According an article in the January 18 New York Times, “Insurance via Internet is Squeezing Agents.” Don’t be so sure, says John Tiene, John Tiene, CEO of the Monmouth Junction, NJ-based Agency Network Exchange, an organization that pools independent agents’ premium for profit sharing to provide the entire membership a stable base to concentrate on sales.
“Digital disruption makes a nice headline,” he says. “The realities of the insurance business, however, are a bit more complex than that.”
A variety of online players attempting to change the way people buy insurance, the Times reports. Foremost among these is Google, which has been running its Compare auto insurance comparison site in Britain for two years now—and which is poised to bring a similar offering to the US through its partnership with Comparenow. Start-ups like CoverHound and PolicyGenius are also selling policies online, hoping to offer consumers better prices and greater convenience than traditional agents.
But Tiene says as consumers get older, selling insurance is about more than just price and convenience. “A young single person with no mortgage and no family may just want to point-and-click to get a cheap policy, he observes. Eventually, “You need a qualified, educated risk manager who understands your needs and can make sure you get the policy that offers you the best value—as opposed to just the lowest price,” he adds.
Tiene also questions some of the statistics that are used to support the assertion that the agent channel is in deep trouble. The fact that more premium dollars are being pushed through direct channels, for example, doesn’t prove that those dollars are very profitable or that direct online sellers are doing a good job of retaining customers.
“The direct channel is often the best sales tool an agent could want,” asserts Tiene. “All it takes is one bad experience with an online policy to bring someone into my office looking for a more trustworthy and professional alternative.”
Even though the Times reports that direct of automobile insurance policy sales doubled between 1995 and 2012, Tiene claims that his agency network wrote $15 million in new business last year, of which 30% was personal lines. Agents are themselves also learning to use technology more effective for marketing and for post-sales services.
And comparison sites may run up against their own obstacles, especially with the mélange of state and federal regulations around insurance, Tiene warns.
