Independent Agents: Keep Them or Dump Them?
Insurance Experts' Forum, November 23, 2009
Anyone who knows me is well aware that I don’t shy away from controversy (quite the opposite, in fact), so when I brought together my annual panel for the recent ISOTech conference in Orlando, it was no surprise that some fireworks were seen.
One of the more incendiary issues grew out of an analyst report I saw last year that basically recommended to carriers that they automate their sales function and stop using independent agents. Ironically, the same analyst said carriers should do all they can to make sure their automated systems mimicked the live agent experience in any way possible.
On our panel, Oracle Insurance’s Chuck Johnston, VP, strategy and alliances, had the temerity to point out that, truth be told, insurance could be sold (and is being sold) without the independent agent. This immediately precipitated an impassioned defense of the agent from Cal Durland, program manager and AUGIE facilitator for AUGIE (whose husband just happens to be an independent agent). Ms. Durland pointed out (and rightly so) that the independent agent has been the backbone of the insurance experience, and that the customer relationships cultivated by those agents are the glue that holds the sales process together.
Perhaps the operative phrase in that defense, however, is “has been.” When we hear that more and more people are buying insurance online (often without agent involvement), it is easy to worry that eventually such technology will, dare I say it, “disintermediate” agents altogether. But is that a realistic worry?
First, it should be noted that not all forms of insurance lend themselves well to non-human commerce, due to product complexities and the individualized nature of many risks. And even in product lines such as personal auto that have become “commoditized,” the niceties of rating are such that consumers who purchase online without doing a lot of homework will find a surprisingly wide variety of premium quotes, and will often end up paying too much or getting more or less than they need—a situation that could easily be averted by talking to a knowledgeable independent agent.
Automation has done a lot to speed the rating and sales process, and it has done so to the benefit of the agent. Agents can get more done, and have time to sell more thanks to the technological advances we have seen in recent years. On the other hand, it is tempting to speculate that more and more functionality could be automated to the point where carriers looking to save money would severely curtail or discontinue independent agent activity.
That won’t happen, however, at least not any time soon. Online purchasing of insurance, while it is growing steadily, is still a highly flawed process, and more often than not, humans must become involved. Then there are some of us—known as Baby Boomers—who actually like to interact with human beings when we buy something, especially something that involves a trust relationship. And by the way, we Boomers are still the largest chunk of the market.
Another factor is that the independent agent continues to utilize technology in a way that benefits both agents and carriers. IVANS reported today that over the last 12 months, the number of insurance agents using claims download technology grew by 165%. “As property/casualty carriers compete in a lackluster economy with increased regulatory oversight, claims download technology is providing a welcome avenue for quickly impacting the bottom line through improved customer service and operational efficiency,” said IVANS.
Make no mistake; online sales of insurance will continue to grow, and automation of sales will also grow—as long as they make sense for the customer. Will there come a day when consumers don’t really care about human interaction when it comes to important money decisions? I doubt that even this current, disaffected generation will buy that, no matter how cool it may seem. There may be fewer agents in years to come, and they may play different roles in the process, but they will not vanish completely.
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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The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.
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