QUOTE OF THE DAY:
"Only those who risk going too far can possibly find out how far they can go."
T.S. Eliot
EXCELLENT ANALYSIS OF A CHALLENGE/OPPORTUNITY
HOW MIGHT SMALL-BUSINESS AGENTS RISE TO THE CHALLENGE OF DIRECT ONLINE SELLERS?
PropertyCasualty360.com
By Sam J. Friedman
March 25, 2014
As a growing number of insurance carriers attempt to sell small-business coverage direct to consumers, agents will need to be more than mere policy peddlers and price shoppers to remain relevant for their customers.
That’s the message I delivered to the “2014 Organic Growth Exchange,” a conference for independent agents held earlier this month in Arizona. I realized early on that I was preaching to the choir with this assembly, made up largely of members of the Beyond Insurance Global Network, described on its website as an “exclusive peer-to-peer group of best-in-class independent agencies and brokers that serve their clients as diagnostic, consultative Trusted Risk Advisors.”
The group was launched by Scott Addis, president of The Addis Group in King of Prussia, Pa., who invited me to deliver the keynote address at his event. I met Scott in 2003, when, as Editor in Chief of National Underwriter, I profiled him and outlined his agency’s loss-control emphasis. In that story, I highlighted the fact that NU had chosen The Addis Group as the year’s “Commercial Insurance Agency of the Year” even though Scott insisted his firm did not sell insurance for a living. Instead, he positioned Addis as the risk manager for its clients.
After the profile appeared, Scott started getting calls from agents all over the country, seeking more details and advice about his consultative-brokerage approach. He went on to build a solid agency consulting business based on that philosophy, culminating with the launch of his Beyond Insurance network and the creation of his “Certified Risk Architect” certification program.
Ultimately, the majority of Commercial Lines agents are likely going to have to offer risk management as a core service if they expect to ward off the threat of disintermediation. Indeed, Small business clients are starting to resemble Personal Lines consumers more and more, a price-driven market with policies increasingly commoditized. As that trend plays out, agents who have little else to offer except quote and coverage comparisons will find themselves being marginalized and often elbowed out of the transaction.
This isn’t some far-off concern. There is a market segment already keenly interested in buying their Small Business insurance direct from carriers, without an agent or broker to help them or advise them. A survey by Deloitte of 751 small-business insurance buyers last year found that 16% were “very likely” to buy direct if given the opportunity, while 35% were at least “somewhat likely” to do so. Together, that means half of the market may be at risk for agents.
However, this certainly doesn’t mean all Small Commercial agents are doomed. Deloitte’s research found that many independent agents still have a strong foundation on which to fortify their relationships with small-business clients.
For one, trust in agents among the respondent pool was quite high, in the neighborhood of 80% for a number of service categories, such as guiding clients through the claims management process and serving as their advocate with a carrier if a claims dispute arises. Nearly three-quarters surveyed also said they trusted their agent to serve as their loss control advisor and offer tips on how to mitigate their exposures.
The trust issue is significant, because among the 48% of respondents who said they were “not very likely” to buy Small Business coverage without an agent, two-thirds said it was because they “don’t trust an insurance company to deal with me fairly,” which was far and away the biggest reason cited.
Satisfaction levels among the survey respondents were also positive, with 31% “very satisfied” with their agents, and another 52% at least “satisfied.” Given such high ratings, it’s no wonder that more than half hadn’t changed their agent in over a decade, including 28% who had never done so.
Still, even agents with strong client relationships can’t afford to take their Small-Business customers for granted. Insurance consumers remain very price-sensitive, and the Small Business market is no exception. Indeed, Deloitte’s survey found that nearly half said a price hike by their current insurer or a lower price offered by a competing carrier would be “very influential” in deciding whether to move their account.
Meanwhile, 40% of respondents who had changed agents said they did so because they didn’t get the best price available from their prior producer. Combine that with the 84% who said they expected to get a price discount if they abandoned their agent and bought Small Business coverage direct from an insurer, and you can see the makings of a market disruption.
So, what should agents do to differentiate their value proposition and maintain their place in the distribution chain?
• Don’t panic. At first blush, those who seem most inclined to buy direct are smaller accounts that may be difficult for independent agents to serve profitably. They are also very price-driven, which is not the niche targeted by consultative brokers emphasizing the value of long-term savings generated via loss control and risk management advice.
Perhaps a segment of this market is simply destined to transition to the direct sales channel. But if that’s the segment your agency happens to serve, you might have to go after bigger clients with more complex needs, or find another line of work.
