Note to independent agents: In case you haven't heard, you'rejust about extinct.

The latest salvo proclaiming that independent insurance agentsare toast comes from a study by investment bank Nomura, stating that the battle for personal linesauto insurance sales has already been lost to the directwriters, and that the independent agent's role, if any, is rapidlydwindling:

The Nomura analysis also says that as insurers'underwriting-model sophistication grows, “the value of 'frontlineunderwriting'—the strategy of paying talented agents todifferentiate good vs. bad risks on behalf of the insurer—hasdeclined. Even the ability to provide price comparison has beendiminished because the consumer has been made aware of a cheaperalternative to the independent agent's best deal.”

Well, duh. Is this really a news flash?

Independent agents have been losing personal lines auto marketshare for the past 17 years, according to an IIABA property-casualty insurance market study released inFebruary. After stabilizing from 2001 to 2005, national independentagencies carriers saw their private passenger auto market sharenearly cut in half, from 14.1 percent to 7.5 percent. And whilesome regional carriers are bucking the trend—ACE INA, Foremost andInfinity posted double-digit market share growth numbers from 2010to 2011—the trend is definitely downward.

The report continues, “[T]he continued growth of directresponse—even during a recession—suggests traditional advertisingand new forms of marketing are effective…Without dramatic change inmarketing, it is likely they will continue to grow and take shareaway from the other channels involving agents.”

The real concern with this ongoing trickle of data on the agencysystem going extinct is that what has happened in private passengerauto could happen in other lines. We've written extensively aboutwhether small commercial insurance buyers will use technology tosimply shop and buy their own coverage. Can some monolithic directwriter do for commercial lines what the geckos and cavemen did forauto?

According to AA&B tech columnist Rick Gilman, who also headsup the Personal LinesGrowth Alliance, the answer is–not yet. But he concedes thatsmall commercial lines business could lend itself to this sincesmall business owners are constantly under pressure to hold downcosts. And if turning business insurance into a commodity like autowill bring prices to rock-bottom, why not?

In fact, technology and social media—those tools that arehelping independent agencies compete in a crazy competitivemarket—could also be the tools of their undoing, he said.

“Before social media, agents had walk-in business fromindividuals and businesses in their community,” Gilman said. “Youhave to recognize that as you grow your business through socialmedia interaction and marketing, the footprint of your client baseshouldn't necessarily get so large that you struggle with thestrengthening of those relationships.”

On the flip side, these same tech tools can helpa determined agency to market and sell personal linesauto the way the direct writers do, Gilman said. “Auto insuranceis not a complex coverage; it is a commodity. From asmall agent perspective, if you want to go after that business, youcan find a way to mass produce a brand. Methods as simpleas Constant Contact, social media, and YouTube videos can help youbrand much the same as GEICO and State Farm.”

So should you fight for personal lines auto?

“It's absolutely worth fighting for,” said Chris Paradiso,president of Paradiso Insurance inStafford Springs, Ct. About 30 percent of his agency's businessis in personal lines auto, which generates great profits andretentions.

“We're not under attack from direct writers at all. We're notlosing business to them, we're taking business from them.”

Paradiso encourages prospects and customers to shop directwriters–who in their lust for churning new business encourage thepurchase of state minimum coverages and in some cases, actuallydiscourage buyers from requesting umbrella coverage to keep costslow.

And while he concedes that personal lines auto is a volumebusiness, standard commissions are 15 percent or higher–and at hisagency, retentions are high. This is important because the agencyonly breaks even 9 months into the second year of a policy, hesaid.

Like Gilman, Paradiso believes that smart brand identitycombined with technology makes all the difference in whether anagency will succeed. ”I think we have to wake up and startmarketing our business by finding our identity and branding itthrough the Internet. We don't cold call or do anything fornew business except marketing thru Internet,” he said.

For Paradiso, it's all about education–explaining to a homeownerwhy cheap auto coverage could jeopardize everything he owns ifthere's a claim, and that if his auto coverage goes up at renewaltime, Paradiso as an independent agency can shop the risk to othercarriers.

And that's a service that direct writers can't compete with.