign guys in a far-flung service center.

Just gets you to thinking…

Special Reports /

Toops Scoops: Can You Be Offshored?

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