The face of the insurance industry is changing as our careers evolve. And, like the old adage about cooking a frog, “you don’t cook a frog by putting it in hot water – it will jump out – you put it in cold water and slowly turn up the heat – the change is so gradual that the frog cooks”, the change didn’t take place in a month, a year or even in a decade. It took place in a generation, beginning in the 1960’s and continuing unabated to today. And, like the frog who swims in an ever-hotter “pond” most of us won’t know how to react to the heat – it will seem normal to us – until we are boiled and eaten. What we would like to do in this article is to shock a few of us awake long enough to change our environment. We are frogs. We are not going to become eagles. But we don’t have to stay in the ever-hotter pond. There are ways that we can survive and thrive outside of the artificial “box,” the form of agency into which we continue to operate.
The change that has taken place doesn’t have a value. It is neither good nor bad. It just IS. There are no heroes or villains in this play. Every one of us in the industry and every person or entity that buys insurance is a participant. Blaming the direct writers or banks or the changing attitudes of our carriers is as valuable as railing against the tide because it is flooding our home. If we recognize that our homes are being threatened, it is up to US to solve our own problems – or move on. Only the most foolish stubbornly stay to drown.
The initiators of the changes in the last fifty years range from simplified package policies (auto and homeowners and BOPs) by the carriers to the advent and market manipulation of the direct writers, the automation that brought us direct bill and internet communications, and the technology that made predictive models of rating and underwriting ever-more-accurate.
The direct writers have proven that all it takes to attract customers is money and innovative marketing methods. Automation has proven to everyone that rating can be done by the client, himself, with a few keystrokes direct to a mechanical rater and/or to an insurance company directly such as life insurance. The modeling is convincing carriers that they can predict loss data sufficiently to target the markets that will give them acceptable loss ratios based on the law of large numbers (especially in personal auto insurance). Underwriters have become functionaries and administrators more than risk selectors.
And, certainly, every carrier is re-evaluating the role and the need for independent insurance agents. In the past, agents were the relationship managers between the insurance-buying public and the carriers. The carrier underwriters were the final (and sometimes arbitrary) arbiters of risk, but even then, insurance agents were expected to be the front-line underwriters analyzing a risk for both objective and subjective factors that would yield acceptable loss ratios to the carriers. That’s why insurance companies paid agents profit-sharing bonuses.
But agents were also needed to produce, deliver and manage insurance policies to translate the needs of the client into the right form of policy and to manage the client on behalf of the Company. Agents were always representatives of their carriers even though they acted on behalf of the clients.
As processing has become automated and the direct writers have proven that advertising and marketing and re-educating consumers into believing that all insurance is a commodity, the carriers have proven that insurance can be sold without independent agents. So many traditional insurance companies have created alternative distribution systems that would allow clients who desire independent agents to continue to use them, but permit consumers who would like to access the Company directly to do so, as well. Others will also do so over the next few decades because it simply makes sense to them to sell in whatever direction the buying public would like to buy.
So far, agents may be tempted to swallow the business end of a pistol and “do the honorable thing.” That’s why so many agencies have been merging and selling into each other and so few independent agencies are being created.
But I contend that the difference between where we are being led and where we should be going as independent insurance agents is the difference between lemmings blindly following the herd to the cliffs and insurance professionals defining the NEEDS of the insurance consumers and reacting accordingly.
While the pricing and processing of insurance is, inevitably, moving toward automation, the concept of ASSET PROTECTION is far from simple for individuals, for families and certainly for businesses. If we redefine ourselves as the INSURANCE COUNSELORS for our clients, we will again be valued beyond the fees that we charge for the service. Our difficulty will be identifying and attracting those people who are smart enough to know that the concepts and products available to protect their assets have never been as simple as “15 Minutes to save 15%” or packaging boxes of insurance off a shelf. Many people on the East Coast after Superstorm Sandy found themselves pitifully short of the real protection that a professional agent could have afforded them. Whether we re-educate the consumer to understand the importance of agents or wait for a negative experience for them to realize what they’re missing, there will always be a segment of the insurance-buying public that wants the services of an objective professional.
What Can An Agent Do To Make the Agency Relevant In the Future?
1. Eliminate your concentration on processing work. This will, inevitably go away as automation continues to make access to products and processing easier for customers. Spend your time and money and human resources on knowledge based education and sales education. You have to be both insurance experts AND experts in the process of converting prospects into clients.
2. Stop Selling and Start Consulting. Once your customers are comfortable that, like the family doctor, you are there to identify their illnesses and cure them, not to sell them product or services you will have become an insurance consultant instead of ‘just another salesman’. The down-side of this is that it takes longer to gain trust than it does to quote low prices. But the up-side is that you keep a friend forever while you lose the cost-conscious client as fast as you get him. MAKE FRIENDS, not customers.
3. ADAPT AND ADOPT – technology and social media. If you’re not smart enough or too old to grasp the concepts of communicating with your clients and prospects over the internet, find someone smarter or younger than you who can help you. We don’t have to know how to take apart a car to drive one and none of us consider giving up driving because cars are becoming more automated. Don’t consider giving up your business simply because it is changing.
Don’t allow your website to be a static “billboard.” Add things to it daily or weekly and direct every client to it for anything from local news and sports to seasonal insurance tips. Give them a reason to come back to your website. Make sure your website is on EVERYTHING you send to a customer (mail, e-mail, etc) and promote it as the place to go for info important to your clients.
Get and keep e-mail lists on every client. It is becoming more important than their street address. Update it regularly (e-mails change more often than addresses and we rarely know or ask about it) and use it to communicate with your clients when weather conditions suggest a mass-email, to wish them well on special days or holidays or when other meaningful issues arise for which communications between the agency and the clients are beneficial.
Become a participant in Social Media as an insurance expert willing to answer questions and lend advice (be careful not to give answers – potential E&O issues – just general advice). It is the way to familiarize your agency to younger buyers and to keep relevant to your current clients.
4. Invest in people who are “helper” personalities, whose main goal in life is to help others. They will be the coaches and counselors to your client base that makes your clients want to use the services of your agency instead of seeking insurance on line.
There are Assessments that can identify the personality dynamics of an individual that you might hire (see Agency Consulting Group, Inc. Hiring System). “Helper” personalities who become insurance professionals will be the consultants, as interested in solving the clients’ problems as they are in selling product. Solve the clients’ problems and they will likely use your services in return.
These four points sound simple, but are complex to implement and require a level of commitment that approaches religious commitment. Once you are convinced that the environment is changing rationale beings will change to survive. Until you are convinced that the changes are permanent, you will always look backwards toward the “good old days” hoping for their return. Let me assure you that TODAY is the first of the ‘good old days.’ You will be much happier and more successful learning how to surf the waves than trying to stop them.