Everybody loves an underdog story. From David and Goliath to The Little Engine That Could, from Rocky to Rudy, those who prevail against overwhelming odds provide endless inspiration in our daily lives. I still remember where I was for the "Miracle on Ice" at Lake Placid in 1980. Nothing stirs up our hopes quite like the mouse that roars.
To me, the independent agent represents that same kind of pluck and tenacity, and it's one of the reasons I'm so fiercely committed to this channel.
In a recent research study, Safeco Insurance found that the distribution of auto insurance, by channel, was unchanged over the last five years. No change may seem like no news, but consider this: during each of those five years, the big, direct-to-consumer carriers spent a combined total of about $6 billion on advertising. And yet this collective roar took virtually no ground at all from the independent agent — not even enough to register beyond the margin of error.
That's great news, isn't it? I think it is. It's exactly the kind of story that gives us hope. However hope alone can become a problem. As the saying goes, hope is not a plan. We need a plan.
(Source: Safeco)
The gathering storm
While I will happily lead the conga line celebrating the undiminished strength of the independent agent (IA) channel, I'm also keenly aware that our fight is just beginning. There's every reason to believe that the advertising blitz will continue. Overall growth is slowing, particularly in auto insurance. If the pie isn't getting bigger, smart competitors will come more aggressively after our slice.
At the same time, we can expect increasing competition from price comparison web sites. Don't let Google's withdrawal from this market fool you. "Google may have decided for a variety of reasons that a strategic retreat was in order at this time," wrote Sam J. Friedman in an excellent article, "but it is unlikely online competitors for agency customers will be going away en masse any time soon." In fact, I'd predict there will be more entering the market.
Meanwhile, even as consumers' values hold steady, their shopping behaviors continue to evolve quickly, which means there's a lot of latent volatility in those channel-distribution pie charts. In Safeco's research study, 60% of respondents currently with independent and/or captive agents said they would consider going direct the next time they shop for auto insurance. Conversely, about 40% of respondents with directs said they would consider going the other way.
"In physics, they call that potential energy," says Kevin Jenné, Safeco's head of consumer research. "If it ever turns into kinetic energy — if all those people who are willing to consider a change actually start moving — those pie slices could look very different by the next time we measure."
Which leads to the question: When did Noah build the ark?
Continue reading…
(Source: Safeco)
Before the rain
Where did the IA channel get the strength to resist a $30 billion attack over five years? From decades (decades!) of building relationships, providing value beyond price and running smart, disciplined businesses. Similarly, in order to weather tomorrow's storm, we must start preparing today. Only this time we don't have decades to do it.
We spend a lot of time at Safeco thinking, reading, writing and helping to prepare independent agents for the future. Most of the advice I've written and read can be distilled into three simple notions:
- Stop ignoring millennials. We must all face the facts: the eldest millennials are growing up. They're turning 35 and making major life decisions — getting married, buying homes, starting families. Already the largest segment of the U.S. adult population, they're the only one that's growing and will remain the largest until at least 2042. That means their preferences will drive the market for the rest of my career, and probably yours. The independent agent is in the best position to meet the evolving needs of these customers. If we don't take advantage of this opportunity, we may lose tomorrow's customers.
- "Lean in" on digital. More and more, I'm seeing this as a distinct strategy from the one above. The new rules and tools of engagement are no longer particular to Gen Y. The rest of us have caught up — social media, email drip campaigns, mobile apps and 24×7 access to digital tools are markers of the "new normal" in business, even small business. Agents like Angelyn Treutel Zeringue, president of SouthGroup Insurance, Gulf Coast, are seeing three to five referrals a day with a smart social strategy. And so can you.
- Play to your unique strengths. Independent agents offer a combination of advantages that no other distribution channel can match: ease of doing business, the widest array of choices to meet myriad customer needs, and the trusted counsel of an industry expert. Each one of these attributes, taken on its own or in combination with another, can be compelling to certain segments of policyholders. But the IA's unique ability to combine ease, choice and advice amounts to a "super power" that, according to our research, is actually gaining relevance in the personal insurance market.
No guts, no glory
If you ask any member the U.S. hockey team that won the 1980 Olympics, I'll bet not one of them would describe what they achieved as a "miracle on ice." They know that their victory was won long before those games began, in the countless hours of preparation, both mental and physical, on and off the ice. That's why every Rocky movie features a montage of our hero training incredibly hard, getting "the eye of the tiger" and all that. Deep down, the audience knows that winning doesn't happen — and wouldn't have any meaning — without work.
The independent-agent channel has defied some very dire predictions in recent years. We can enjoy continued success in the coming years, but only if we start preparing today.
Matthew Nickerson is president of Boston-based Safeco Insurance. Contact him on LinkedIn.
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