• If you can’t beat ‘em, join ‘em. Carriers selling direct to consumers might try to avoid channel conflict with their existing distribution force by referring clients to agents for service and cross-selling—although likely at a lower commission rate, since the acquisition costs are being absorbed by the carrier. In that case, a direct sale could be a win-win-win for the insurer, the agent, and the buyer.
• Added-value is the key. No matter how an agency conducts its business, remember that every client is in play—if not vulnerable to being solicited by direct writers, then certainly by other independent agencies. What will your agency do to stand out and make its services unique and essential to clients? If direct-to-consumer insurers offer a sizable discount for discarding the intermediary, that means agents are going to have to earn that extra premium to remain in the distribution chain.
• Holistic service is crucial. To convince policyholders that an agent is worthy of retention, they are likely going to have to be more than just a sales intermediary. Deloitte’s survey found that only four in 10 small-business respondents characterized their agents as taking a consultative approach—that is, offering advice on risk identification, loss control, and claims management. More agencies will need to go this route to preserve their clientele, especially as direct selling expands.
• Consider a new compensation model. Truly consultative agents and brokers may want to wean themselves off pure sales commissions and consider charging a fee for their value-added services. In this way, their expense can be more transparent and their value more easily compared against the savings they generate as risk managers, measured in terms of lower loss costs and smaller insurance premiums.
• Try cross-selling. Agents who have multiple policies with clients are usually at far less risk of losing accounts than those who fill only a single coverage or service need. Beyond Property and Casualty insurance, more small-business agents might expand their offerings to include life and health insurance, disability coverage, and retirement planning, as well as loss control and safety services.
• Fight fire with fire! What’s your digital strategy for sales and service? Independent agencies should build their own robust tech capabilities, delivering information and services via multiple platforms, including mobile devices and social media. Meanwhile, nothing is stopping an agency from starting up their own aggregator website to sell coverage online for multiple carriers.
Most importantly, know your customer inside and out, target your services (as well as the medium through which they’re delivered) to meet your clients’ specific needs, and be able to document the added value your agency provides. The future is now
SELLING COMMERCIAL DIRECT: THREAT TO AGENTS OR CAN EVERYONE PROFIT?
By Phil Gusman
Propertycasualty360.Com
March 27, 2014
Hiscox USA has been selling Commercial Insurance products direct to small businesses since 2010; and while the company has bet on a bright future for this distribution method, CEO Ben Walter still believes in the value of agents and brokers as well.
“What I caution against is thinking of [the direct and broker channels] as mutually exclusive competitive segments,” Walter says. “I think they’re complimentary.”
Some business, he says, lends itself to the direct channel while other business does not. If it’s all done the right way, says Walter, selling some Commercial Lines direct frees brokers up to become true risk advisors for the businesses that really need it.
Determining the right business for the direct channel doesn’t come down to a particular line of insurance, but rather the complexity of risk, says Walter. The best candidates for the direct channel have “fairly homogeneous” risks that can be rated in a “fairly simplistic way.” This, says Walter, is more closely, but not always, related to the size of the business and the industry in which it operates, rather than the line of insurance.
Although large corporations might have more robust risk-management capabilities, Walter says as a company gets bigger and more complex, exposures grow, and larger companies will generally want a broker.
Walter says some businesses should have a broker to advise them on their risks and their needs. “We’re not saying the whole world should go direct,” he points out, adding that it is not right for everyone.
In fact, he says some customers with complex businesses and insurance needs that approach Hiscox through the direct channel are referred to brokers. Walter also says Hiscox offers its wholesale distribution partners access to its direct platform so businesses can “get coverage through broker partners as well.”
However, he adds, “Some prefer going direct, and we support that.” He says Commercial Insurance buyers should have options and should be able to buy coverage how they want. “The more pipes the better.”
Do agents and brokers view this strategy as a positive for the world of Commercial Insurance or as a threat to their business? “It’s been a journey,” Walter says of his conversations with distribution partners. “In the beginning, they saw it as a solid threat.” He adds, “They were tough conversations at first.”
Walter says, though, that agents and brokers grew more comfortable with the idea once they saw the type of business Hiscox was targeting for its direct channel, and how much business there was to go around. He says Hiscox and its distribution partners have grown together and that a successful tide “has lifted all boats.”
Still, he says, “I don’t want to oversimplify it,” noting that “none of the conversations [with distribution partners] were or are easy.”
