Disintermediation: A Reality Check

The question is: Who will be disintermediated? 

Roughly defined, disintermediation means removal of the middle man. Do a linear projection based on historical forces and you'll conclude that the disintermediation of the agent from the Personal lines process is inevitable. After all, when Warren Buffet, Conning & Company, banks, large insurance companies, and others agree on something, they must be correct, right?

Wrong! Fundamental discontinuances of major market forces have changed the rules of the insurance industry. The new rules re-establish the local entrepreneur as the force in Personal lines. Three of the most important discontinuances are:

• Technology empowers individuals, not institutions. Information is power, and as power decentralizes, large centralized institutions lose. The historical role of an institution being the harbinger of knowledge and skills is dead. Today's technology-personal computers, expert systems, and the Internet-brings the information and knowledge that was formerly the institution's "reason to be" to the local and individual level. In Personal lines, the weighted institutions of our past will certainly continue to mate, but will slowly die from their own weight in an environment that requires speed and nimbleness.
• Human resources are scarce, and will remain the fundamental source of marketplace advantage. This battle for talent is being won by the local entrepreneur in every industry, not by the large institutions. Human resources are becoming ever more valuable, and the strongest repository of talent in the industry today is the local entrepreneur. This person's knowledge and skill base is perfectly positioned to take advantage of society's major forces. The fact is, it's not the institution that doesn't need the agent, but the agent and the customer who don't need the institution.
• Low cost is not an advantage but a requirement. And who can deliver superior service: a local service center or a center 1,000 miles away? The battle in the 21^st century won't be over what access channel the customer will choose-direct mailer, direct writing agent, the Independent Agency System, the Internet , affinity groups, banks, or whatnot-and its cost.
  
  It will be over the ability to deliver superior service. Every serious player will be low priced and will respond to whatever access channel customers choose, when and how they choose it. In fact, the same customer who today transacts a quote or auto change over the Internet may some day want to walk into your office to discuss a substantial claim-for instance, a seriously injured family member. We can't afford to lock into any one channel; we must respond to them all. The battle will be over service!

Service is about satisfying customers' needs, and when service cap-ability is the competitive tourniquet, the local entrepreneur wins! Examine a few of the key needs.

• Speed. Speed is authority at the moment of customer interaction. The routine service of tomorrow will of course be given at electronic speeds, but the speed of complex service (for example, a difficult claim) will be gauged in direct proportion to your level of institutional bureaucracy. The skillful local entrepreneur wins!
• Accountability. Institutions with 800 numbers are not accountable; people are. An automated 800 number system is efficient, but wears thin when the cost advantage disappears and an accountable explanation is required. The local entrepreneur wins!
• Convenience. The idea of distribution to the customer is being reversed. The customer will be accessing the product. Only when a local service center is established will the customer enjoy the ultimate in convenience. The service center that can handle electronic interface while allowing for a personal walk-in tomorrow will win. The local entrepreneur wins!

For the local entrepreneur to capitalize on these forces, two fundamental shifts must take place within industry minds. First, local entrepreneurs are not an arm for distribution or for sales and marketing. They and their service partner, the customer, constitute the service body. The institution is the financial arm.

Second, the local entrepreneur must find a strong financial partner willing to team up with the agency to create the lowest-cost system. Only after this relocation is accomplished will the freedom of true superior interactive customer service be released-and when that happens, the local entrepreneur will win the 21^st-century marketplace.