In tough times, the decision-making process of the agent becomes pivotal. What are agencies looking for from their carriers? Celent senior analyst Mike Fitzgerald explains how technology is helping carriers move products and make money.
TD: Ease of doing business might be the most important issue in the area of distributing products today as independent agents and brokers want to work with insurers that strive to make the agents' customers happy. How much emphasis for this are you seeing among carriers and agents?
MF: A huge amount. When these initiatives pop up, sometimes they can be the flavor of the month and they go away, but ease of doing business definitely is one that has stayed around for a while. I first saw it in personal lines a number of years ago when insurers started to move to shorter cycle times. It really goes across all lines of business nowadays. Much like price and product, it's becoming the cost of admission to being on the favorite-carriers list for agents.
TD: With the economy being in such difficult shape, how important is this aspect of business for carriers?
MF: It's very important. It was important before, and it's more important now because every carrier relationship agents have to maintain costs them money. They know in their gut and implicitly it takes money and time for those relationships to be valuable for them. When times get tough, they have to look at cutting those relationships back, making them as efficient as possible. All that means is the carrier that is easiest to do business with, returning the most value to agents in terms of the service they can deliver to their customers, is the one that is going to be preferred.
TD: Some carriers are looking at analytics to assess their agents and the value they are getting from those agents. Are you seeing that, as well?
MF: In our internal discussions at Celent as to what's next, we feel distribution management systems are poised to have a lot of activity in 2010. If you think about it, we've had a rash of core system replacements that still are going on. A number of insurers are upgrading their billing systems, recognizing that's an important part of customer service. As those projects are finishing, we do think attention will be paid to analytics and better management of the producer force, which will lead to initiatives in that area.
TD: What other steps are insurers taking to improve the process for their agents?
MF: We did a survey recently in the property/casualty space and also in the life space, and the smart insurers continue to emphasize making their systems much more open on what we call a transactional basis–not just plain inquiry but pushing out status notices when something on a policy or an account changes. All of that is supported by the technologies such as open architecture and ACORD standards. Insurers are continuing to make their communications with the agents much more operational in nature–not just brochure-ware and not just the ability to look something up but rather to get to the cusp of the insurance transaction–updating agents when and where they want to be updated and in whatever manner they want to be updated.
TD: Is this being done just in personal lines, or is it being done with commercial and other lines of insurance?
MF: A lot of these initiatives start in personal lines and roll into small commercial and midmarket commercial, but they really do apply to all. For example, information portals are being adopted at the very largest ends of the commercial lines business to deliver to brokers information that previously had been either obtained by telephone or had been fairly difficult to get from an insurer–not because the insurer didn't want to give that information but just because the insurer wasn't set up to distribute it easily. So, I think you're right–personal lines is where a lot of this starts, but so much of the technology is starting to get into the other lines of business, as well.
TD: How much leverage do agents have in this area, particularly when their customers, the insureds, are looking for the best price?
MF: They have a fair amount of leverage in terms of directing business to companies. For risks that are hard to place, they don't have any leverage, and they have markets they definitely need. But in the general insurance space, price is in a fairly narrow band that gives agents a good deal of decision power over where they want to place the business. As so much in insurance does, it comes down to the individual risk level. So, if it is a difficult risk, price is going to play much more of a part and availability of coverage is going to play much more of a part, which lessens the agent's leverage. But in the vast majority of the insurance transactions, the agent actually has pretty good leverage. The survey I mentioned before, at least in the property/casualty space, shows agencies have a little bit over three-and-a-half carriers they identify as their preferred carriers, which means, all things being equal in terms of price, a carrier is going to have a little less than a one-out-of-three chance of getting a piece of business. That's a pretty competitive landscape.
TD: If somebody wants to get in touch with you, what's the best way to do that?
MF: It's mfitzgerald@celent.com. We're always looking for input and fresh views that helps form our research.
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