Turn Lemons Into Lemonade

Turn Lemons Into Lemonade

In tough times, insurance carriers need to find ways to help their independent agents get away from processing orders and go out on the street doing what agents do best: selling policies.

Robert Regis Hyle

Now more than ever the relationship between insurance carriers and independent agents is being tested by a wide-ranging list of factors, but no matter how strong the relationship has been in the past, current market and economic conditions demand both sides work hard to keep that bond intact.

For Chad Mitchell, a senior analyst with Forrester, the major issue for carriers is helping agents improve their sales by improving the customer experience. “A happy customer means you have happy agents,” he says. “What we are seeing is any functionality available on the Web for quoting has to be seamless for the agent, whether it is with a call center or an in-person experience.”

The industry is beginning to see a seamless channel experience, Mitchell believes. “One of the top IT investments among insurers continues to be legacy modernization,” he says. “But the next [investments] are about improving customer experience and implementing tools to improve the agent experience.”

The fact that ease of doing business is a big driver for most insurance carriers is not a surprise. The key to reaching that stage with the independent agent community, notes Bill Jenkins, CIO at Penn National, is technology.

“That's where we compete for the business–at the CSR desktops in the agency,” says Jenkins. “Technology is a driver, and part of that direction involves the use of predictive analytics to determine how we segment the business and which customers are more profitable to deal with, and we've also been able to discover what types of products we need to be developing.”

The most important thing carriers can do is make it easy for agents to do business with the carrier, agrees Jeff Yates, executive director of the Agents Council on Technology (ACT). “That's a key area in terms of real-time quoting, endorsements, and inquiries,” he says. “The more you can free agents from processing, the more time they have to cross-sell, protect renewals, and focus on sales. It frees up people.

“One of the things we always recommend to producers is to get out of the servicing and processing business as much as possible and spend your time generating sales and figuring out how to grow,” continues Yates. “In order to do that, you need efficiencies in the back room. I emphasize real time and download as critical foundation steps.”

STATE AUTO STORY

The sole distribution source for State Auto Insurance is through the independent agency system, so David Russell, chief enterprise architect, maintains the carrier understands what agents want. To back that up, Russell points out industry research group Deep Customer Connections ranked State Auto eighth out of 250 property/casualty carriers in its recent survey on ease of doing business. “We feel pretty good about that,” says Russell.

Achieving ease starts with listening to the agents, Russell stresses, and then working to do business the way those agents want to do business with State Auto. “There are a number of initiatives we have taken over the last couple of years that have been based on direct feedback from our agents,” he relates.

The first initiative was in the carrier's business insurance arena. In order to improve its position in the market, State Auto automated quoting capabilities for both the business auto line and BOP in all of its operating states. “Last spring, we rolled out to all 29 states in a matter of eight weeks,” he says. “The agents noticed, and they've rewarded us with additional business.”

On the personal lines side, the carrier initiated a project 18 months ago to bridge with both agency management systems and comparative raters. “We've gotten more opportunities to quote, and we are seeing approximately 30 percent of all our new business quotes are coming through our bridge solutions,” he says.

State Auto now is providing real-time rating with the comparative rating systems coming to the State Auto Web site and getting real-time responses directly back into the rating system.

LISTEN UP

Russell credits State Auto CEO Robert Restrepo, Jr., with recognizing several factors when he took the reins in 2006. “We were not being as aggressive as we needed to be,” says Russell. “In listening to the agents and through his leadership, we started with the bridging solutions. One of the things he did early in his tenure was he went out to listen to the customers.”

Through that interaction in agency council meetings, several initiatives began, according to Russell. “We also went out to nearly every state with CSR meetings and listened to them–validating things we knew and learning new things,” he says. “We have been acting on things we have been hearing from them.”

Today, 98 percent of all new personal lines business is being placed through the agency portal, and one third of that is coming through a bridged solution with the agency management systems.

“Agents were telling us they wanted to bridge directly from their agency management system or their comparative raters,” says Russell. “We had agreed some time ago on using the ACORD XML standards to communicate within our rating application, and those standards were the basis of the communication from the agency systems and comparative raters. We had prepared ourselves to integrate with third parties, and since we had that piece already in place, I won't say it was a piece of cake, but it was a very repetitive state-by-state implementation.”

Penn National also discovered great value in speaking directly with its independent agents. Jenkins believes it is important to give agents the products they need to do business as well as make it easy from a perspective of efficient, user-friendly technology without the agents doing a lot of rework. “Agents are looking at technology as a differentiator,” says Jenkins. “This is not rocket science, but it is amazing to me a lot of carriers don't do this.”

