Traditionally, independent agents have been considered the golden path to increased sales and customer service for insurers. Providing the most important conduit to the carrier, agents' one-on-one care for prospects and customers accorded them the utmost respect. Insurers competed financially for relationships with the top producers, offering training, marketing tools and the latest technologies to keep them front and center in the carrier’s distribution chain.
This business model is still generally paying off. For example, independent agents (IAs) and advisors in the life vertical, where customer intimacy is king, see record-setting new business opportunities. According to LIMRA’s analysis of its 2016 study, 30 percent of households (37.5 million) remain uninsured, and 48 percent of households (60 million) have a life insurance coverage gap of $200,000 on average, which amounts to more than $12 trillion in total market need.
And a review of a 2016 survey conducted by the Independent Insurance Agents & Brokers of America (IIABA) reveals that IAs still control most the entire property and casualty (P&C) market, writing nearly 58 percent of all premiums and almost 35 percent of personal lines’ premiums. The numbers are even better for commercial lines, where IAs write 81 percent of new business in a market that has grown by more than $45 billion over the last three years.
Nonetheless, these numbers may be fleeting. There are 37,500 independent agencies representing more than 900,000 workers currently representing the insurance industry, notes IIABA. But research and consultancy McKinsey reports that in 2014, the average age among insurance agents across all lines of business in the United States was 59, noting that one-fourth of the insurance industry’s workforce will retire by 2018.
Additionally, technology, for all its glory, is also considered a bane to some IAs, especially those in personal lines’ property and casualty markets. Over the past few years, Tier 1 carriers’ distribution strategies continue to evolve in response to a statistic quoted by Karlyn Carnahan, research director at Celent: 75% of prospects now research online and 20-25% of all new auto policies are purchased online. In the scramble to meet these online demands, many insurers are responding with direct-to-consumer online strategies, mobile apps that offer robo-advisors and mouse-click policy shopping, automated customer service/claims centers and relationships with online aggregators. (Thanks to Google, consumers can get most of their questions answered, further separating the IA from the product they are selling.)
The technology shakeout that creates changes in the distribution chain is also creating changes within the independent agent network: IAs, in a scramble of their own to remain competitive and provide demonstrable value to the sales process, are already partnering with insurers on investments in technologies that will bolster business development such as analytics, CRM, e-signatures, portals, customizable user interfaces, SEO, improved lead generation and a social media presence.
Within the insurance distribution chain, there will always be a place for independent agents, but carriers will move forward with those that can leverage technology to provide ongoing value.
