When I first rolled into the insurance industry some 14 years ago as an experienced technology journalist, one of the most frequent messages I got from my fellow tech heads was that computer technology and commoditization of insurance products would eventually render the independent agent useless, and thus accelerate his or her demise.
I recently wrote about the illusion that we sell static commodities, so I thought it only fitting that I address the other bogeyman—disintermediation. On its face, the idea that direct selling and sales/process automation would eventually obviate the need for the agents makes sense. Indeed, if we were selling widgets, the so-called “middle man” would long ago have gone the way of the dinosaur. But selling and servicing insurance is a great deal different than selling widgets.
Insurance, as many have noted, is a product that must be sold, rather than snatched off the shelf at Walmart. Insurance must, to a great extent, be customized to the buyer. In fact, technology has allowed us to be much finer in the way we evaluate risks and assign premiums to individuals and businesses. We don’t really need agents to do that. What we do need agents for, among other things, is to explain why we’re paying more than our neighbor or the business down the street, and to offer advice on alternatives that might cut costs and/or enhance value for insurance consumers. We also then need agents to help us understand the details of our coverages, and to negotiate the often stressful claims process.
Could a computer accomplish the above tasks? Given a higher level of sophistication than we commonly see today, it probably could. But the consumer is king, and most consumers just don’t trust technology as much as they do human interaction. It’s probably safe to say that most of us have shaken a fist in frustration at our computers when a particular process stream breaks down, leaving us without a clue as to how to proceed. It’s the online equivalent of getting caught in an automated voicemail loop—the kind of dilemma that leaves us begging for human intervention.
Yet another technology development that should actually enhance the survival of agents is that insurers themselves are beginning to specialize more than ever. Much like trying to put together a best-of-breed software solution, consumers are now able to search out who does the best job with what types of insurance, who offers the best service, who has the lowest premiums—all thanks to the Internet. While this is possible, however, it also is a lot of work. A trusted agent, on the other hand, can do the optimal search from an expert point of view—adding real value to the resulting recommendations—and put it all together in a neat and easily understandable package for the consumer.
This is not to say that technology, and the Internet in particular, have not had a profound effect on the way we market our products and stay in touch with our customers. There is no question that this is so, but there also is no question that people continue to have the same basic needs. The tools have changed, but the minds and hearts of consumers must still be won, and when push comes to shove, we want a human who will respond from empathy and knowledge—not a software program that answers only the questions it has been programmed to answer and, it is safe to say, lacks empathy.
An interviewer recently asked me if the agent would ever be completely eradicated from the insurance process. “Not as long as Baby Boomers are the most powerful economic block in our world,” I said. My point is that we Boomers, although certainly aging, are used to human interaction and, for the most part, we trust it more than the offerings of a software program. While older Boomers are retiring, those at the younger end are still in their 40s, so I wouldn’t look for this to change any time soon.
Will this shift when other generations become more numerous in our society? Perhaps it will, but then again, the desire for connection and affiliation is a human one, and I can’t see it suddenly going away.
Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.
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