I hate to be a party pooper, but the fact that Google has closed down its aggregator website for auto coverage, at least for the time being, doesn't mean insurance agents should be dancing in the streets to celebrate the "victory" of live intermediaries over Internet sales.
Indeed, even a mild sigh of relief might be premature, given the inclination of more and more consumers to do much of their business online, along with the emergence of a growing number of Internet-based aggregators to meet this emerging demand.
Bottom line, agents shouldn't read too much into Google's decision to withdraw from the insurance intermediary business. What's more, I think they would be making a serious mistake if they believe this development represents some sort of fundamental "proof" that agents will always trump web-based alternatives.
It would be understandable for beleaguered agents at first blush to read a lot into Google's decision to emphasize the sale of AdWords to insurance providers over its own aggregation services. Google has an enormous presence in our economy and culture. Its name is not just a noun — it's actually become a verb as well. Whatever it does is big news.
Competitors for customers won't be going away
But in this instance, Google was a not-so-fast follower rather than a first mover. There were already a number of comparison shopping sites for insurance on the web when they launched their initiative. Google was even working with one of them — that being CoverHound. Google may have decided for a variety of reasons that a strategic retreat was in order at this time, but it is unlikely online competitors for agency customers will be going away en masse any time soon.
However, that doesn't mean there aren't lessons to be learned here by would-be online disruptors and legacy agents alike.
From the perspective of those looking to disintermediate agents, Google's exit confirms that prying insurance consumers away from their live advisers won't be easy. This is no surprise to us. Deloitte's own research into the potential to sell small-business insurance direct to consumers over the web found that while half of those we surveyed said they are willing to consider doing away with their agent if it means saving money, a good number of these online prospects are still hesitant about taking that leap of faith and going it alone.
Many see agents as their safety net — making sure they get the right coverage at the best price, while serving as an advocate during claims disputes. Some expressed a need to have the proverbial "throat to choke," meaning someone to hold accountable if there's a gap in their coverage. How direct sellers alleviate such fundamental concerns may largely determine their ability to disintermediate agents in a significant way.
Agents need to become web warriors. (Photo: Thinkstock)
Another lesson is that aggregators may have a hard time getting traction if they take a "build it and they will come" approach. Launching a comparison-shopping site isn't the end of the process — more likely it's just the beginning. Those insurers that sell auto insurance directly to consumers tend to do an enormous amount of advertising. Those running an aggregator site where consumers can shop for coverage among multiple carriers may need similar exposure or affinity group connections to gain consumer awareness.
For agents, the lesson is not to stick their heads in the sand and wait for online aggregators to disappear. The takeaway is to reassert their value to consumers beyond merely shopping primarily on the basis of price. (In Deloitte's small-business insurance survey, the vast majority of respondents who were open to the idea of buying direct said their agents actually did little more than get them a premium quote, leaving many wondering how much value they might really lose by doing away with their intermediaries.)
Agents need to evolve
To avoid disintermediation, more agents need to evolve into consultative brokers and personal risk managers, offering a wide variety of additional services such as loss-control advice, and perhaps even broader business management and development support.
Agents also should become web warriors themselves, establishing a robust, 24/7 virtual service that allows clients to access policies, certificates of insurance, and risk management information, while providing an around-the-clock outlet for coverage and claims questions.
Any agent who doubts that comprehensive online capabilities will be critical to attracting and retaining web-dependent insurance consumers need only look around them the next time they go out to eat. Pay close attention to the tables with children. It isn't only teenagers (or their parents) whose eyes are glued to smartphones and tablets. I still marvel at the sight of three-year-olds deftly navigating games and videos on their hand-held devices. I can't imagine many of them preferring to chat with an agent in person when they grow up, rather than surfing online on their mobile device for the best deals in personal and business coverages.
In the long run, the withdrawal of Google Compare is likely to be merely a blip in the inevitable, historic movement toward greater automation of insurance interactions. The sooner agents come to grips with that, the sooner they will realize the need to fortify their own online positions to avoid being rendered irrelevant by what are likely to be increasingly sophisticated aggregator sites.
Sam J. Friedman (samfriedman@deloitte.com) is insurance research leader with Deloitte's Center for Financial Services in New York. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. These opinions are his own.
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