I’ll be honest with you, I’m more excited today about the future of our business and our channel than I’ve ever been in my 30 years in the insurance industry. Yes, there are challenges. The demands of keeping up with new and rapidly changing technologies is endless, adapting to the ever-evolving needs of consumers takes time and resources, and of course, navigating the pricing pressures from direct carriers is a day-to-day battle.
However, we also have incredible opportunities to compete to win in the current marketplace and to define our future together as carriers and agency partners. I’d like to share my perspective on what is happening in the industry, the challenges we face, and how we can work together to leverage the changing landscape and our unique strengths.
What’s going on in the industry?
Unprecedented investment. There’s been more outside investment in the insurance and financial services sector over the past several years than just about any other segment. According to CB Insights, funding for insurance tech startups topped $1 billion in the first half of 2016. Their research indicates 63 percent of these investments took place in the United States. With more than 80 deals in the first two quarters, 2016 is on pace to top 2015′s total deal volume by more than 42 percent.
We are also investing in the future marketplace. Liberty Mutual, Safeco’s parent company, recently launched Liberty Mutual Strategic Ventures (LMSV), a $150 million early-stage venture fund focused on the intersection of innovative technology, services and customers. In addition, we have established our own innovation labs to create new products or services that IAs might sell and that customers might demand in the future.
Technological advances. The rise of new technologies enabled by increased mobility, big data and the Internet of things (IoT) affects nearly every industry. The ubiquity of smartphones has forever changed the way consumers shop, buy and do business. When houses and cars become “smart” it has a definite impact on risks and coverages. Cars are becoming safer to drive, even trending toward autonomous, but cost much more to repair because of the pricey, sensitive technology inside.
Consumers’ needs and expectations continue to evolve.
It’s not just a millennial thing. We once talked about these “digital natives” as though they were a new species. But today, many of us read Yelp reviews, bank online and stream movies. Now, my own mother opens an app on her smartphone to order a pizza and track its delivery.
Gen Y is growing up. Millennials are getting married, buying homes, starting families — and their financial needs and risks are becoming more complex. This is great news because millennials, perhaps more than any other segment, appreciate the ease, choice and advice provided by IAs, and millennials are, and will be, the largest segment of the population until mid-century.
Customer behavior and attitudes are changing. Increasingly, consumers are subscribing to services rather than purchasing products, which changes how they view risks and coverages. In addition, “sharing economy” services like Uber and Lyft are contributing to what may become an overall decrease in car ownership, even as they create new gaps in coverage that carriers and IAs must address.
What does this mean for the IA channel?
The IA channel overall has held its own against other distribution channels. In a recent internal research study, Safeco Insurance found that the distribution of auto insurance by channel was virtually unchanged from 2010 to 2015. But that’s only the headline. While most agencies aren’t growing at all, some are growing like gangbusters. A Safeco study of the 2000 largest Safeco agencies nationwide revealed that policies in force for the 240 fastest growing agencies grew by 14.9 percent in 2013. In 2015, that same segment grew by 27.6 percent, growing nearly twice as fast as they did in 2013.
There’s no hidden formula, nothing they’re doing that other agencies can’t adopt in some way. But there are five things they all seem to have in common, things every independent agent can do to plan for growth in the coming years:
Find ways to operate more efficiently. Customers respond to price and that’s not likely to change. Carriers and agents need to manage expenses so that we can collectively drive lower prices in the marketplace and narrow the price gap. That’s not to say we’ll be as cheap because there is added value by working with a local, trusted advisor.
For example, now’s the time to consider consolidating the number of personal line carriers your agency partners with. The 2014 Agency Universe Study reports that on average, agencies already write 83 percent of personal lines business with their top three carriers. Is scattering the remaining 17 percent across as many as eight other personal lines companies really good for business and good for your customers? Or would moving that business to one of your lead personal lines markets result in higher base commissions, increased profit sharing, more satisfied agents, an enhanced revenue stream and a better customer experience?
Work less in your business and more on your business. The agency principals who are thriving have found a way to get their heads out of the day-to-day and embrace their chief-executive roles. Rather than doing sales or service work, they think about how the business is going to operate in the future. They’re asking “What skills does my agency need?” “Are there technologies that will make my agency more efficient or provide me with meaningful data?” These principals make time to think about the long term future for their customers, their agents and themselves and take action to support that future.
Invest in the things that are proven to drive growth. Spend less on brand marketing, where the ROI is difficult to track, and move more toward relationship marketing. The agencies who are really flourishing in this climate have started taking a more deliberate approach to cultivating and growing relationships, even hiring part- or full-time marketing help to manage the effort. They’re also hiring new producers faster than their peers, and it’s undeniably driving growth.
Focus on where you really add value. Customers still value ease, choice and advice – it just looks different than it did 10 or 15 years ago. Whether it’s e-signing a policy or using a smartphone to file a claim, many customers want to do some things on their own. Embrace these changes. Agency carriers and IAs need to be comfortable with that and provide customers with those tools. The upside is we will be able to focus more resources on the things that really add value and support long-term relationships with customers. For example, working face-to-face with a client when they have a catastrophic claim. Or advising them when their life situation and risk profile changes. These are opportunities to demonstrate why an independent agent is so valuable.
“Lean in” on digital. You already excel at relationship building, far better than any computer generated lizard ever will. It takes decades to perfect that. Digital tools, by comparison, are easy to learn and even easier to hire for. The path that leads to your doorstep is increasingly made of bits and bytes — search engines, review sites like Yelp, social networks like Facebook. And after the sale, consumers increasingly expect to be empowered by digital tools to manage accounts themselves. Meeting those expectations is table stakes today if you want to compete tomorrow.
There are tremendous opportunities for all of us and there’s no doubt that sometimes it can be daunting. You’re not in this alone. Your carrier partners have a responsibility to stand by your side and help you prepare for what’s next in this fast-changing environment. Carrier partners should also be doing more to champion the cause of the IA, to help them grow, excel and win.
Safeco is committed to the success of independent agents and we are focused on providing you with modern tools, competitive products, innovative services and information to meet the changes head-on. Insurance Journal recently sponsored a Channel Harvest survey asking independent agents to rank carrier relationships across a variety of categories. One question asked respondents to “name the carrier that does more than others to support your agency’s overall growth – a carrier that is a champion of the independent agent.” We are honored that Safeco was rated #1 (twice as high as the next national IA-focused carriers).
We remain your partner, your champion and advocate. We are pushing to finish strong in 2016 and are planning for even more growth together in 2017!