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PERSPECTIVES


How insurers can help independent agents compete and win

Michael Lyman, Accenture Strategy's Insurance Lead, discusses how insurance carriers can help independent agents improve long-term viability.

Michael Lyman, Accenture Strategy’s Insurance Lead

Independent agents face a multitude of challenges. What’s more, new research from Accenture shows there is a complex relationship between them and insurance carriers, and that this hampers efforts by insurers to help agents improve their efficiency and sales effectiveness. We asked Michael Lyman, Accenture Strategy’s Insurance Lead, what carriers can do to strengthen this vital channel.

What are the prospects for the independent agent (IA) channel?

IAs have always been an important insurance sales channel, and they continue to be—in 2013 they accounted for 58 percent of all property and casualty sales in the United States. But there are ominous clouds on the horizon. They feel threatened by insurers’ direct online offerings, and we’re seeing the advent of powerful new distributors from outside the industry: Walmart is selling auto and health insurance, IKEA is testing the waters with child and home insurance and Google has just secured licenses to sell auto insurance in 26 states. We know from our research that 23 percent of insurance customers would consider buying from distributors such as these. In addition to this, the average age of agents is rising steadily—it’s currently 56 in the United States. This makes it more difficult for them to identify with the new breed of insurance customer, and to appreciate the benefits that emerging technologies offer the agency. So they face the threats of being squeezed by formidable new competitors and outpaced by more efficient traditional ones.

These threats are bad news for insurance carriers too, aren’t they?

They certainly are. While many carriers are investing in new digital channels, most depend on their independent agents to bring in a significant share of both new and repeat business. Accenture research found that one out of four insurance customers have at least one auto insurance policy purchased from an IA, while 19 percent have at least one home policy and 20 percent at least one life policy. We also found that agents are the preferred channel for getting advice on insurance, ahead of websites and insurers’ customer service centers. So while the shift to digital channels is clear and strong, the IA is likely to remain a crucial contributor to insurers’ total premiums for many years to come.

Since they both have an interest in the prosperity of the channel, are they working effectively to optimize it?

The relationship between the two parties is a fascinating one. It’s clearly symbiotic. But it also has an adversarial component. IAs regard insurers’ online channels as the number-one threat to their market share, and they suspect that many of insurers’ initiatives to support their business are a disguised effort to wrest ”ownership” of the client from the hands of the agent. Insurers, on the other hand, feel that independent agents have limited loyalty and often play their carriers off against each other to gain the most favorable terms and treatment. Insurers are investing a lot to support IAs in areas such as marketing, operations, local market data and customer self-service. But if the aim is to build stronger relationships with the agencies, it’s probably failing. Our survey of IAs found that the key factors in deciding where to place their business are things like claims process speed and quality, underwriting appetite and pricing consistency. Carriers’ support initiatives come low on the list and don’t seem to be winning them much business.

If IAs are not embracing carriers’ efforts to support them, are they at least working on their own to enhance their competitiveness?

The number-one priority of independent agents is to retain customers by providing a superior service—and that includes offering a range of competitive products. Attracting new customers is a secondary concern. Bottom of the list—at least of the list we provided in our survey—is is upgrading their technology. This is particularly true when it comes to digital capabilities such as mobile and web customer engagement and support. Information is important, but it’s no surprise that insights into existing customers are valued more than qualified prospect leads. We believe that many IAs are underestimating customers’ expectations regarding digital interaction, mobility and social media, as well as the advantage enjoyed by those of their competitors who have mastered these capabilities.

So what can insurers do to help independent agents become more competitive and defend their market share?

As we spell out in our research report, the first step is to ensure they understand the priorities and constraints of the IA, and also their attitudes and perceptions relating to carriers. Then, we argue that there are five mutually beneficial outcomes that agents and carriers should work towards: increasing customer loyalty, offering them their channels of choice, enhancing the capacity for advice-oriented sales and service, improving agency operations to make them more efficient and adaptive and generating data-driven insights that improve the IA’s effectiveness. In our report we list the specific steps which, we believe, will deliver these outcomes. The benefits will be shared by everyone: a stronger IA sales channel for carriers, a more viable business for agents, and a better overall experience for customers.