Many knowledgeable people have predicted the demise of the local insurance agent in America. There are several reasons for these predictions such as advancements in online technology, the generic nature of auto and home insurance for most families, and the massive advertising budgets of the direct online insurance providers. Some have even said that the insurance companies use of risk based pricing has increased efficiency and reduced innovation and now all insurance companies simply look alike.
Some major insurance companies with an agent distribution system have even gone further by taking the customer service burden off their agents through centralized 800 number call centers. The idea being that the agents will be more efficient with their time and use it wisely to increase sales. The thought is that customer service should be handled at the company level in order to deliver a consistent and risk free message to the customer.
Can this possibly be true? Are we destined to have our auto policy with a direct writer one day? Will life insurance sales be just a term policy purchased through the internet?
Will the local insurance agent become an advisor for commercial insurance or specialty products only? In simple terms, will insurance agents become extinct like a dinosaur?
The answer is…….Maybe. Let’s take a look at an industry in transition.
The direct writers (those that sell direct to the customer through an 800 number or online) market share has doubled in the last decade and they now control 27% of the total auto insurance market. The growth of the direct writers has slowed down a bit recently primarily due to the agency companies increasing their advertising budgets and, in some cases, buying or creating their own direct insurance outlet (like Allstate purchasing Esurance or Farmers purchasing 21st Century).
GEICO spends a mere 6% of their gross written premium on advertising. But that 6% represents over $800 million in advertising each year! Agency companies typically pay around 10% of their auto premium in commission to their agents. The prevailing thought is that these local insurance agents already know their customer and they certainly want to grow their business so it is natural and proper to pay them a commission for their services.
Insurance agents have increased competition. They have always had competition and many agents have prospered in that environment. What is different today versus 10 years ago?
The difference is the service that agents provide their customers. Ask any agent to identify what separates them from other agents or the direct writers and they will respond with “I provide great customer service.” Many cannot even identify what customer service really is.
Let’s take a look at how agency customer service has changed and how agents are at risk if they do not change the way they do business.
First of all, almost all agents have delegated the relationship with their customer to staff. This is not necessarily wrong because few agents have the time to answer the phone and take care of customers. Many agents have embraced newsletters or email to connect with their customers and help them stay informed. Few agents have developed any kind of ongoing policy review system with their customers. Those that do have a policy review system use it primarily to sell something else and therefore get push back from the customer. Almost every agent I know does not want to get involved in handling claims. They would much rather direct the customer to an 800 number claims service. Still more agents have taken the “let a sleeping dog lie” approach and decided it is not a good idea to make contact with a customer because it only opens up an uncomfortable discussion.
Many agents build their business on purchased leads from vendors, contacts with auto sales people and a few friends and family. In addition, many agents are never taught how to build a successful business as they are pushed to perform.
If we recognize that there will always be competition in our industry and we know that the cost of our products are going to vary, sometimes dramatically, and we accept the fact that a satisfied customer is my responsibility what can we do to improve service to our customers and why is that critical to our success?
Every agency owner needs a customer service plan. A plan that openly discusses how the agency engages with the customer. A good plan answer questions on how the phone will be answered. A plan addresses the responsibility of the agency owner and each staff person responsibilities. A good agency plan encourages customers to use reputable and selected vendors when they have a loss without directing them to an 800 number. It is important to remember that ALL insurance companies are the same until you have a loss.
Ask yourself this question: “How do I wow my customers and make it extremely difficult for them to leave?”
If you can find ways to engage with customers and make them forget the price differences your future is guaranteed. If you do not, you will find that your days are certainly numbered.
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