He says the industry tends to be slow to change, but he maintains there’s a mindset shift occurring. Walter points out that there’s some competition in the direct Commercial marketplace now from an insurer backed by American Family. The Hartford, too, is entering the market, he says. “We welcome the competition,” says Walter, because he feels it validates Hiscox’s bet on selling commercial insurance direct in the U.S.
He says the concept has been slower to catch on in the U.S. in part because “it takes a lot of courage to look distribution partners in the eye and tell them about this.”
As competition moves into the direct space, Walter says Hiscox will leverage its experience in this area to win customers. The company sold Commercial insurance direct in Europe before launching it in the U.S. Walter also says Hiscox has spent time and money on technology, on understanding customers and on marketing.
Walter says Hiscox has seen growth in its direct channel, with about 50,000 policies in force now. He says many risks come with small premiums though, “so it takes a lot of customers to build up the business.”
Walter believes it will take time—at least 10 years—for the idea of Commercial insurance sold direct to really get going. “It’s a long burn,” he says, noting that generations will turn over before the business really starts to shift. Still, with some big insurers entering the space, Walter says the concept will catch on. “I think the Commercial space is ready for this,” he says.
As for brokers, Walter says he believes they will survive and succeed. He points to changes in the travel industry, noting that travel agents have changed, but have not died off despite competition from online services. Walter states that insurance brokers who understand that they can provide value-added services beyond the sale will be the most successful in a world where selling commercial insurance direct becomes more common.
A WIN-WIN-WIN FOR CONSUMERS, COMPANIES, AND AGENTS
CO-BRANDING IN THE DIGITAL AGE
INN Breaking News
March 28, 2014
by Laura Goodenow
Carriers, including Safeco, are joining an effort to increase the online presence of individual agents and bolster awareness of the independent agency channel as a whole.
Carriers continue to battle each other for business with independent agents. Meanwhile, consumers continue to flow into the direct channel. “Consumers are shopping and learning more about insurance than they ever were in the past,” says Safeco Insurance president Matt Nickerson.
U.S. consumers still overwhelmingly prefer doing business with agents, according to a recent Accenture survey. Most insurers continue to struggle with establishing a strong agency value proposition, i.e., the ability to increase loyalty among independent agents in order to achieve “preferred carrier” status with a larger number of agencies, says the consulting firm’s report, “Creating Value in the Independent Agency Channel”.
“We only win if our independent agents win,” said Safeco Insurance president Matt Nickerson. “Part of that is that the independent agents need to evolve and change.”
Safeco sells insurance products exclusively through independent agents, and, along with Westfield Insurance, Central Insurance Companies, The Main Street America Group, State Auto Insurance Companies, and Selective, is a founding investor of Project CAP.
Founded by the Independent Insurance Agents & Brokers of America (IIABA) and the six carriers, Project CAP—Consumer Agent Portal—offers online marketing solutions to independent agents and manages TrustedChoice, the IIABA’s advocacy website. “CAP is one of many levers—but an important lever—in responding to the changing consumer,” Nickerson says. The site’s quoting capabilities for participating carriers should be nationwide this summer.
Home and Auto insurance shoppers in 18 states can now request online insurance quotes through Project CAP, and then find nearby agents to write those policies. Capabilities should span the nation by mid-year. Currently, 33 carriers have signed up or are in the process of signing up to provide quotes, with at least a dozen more carriers in the pipeline.
Carriers agree to present rates on TrustedChoice through a real-time data connection to the EZLynx rating vendor in each state it is licensed. They then pay monthly fees based upon state and per-quote fees each time a quote is presented.
Project CAP works with carriers and its rating vendor to balance a need for quoting information with the number of questions a consumer must answer. It also provides business intelligence reporting, such as where the carriers ranked in the listings, how many times they showed up, and how many times they were selected.
Because the site leads customers only to agents who can write policies, TrustedChoice.com can’t track how much actual business is generated. Additional opportunities for data sharing, as well as carrier promotion and spot placement, are in discussion.
According to IIABA, many independent agents and brokers are competing locally with the direct response companies and captive agencies by combining customized service and advanced technology in their personal lines marketing. And, online advertising and rate quoting capabilities are cited as successful ways to obtain customers.
“Many agents are receiving multiple leads and quotes, and from our early sampling, it appears that about half of those leads are turning into written policies,” Bacciocco says.
Last year, independent insurance agency Southern Financial Insurance Group took the plunge. “Part of our growth model was to have a presence on the Web,” says agency manager Stephen Copeland. “We had considered doing it ourselves but quickly nixed that idea when we saw what Project CAP could offer.”
