Keep Calm and Stay in Business

The latest in the “independent insurance agents are dinosaurs” studies has come down from McKinsey  and it's a doozy. The gist: Independent agents who approach selling insurance as a commodity are doomed. The study specifically points to changes in the way people buy auto insurance as an example of where the rest of the industry is going and predicts the demise of the commission system as we know it as carriers recognize the need for agents to provide “extras” to get and keep customers.

Shocking, right? Still, haven't we been here before–both very recently (with the Deloitte study showing that 1 in 5 small commercial insurance buyers are more willing to go direct) and in the past, when direct writers, insurer-run service centers and other threats were supposed to deliver the coup d'etat to the independent agent system? More to the point, aren't most of you way ahead of the curve and adapting by sheer necessity?

Just this week we did a story on a J.D. Power study in which the big take-away is that small commercial buyers (the same guys who Deloitte says might be inclined to buy direct) depend on the counsel of their independent agents–and ironically, actually value in-person communication above email. (I remember a mantra from the early days of insurance technology extolling the value of “high-tech, high-touch” customer contact. In spite of the slight creep value of that saying, it still holds true.)

Jeff Yates, Big I's high priest of technology, recently weighed in on the McKinsey report, choosing to focus not on the doom and gloom, but on steps agents can take to prevent the obsolescence that the study predicts. In fact, Yates points out, smart agents are already way ahead of the game.

Among McKinsey's recommendations:

• Increase your digital presence
• Have a value proposition that appeals to both customers and carriers
• Define and reach target markets
• Find new ways to get in front of your prospects
• Deliver more tailored and deeper expertise, such as bundled insurance packages and tailored advice
• Use technology to do more with less.

I think it's safe to say that most of you can check those items off your to-do list, and add a few of your own innovative ideas as well.

Last count, according to the 2012 Future One/Big I Agency Universe study, there are still more than 38,000 independent agencies out there—representing an increase from the 2006 and 2010 studies. Many are newer startups–no small feat in this new-normal economy. Others are putting a new spin on agencies founded by parents or grandparents. Better yet, today's agencies are more diverse in both business and culture, and are actually more profitable than in 2010, with 60 percent reporting revenue increases since then.

This certainly didn't happen by accident, or by doing business the same old way.

McKinsey is right that to succeed now and going forward, agents will have to operate very differently than in the past. But they're dead wrong if they're predicting the end of the independent agency system.