Abram Interstate Insurance Services, Inc., CMGA

Helping Independent Insurance Agents Since 1996

Why the independent insurance agent is still needed (Part 1)

Published on June 19, 2014

Recently  Walmart and Overstock.com have announced their entrance into the insurance game. This has brought to light a question that’s been nagging at the corner of many people’s minds for some time now: Does this mean the independent insurance agent will become obsolete?

insurance agent

It’s clear to see that the public’s knowledge of main stream insurance is dominated by the media-presence-heavy icons like the Geico Gecko and Progressive’s lady Flo. However, as a wholesale insurance broker we care to look honestly at this situation.  We believe what many others still believe, that ultimately these less-personalized versions of insurance to not displace or discount the need for the public to have an independent insurance agent who can truly help them understand their policy and their coverage. Here is an excerpt from a recent MyNewMarkets article by Amy O’Connor that articulates our thoughts well. Rest assured, you are still needed.

The problem with that model, said one reader and commenter, is that not all insurance products are the same: “There are different market segments out there; there are also hundreds of different types of insurance policy types. Some people want to do things online, others have more sophisticated needs and demand professional expertise. This is especially true with higher net-worth personal lines and almost all of commercial lines.”

The National Association of Professional Insurance Agents (PIA) released a statement refuting Chesky’s comments as well and pointed to research from a 2011 survey it did that found consumers do in fact want a relationship with their insurance provider. Findings from PIA’s two online surveys of 1,819 respondents included:

  • 67 percent of customers would like to be contacted by their insurance company, agent or agency every six months or less to inquire about changes in their life or circumstances, which could trigger the need for coverage changes.
  • 63 percent of customers would like to be contacted by their insurance company, agent or agency every six months or less for a general review of their coverages and costs and if they are paying too much or missing needed coverages.
  • 73 percent of customers would like to hear from their current insurance provider more often than just at renewal.

“Some of the erroneous claims made about agents – that the agency system is dead and consumers don’t want relationships with agents – we don’t agree with and have actual consumer data that is completely contrary to these claims,” says PIA president and CEO Mike Becker.

PIA is currently conducting an updated survey that it plans to release later this year. Becker says that while selling insurance online has only grown since 2011 and is an important tool for agents, consumers still want the services agents provide.

PIA also disagrees with the message that insurance is a commodity.

“[Insurance] is very complex and it’s very personal – it’s a not a one size fits all environment,” Becker says.

Bill Wilson, education director for the Independent Insurance Agents and Brokers of America — the Big “I” — agrees.

“Most of the advertising you see makes apples to apples comparisons but they are talking about the major types of coverage. No one is talking about individual perils or exclusions that restrict coverage on a policy,” he says. “The people talking the loudest are the ones talking about price.”

Wilson says helping agents educate consumers on why insurance isn’t a commodity and why the relationship is so important has become a major focus for the Big “I” and was largely motivated by a McKinsey report released last year titled, “Agents of the Future: The Evolution of Property and Casualty Insurance Distribution.” The report detailed how personal lines insurance is becoming commoditized – particularly auto insurance – and claimed that the traditional agent model is beginning to “unravel.”

“There has been a gradual shift in value that carriers and customers (both retail and small business) place on many activities traditionally performed by local agents, which is increasingly calling into question what role they will play in the future,” the report begins.

Wilson says the Big “I” has been working on “the other side of the story.” There is now a section on the Big “I”’s website called “Is Insurance a Commodity?” that provides resources, educational opportunities including webinars, along with links to discussions and tools agents can use to help prove their value.

“The reality is most consumers don’t have the training and background to be able to read and compare policy coverages,” says Wilson. “We have to get the message out to consumers that agents have the expertise and that has value. The biggest value is the independent agent owns them… and at claim time the best advocate besides your attorney is your agent who can advocate on your behalf. I don’t think you will get that kind of advocacy from Jake at State Farm with his khakis.”

 

Stay tuned PART 2 next Tuesday: How the independent insurance agent can adapt and see their customer’s needs in a way that makes their role clearer in the sea of automated insurance.

Abram Interstate Insurance Services, Inc. is a California wholesale insurance broker (CMGA) that has licensing and expertise to place business in both admitted and non-admitted markets in California and surrounding areas. Quote Online Today.