Robert Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America (IIABA) , recently took issue with a McKinsey & Company report that suggests in today's digital economy, local agents are becoming unnecessary as the middleground between customers and carriers. Rusbuldt points out that agency's businesses are doing fine, and even ramping up, while arguing that McKinsey took too narrow a view in making its prediction.

For its part, McKinsey predicts the agents that will make it in the digital age are those who are part of large agencies, or conversely, those serving smaller, specialized niches.

Rusbuldt makes some valid counter-arguments, to which I would like to resurface some observations I've made over the past year to illustrate the value of the “secret weapon” insurers have in their agent and broker networks.

For example, the prominent technology industry consultancy IDC says the insurance industry was one of the early adopters of social networking, thanks to agents. Strong customer relationships built on trust do not evolve through endless tweeting or friending. Rather, agents have the personal, in-depth relationships of which social media companies can only dream. “Any savvy chief marketing officer knows that social media ROI cannot be computed just by soft metrics like fans, followers or retweets,” as AdAge Digital's Clara Shih put it. “The effectiveness of your programs comes down to customer acquisition and retention, and the insurance industry has cracked the code.”

Plus, in looking at the strength and returns seen in the customer channel, another advantage keeps getting overlooked: insightful analysis of customer analytics. Before pouring all that money into analytics software and servers, be sure there is enough investment in the most powerful and intuitive analytics system on the planet — agents. You may have tons of data about your customer's lifestyle and requirements, but agents provide a depth of understanding that algorithms will never crack.

Just to cite a simple example, a customer's wink, for example, is meaningful communication that occurs within a certain context. That wink, however, would befuddle even the most advanced IBM Watson. But it would be clearly understood by an agent.

Here's where many insurance companies have the ultimate advantage. They maintain networks of agents — be they independents or direct employees — who make it their business to be out in the market, making face time with customers, getting to know them one-by-one. Agent insights will keep companies light years ahead of anyone attempting to purely compete based on analytics. As mentioned before, the challenge for carriers is to be able to deploy technologies and approaches that support this infrastructure. Needed are better ways to communicate and collaborate with agents, for example. Agents need to have access to the same cloud-based, analytical and mobile tools that carriers are employing to be on and available 24-7. Online training is another area that will greatly benefit the network.

What else do you think agents can do to stay profitable in light of commodification, consumerization and the rise of direct insurers? Tell us on twitter by tweeting @_INN

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

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