How Direct Insurance is Changing the Landscape

Technology is a blessing and a curse, providing consumers with access to countless services and commodities, including insurance, but not always with expertise. Just as large online merchants offer great prices by eliminating the “middleman,” direct insurance providers offer attractive rates, bypassing independent agents. Agents should heed the advice of PropertyCasualty360, to “build knowledge, a network, and an ecosystem of outside-in relationships to re-imagine and contribute to their company’s future.”

Effects of Buying Direct on Agent Sales

Once upon a time, almost everyone obtained insurance through an agent. However, that is no longer the case, as noted by McKinsey & Company, “The agent was once the face of the insurance brand; now, customers increasingly use multiple channels to connect with their carrier.”
Additionally, only a decade or so ago, agents wrote 80 percent of personal auto policies, and nearly all homeowners and small commercial policies. In 2013, direct insurance regularly outperformed agency writers (independent and general agents and brokers) according to the Insurance Information Institute. The one area where agents prevailed was in commercial property and casualty policies, accounting for almost twice the percentage of those written by direct insurers.

Risks to Independent Agents

At first glance, the McKinsey report seems to spell doom and gloom about the next five to 10 years for insurance agents. It’s predicting an increase in direct carrier-to-client interaction and a shift to only supporting agents who add unique value and drive profit.
Additionally, attaining success through specialty niches may end. As described byPropertyCasualty360, the “symbiotic relationship” between agents and insurers who use them to increase the reach of their business may give way to direct sales that present an opportunity for the carrier and customers to save money.

Will We See Fewer Agents?

As the landscape shifts, we may see a direct impact on the success and number of insurance agents. Agencies that adapt to the changing market could survive, but those that stick to tried and true methods of decades past will likely flounder.

Surviving may require agents to develop “...new strengths and capabilities, and a value proposition that is compelling for both carriers and consumers,” according to McKinsey. Some, includingInsuranceJournal.com, opine that online auto insurance shopping already peaked. Nonetheless, being prepared for changes is better than ignoring growing trends.

Agents vs Carriers

Whether it is property and casualty, commercial, life or auto insurance, leads drive the insurance business. However, the fact that several of the big players in the industry deftly positioned themselves in the market to attain more direct quoting may result in fewer leads for agents.
Progressive insurance, recognizing the power of using multiple channels, aggressively promotes direct sales channel while also supporting agency sales forces. "We actually think we are a leader on both sides," says Alvito Vaz, information technology director for Progressive, quoted inPropertyCasualty360. Esurance also embraces the multi-channel approach, responding to consumer demand for policy purchase and service online, although the company still looks for ways to give customers an “agent experience in the online world."

Today’s consumers expect immediate answers as well as quick response, turning to the Internet for information about products before making any kind of purchase. Just as many brick and mortar retailers struggle to compete with online stores, insurance agents must contemplate competing more and more with direct insurance providers. Understanding the processes used by direct providers is part of the key to successfully competing with them. However, the other part is honing and marketing the unique services only an agent provides.