Penn National also put together agency council committees–one for personal lines and one for commercial lines. As the carrier rebuilds and refreshes its core systems, the carrier has those agency councils come in frequently to critique what Penn National is doing. “What we are hearing is we are different from a lot of others in that we listen to what they want us to do,” says Jenkins. “We not only get their involvement, but we also get their commitment to use our systems. We've got a lot of accolades [from agents] on the upfront automated underwriting system we developed for personal lines. We're getting a lot of use out of it, and because of it, we are growing our personal lines business. Our game plan is to have a tool people will use.”

Penn National has begun to categorize which agents and types of business are most profitable. The carrier eventually plans to share that information online, but for now, Penn National provides its territory managers with that information. Those managers sit with the agents and go over what type of business they should be pursuing for the carrier. “The ultimate game plan will be not only to develop products the agents want but to help them with the marketing,” says Jenkins. “We're moving in that direction. We haven't gotten to that point yet, but I don't know many carriers that have.”

IMPROVEMENTS SEEN

Penn National has focused on personal lines for a specific reason, indicates Jenkins. “Personal lines automobile is the biggest market out there, and we were like a lot of carriers–losing business in that area,” he says. “We needed to rekindle that business, which we've been able to do significantly with the new systems and a new underwriting appetite. Collecting data takes a long time to do. We have the enterprise data warehouse in place, and we continue to build that out with agency data. I don't see us providing that kind of information for the next one or two years, though.”

Thanks to a new underwriting system, Penn National has increased new business in personal auto by 100 percent in the last nine months, reports Jenkins. “A lot of the accolades have to do with the new system,” he says. “We've been able to build that business with the idea we complete the automobile systems this year, homeowners next year, and then work on the commercial lines.”

Penn National also has a new agency portal with a lot of functionality. “We put in things such as third-party report ordering, and we did some prefilling of fields so the agent wouldn't have to key in fields,” says Jenkins. “We did that for endorsements and new business. We put a lot of what-if scenarios upfront for the agents.”

As a result of the changes, Jenkins states Penn National has been able to go from 19 percent straight-through processing to 90 percent today. “[The portal] gives the agents time to market and allows them to spend more time on the street developing business instead of processing work.”

FRIEND OR FOE?

The agents Mitchell has spoken with clearly see the Web isn't going away, but many agents continue to view the Web as a threat because carriers haven't developed clear strategies.

Mitchell points to service issues as one example. If customers bind a policy online and receive a discount for not using an agent but want follow-up service, they are encouraged to call an 800 number. However, the majority–Mitchell believes probably 80 percent or more–pick up the phone and want to talk with a local agent.

“The carriers still are trying to figure out how to manage the commission structure and pricing post-sale of an online policy,” says Mitchell. “We've seen certain carriers say if customers choose to bind online, they either will have to remain in the self-service channel to file a claim or get access through the 800 line. The policy remains an Internet-only policy.”

Needless to say, these activities send mixed messages to the agent community, according to Mitchell. “It's still a difficult channel strategy,” he says.

Not all agents are tech savvy, admits Yates. “I think there are a lot of opportunities that are not followed up on by the agents,” he says. “That's our job to raise awareness and show the opportunities.”

When ACT does its best-practices studies of agents in terms of profitability, Yates explains, an unrelenting focus on productivity is very much a part of what makes a profitable agency. “Things such as real time and download are major points agents look at to improve their productivity,” he says. “When they improve their productivity, it gives them more resources to hire sales talent or to back up the current sales people with high-quality CSRs.”

Technology is a fertile area for agents right now. “Those agents who have picked up the ball, implemented real time and download for personal and commercial lines, and gone paperless–they are growing even in a soft market,” says Yates. “The reason is they have freed up time to concentrate on sales rather than focus on paper all day or working different carrier Web sites. That gets very time-consuming.”

MARKETING TOOLS

Yates sees several ways to extend functionality to the customer through the agent's Web site. Carriers need to help agents better position their brand and marketing on the Internet because that's where customers are headed first. Yates adds that includes social networking sites such as Facebook and Twitter, helping agents with content for their Web site, and marketing pages agents can link to. “Any type of support the carriers can provide,” he says.

What some insurers are doing with real-time quotes–particularly if they come through the agency management system–is send a proposal an agent can use with a customer, continues Yates. “[The proposal] talks about the value-added coverages a carrier offers,” he says. “It makes for a nice presentation piece for the agents.”

