Independent insurance agents account for more than half of the total premiums written by property & casualty insurers, but changing consumer behaviors and the continued proliferation of online direct sales and digital service channels, are undercutting their competitiveness.
Those sentiments were expressed in a new survey of more than 1,100 P&C agents in the U.S. The study was conducted by Accenture, a global management consulting and technology services firm.
Thirty-nine percent of the agents surveyed named direct sales as their greatest source of competition. Of this group, 71 percent said the threat took the form of lower prices, while 48 percent indicated that their competitors had better brand recognition and more effective marketing. Of the new digital capabilities, agents cited Web-based service and claims as the most important, followed by web-based quoting. They placed a lower priority on mobile and social media capabilities.
“Changing consumer behavior and the continued rise of the direct channel are threatening agents’ dominance of insurance distribution,” noted Erik Sandquist, managing director for Accenture distribution and marketing services in North America. “So are new insurance players, with new distribution models, that are making a determined effort to entice customers away from agents. Leading independent agents will take advantage of innovative digital technologies and big data analytics to develop greater customer knowledge and insights, improve their ability to reach their target markets, and deliver a superior customer experience.”
Asked to rate the most critical operational competencies, agents ranked retaining customers at the top of the list, followed by servicing customers. Attracting new customers was ranked third. However, independent agents’ traditional strengths in customer service and risk management could be disrupted by the advancement of technology and the evolution of consumer behaviors and the competitive landscape, Accenture said.
In rating the information available to them, agents placed the highest value on insights into existing customers, and qualified lead lists were ranked last. However, when asked what they would do with more staff, agents rated finding new business as their highest priority, followed closely by cross-selling and up-selling new business.
“It is understandable that they are focused on keeping existing customers, especially in light of capital constraints that make it challenging for most agencies to add sales capabilities to grow their business,” said Michael Lyman, global senior managing director for Insurance within Accenture Strategy. “New technologies can make agency operations more efficient, but they can also be used to create new digitally driven market opportunities to boost reach to new customers. The question is how to make these technologies both affordable and easy for agencies to use.”
Despite their strong focus on customers, Accenture said agents downplayed their own ability to provide differentiated and superior advisory services as a competitive advantage. Access to competitive products, improved customer experience and better brand recognition were more important sources of competitive advantage than the superior advisory services they could offer to their customers, participants said.
“According to a recent personal lines consumer survey we conducted, independent agents have been surpassed by insurance company websites and web search engines as consumers’ preferred source of information about insurance products and prices,” Sandquist said. “However, insurance consumers trust the advice provided by independent agents more than any other source. Independent agents are well positioned to understand customer needs, provide risk management advice, and recommend personalized and tailored solutions. Serving as an effective risk manager will increasingly require insights derived from the Internet of Things and big data.”
Accenture recommends that independent agents join associations, alliances or clusters to bolster their limited resources and network with peers, but most importantly to enhance access to carriers and increase their commissions. Membership in these groups gives agents greater power to negotiate with carriers than they would otherwise have on their own.
“Agents need additional capabilities to compete in the future,” Lyman said. “By sharing investments, independent agents can benefit from economies of scale and cost-efficiently access a broad set of core operational capabilities such as agency [and] customer management solutions, which could help them improve efficiencies and take share from online competitors with more effective digital channels of their own.”
