When the executive committee at Safeco Corp. a year ago decided to pursue an online sales strategy that would involve its independent agents, industry observers who support the Internet's ability to eliminate "the middle man" thought the company was missing the point."Now we look like prophets," says Bill Tormey, director of marketing, for the Seattle-based insurance and financial products company. Safeco is launching nationwide online sales of auto term life policies early this year, and executives insist that independent agents are central to the company's approach.

"We absolutely believe we need an agent involved in the process," Tormey says.

Consumers will be able to purchase Safeco auto and term life insurance and invest in ShareBuilder-a stock purchase service-online through Safeco's Web site or through links on participating agents' Web sites. To conclude an online purchase, the customer must select a local agent.

Web-enabled agents only

More than 17,000 independent agencies and financial advisors sell Safeco products, but the company is targeting approximately 1,600 agencies that meet specific criteria.

"Initially, this is going to be offered to a portion of our multiline agencies," says Tormey. "They have to be agents who are going to take this business and really develop it beyond the Internet piece coming in."

The company also has well-defined technological standards that an agency must be willing to meet, which include: adequate Internet access, a Web site that meets Safeco's graphic design and maintenance requirements, a link on the agent's Web site to Safeco's Web site, and the ability to receive e-mail at the agency level versus through an Internet service provider such as AOL.

Hiring the virtual producer

Agents who participate in the program must also sign a "virtual producer" agreement with the company. "This is just like an agency hiring a producer," Tormey explains. "But it's a producer in virtual space."

Participating agents "hire" Safeco's virtual producer to sell both auto and life insurance, and they share compensation for the auto insurance sale-as they would with a person hired at their agency. The agent receives 40% of the normal commission on new business (Safeco's virtual producer earns 60%) and 60% of the normal commission on renewals (the virtual producer earns 40%).

For life insurance, agents receive the normal commission of 60% of the first-year premium for online sales. For ShareBuilder, agents earn a referral fee on accounts opened through their Web site.

Safeco's strategy is "light years ahead" of other independent-agency insurance companies, says Scott Hinderks, an independent agent at Flury-Hinderks, a Leawood, Kans. agency participating in Safeco online sales program. "Many (carriers) are developing direct sales that exclude the agent," he says. "As we independent agents are contemplating which companies to do business with, we're actively contemplating not doing business with those companies that are going to compete with us."

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