However, not many insurers are doing this yet, points out Yates. Still, he believes it is an opportunity for carriers to give more point-of-sale materials to the agents. “Outside of the technology area, having those materials available to agents to help them sell the business is a valuable step,” he says.

Another form of assistance appreciated by the agents is information on effective Web sites and how to position their agency on search engines. In addition, carriers need to offer content for an agent's Web site, claims Yates. “Providing high-quality insurance information that with an RSS feed an agent can pull over to the [agency] Web site is an area where the carriers could really help,” he says.

Yates believes the next step for carriers is extending real-time functionality through the agents' Web site. “Online quoting for the customer is something a number of agents want to do, and comparative raters are increasingly offering that functionality,” he says. “There are tools available that allow the customer to compare rates on the agents' Web site.”

LEAD GENERATION

To improve opportunities for its agents to sell more products, Penn National is working to improve the quality and amount of data it collects from its agents. “We've developed a data mart as part of our enterprise data warehouse, so every application we get we capture whether we write the business or not and share that information with [the agents]–what goes right, what goes wrong, what are the opportunities, what those risks look like, and especially what those risks are we have an appetite to write,” Jenkins says. “We use that to discuss with agents how we can move forward to get that business. It's a productivity and profitability piece.”

While most of the money carriers are spending to improve the agent connection is going to areas such as quoting, underwriting, and straight-through processing, Mitchell sees major investments coming in lead generation. For example, he points to Web sites for Allstate and GEICO–one a traditional insurer and the other a direct writer–yet both provide agent locaters. “It's very clear when you go to Allstate.com it has this three-channel distribution strategy,” says Mitchell. “Customers can stay online to get a quote, call an 800 number, or find a local agent. That's, in my view, the clearest multichannel strategy.”

Carriers are asking how to develop an Internet strategy without cannibalizing sales and turning off the agent sales force. “I don't think anyone has a perfect solution to it,” says Mitchell. “We continue to see the shift in optimizing the lead generation and the appointment form.”

Even with customers turning to online purchases, particularly for personal auto, Mitchell suggests the carrier can use these sales as a lead generation tool for cross-selling opportunities for its agents if the policyholder needs other products.

“The agents get access to new customers,” says Mitchell. “It's not just a lead; it's someone who already is insured. Agents don't have the opportunity to make renewals or up-sell on the original policy, but they can gain commission by cross-selling.”

Carriers also need to generate reports for agents to cross-sell business, adds Yates. “If agents are writing auto with a carrier, they can offer homeowners as an attractive risk,” he says. “Carriers can help agents in marketing those cross-sell opportunities.”

Beyond all this, carriers also need to bring more functionality to mobile devices, Yates advises, so some of the inherent efficiencies can be tapped by producers and principals in the field selling the business.

WHAT LIES AHEAD

Large portions of the U.S. remain where agents are the only solution for customers wanting to buy insurance, Mitchell points out. “Customers in those states can use the Web site only to gain access to the call center or find the local agent,” he says. “Eventually that's going to go away, and that's where you are looking at a huge investment.”

Traditional insurers are bringing in consultants to organize their e-business strategy and create commission structures, Mitchell observes. That likely means, from a product development perspective, carriers will be offering some online-only products, he predicts. Customers won't be able to change coverages on these types of policies as they are used to doing with an agent. “The Web will create more guided selling or online advice tools,” says Mitchell.

On another front, although comparing rating has improved in terms of agent/carrier quoting, affirms Yates, agents get more quotes than they otherwise would, which creates more competition for the business. “The key thing for the carrier is it wants to be in the agents' workflow,” says Yates. “If the carrier is not in the workflow, it is not in a very good position. Some carriers in personal auto are getting well over 50 percent of their quotes through real-time comparative raters or management systems.”

FINAL THOUGHTS

Insurers need to make sure they are meeting agents on the agents' ground, emphasizes Russell. “The days of being able to dictate to agents how you want to do business are over,” he says. “If we are going to gain business, we need to make sure our solutions are efficient and effective within their agency. We have enough options available we can fit fairly well into their own workflows and the way they want to do business within their agency.”

Agents have to show their value, as well, asserts Yates. In today's market, with the types of technology available, agents can be directly competitive with other distribution systems but have the added value of giving personal service. “If agents figure out the way to use technology and also add value in terms of counseling, it's a winning proposition,” concludes Yates.