Copland attributes an increase in sales to its efforts on the Web - updating its website, adding an online quoting option, and creating a Facebook page.
In addition to its more than 1,200 agency clients, Project CAP looks at the entire independent agency channel as its charge. “We have a branding challenge at an industry level,” Bacciocco said. “That's what Trusted Choice is supposed to be about.“
HIGH-TECH BUILDS HIGH-TOUCH
APPS HELP MAKE INSURANCE COMPANIES MORE PERSONABLE
LiveInsurance
By Stephen Vagus
March 26, 2014
Insurance companies are beginning to look to technology to help them connect with consumers. Although many insurers are using social media to increase their engagement, having a presence on sites like Twitter and Facebook is no longer adequate. Many companies have begun to develop and release their own mobile applications to appeal more effectively to consumers who are becoming heavily reliant on smartphones and tablets.
Apps might be able to help insurers connect with consumers more effectively
Many of the applications from insurance companies provide consumers with quotes. Applications are also being used to begin the claims process, highlighting convenience and automation. Applications that allow people to pay premiums from their mobile devices are becoming more popular .as well.
Some insurers are releasing applications designed to present a certain image that will connect with consumers more effectively. Progressive has the Flo-isms application, which provides users with sayings from the insurance company‘s popular “Flo” spokesperzon. GEICO has a similar application that acts as a mobile game, tasking users with directing vehicles safely to a destination.
These applications have managed to make insurance companies seem more human rather than large, faceless corporations that are concerned with nothing more than profit. Insurers are working to dispel this stigma by showing consumers that they can be more personable. Given that most of the applications insurers offer are free, a stronger focus on mobile technology might help accomplish this goal.
MUDSLIDE INSURANCE LIKELY WON’T COVER WASHINGTON VICTIMS’ HOMES
LiveInsurance
March 27, 2014
by Julie Campbell
The devastating recent news for homeowners who have suffered tremendous losses – or even who lost everything – in the deadly Washington disaster, could become much worse because these people probably don’t have mudslide coverage to protect them.'
Unfortunately, standard Homeowners and Business policies don’t include mudslide insurance. Additional coverage is usually needed for damage caused by movements of the earth, such as earthquakes, landslides, rock slides, and mud flow. Heartrendingly, the majority of people – including most in Snohomish County, Washington – assume that they’re covered against this type of catastrophe until disaster strikes.
Landslides and mud flows can occur anywhere. While many happen in uninhabited regions, this most recent – which killed at least 24 people – is a reminder that they can strike populated areas, as well.
If a property is located on steep ground or near a cliff, added coverage could be a worthwhile investment. It might not be cheap, but the home is typically the largest and most valuable asset in a person’s life, and the added coverage could make the difference between the financial ability to recover, or a devastating loss owns.
Although federal disaster aid can provide some assistance, it usually comes in the form of a low-interest loan, rather than a cash payment.
FAMILIES OF SOME CHINESE PASSENGERS ON MISSING PLANE GET INSURANCE PAYOUTS
By Reuters
March 28, 2014
BEIJING (Reuters) - Chinese insurance companies have started to pay compensation to the families of passengers aboard a missing Malaysia Airlines plane presumed crashed in the southern Indian Ocean.
China Life, the country's largest insurance company, has provided the families of seven passengers with a total compensation of 4.17 million yuan ($671,600), Chen Honghao, an official from China Life's department of planning, told Reuters by telephone on Friday.
China Life had 32 clients on the flight and estimates its total compensation would be 8.94 million yuan, Chen said.
Flight MH370 is believed to have crashed with the loss of all 239 people aboard after flying thousands of miles off course on March 8 during a routine flight from Kuala Lumpur to Beijing. More than 150 of the passengers were Chinese.
Shanghai-based China Pacific Insurance Co., Ltd. compensated the family members of one of its clients with 525,000 yuan on Wednesday, Yan Liping, an executive from the firm's branding division, said in an emailed statement.China Pacific Insurance estimates that it will have to pay out a total of 4.04 million yuan to the families of 12 clients on the flight, Yan said.
New China Life Insurance Co. Ltd. will compensate the families of nine clients on board the flight with a total of about 1 million yuan, Zhang Hongxia, a public relations official from the firm, said on Thursday.
Sunshine Insurance will provide 500,000 yuan in compensation for the family of one of its clients, a woman with the surname of Zhang, from the firm said on Thursday.