P/C Agents Still Carry Clout but Worry about Direct
By Arthur D. Postal
InsuranceNewsNet
WASHINGTON – The top priority of property/casualty insurance agents is retaining and serving existing customers, according to a new survey by Accenture.
“Insurance agents place a higher priority on servicing their customer base, and improving the customer experience, than attracting new business,” the survey said.
The Accenture independent agent survey was conducted to help independent agents “compete and win in the long-term” in the face of substantive challenges, Accenture analysts said. These challenges include changing consumer behavior and the “continued rise of the direct channel,” the survey said. The report also cites other challenges, including new insurance players, with new distribution models, “that are making a determined effort to entice customers away from agents.”
However, as the report notes, independent agents “collectively … pack a mammoth punch.”
The report said independent agents are the dominant P/C distribution channel in the United States. The report said that in 2013, 58 percent of all P/C premiums — amounting to $311 billion — was generated by the independent agent channel.
The report cites the latest data collected by the Independent Insurance Agents and Brokers of America (IIABA) as showing that independent agents are responsible for approximately three quarters of all commercial P/C insurance premiums, 35 percent of all personal auto insurance premiums and 41 percent of home insurance premiums.
In the individual life sector, independent agents control 49 percent of premiums, the report said.
The report said that the “dramatic increase” of carriers’ direct sales via the online channel with the accompanying commoditization of some insurance products, “confirms that one’s business partner may also be one’s rival.”
The report said that independent agents view carriers’ direct solutions as a threat to their sustained profitability.
“They recognize that they cannot compete with the lower prices, more powerful marketing and prominent market profiles of the online sites.”
On the other hand, the report said, “agents’ habit of playing carriers off against each other to secure more favorable terms and treatment serves as a reminder that loyalty cannot be taken for granted.”
The report also said that the challenges of alternative distribution systems, independent insurance agents in the United States “have mostly managed to hold their own.”
Consumers prefer to buy insurance from independent agents, a fact that is confirmed by the finding in Accenture’s 2013 U.S. Personal Lines Survey, which said that nearly 70 percent of consumers trust independent agents to provide advice about the best products.
As a consequence, many carriers that leverage the direct and exclusive agent channels are exploring ways to use independent agencies to expand their product distribution, the report said.
The report said that “many carriers that leverage the direct and exclusive agent channels are exploring ways to use independent agencies to expand their product distribution.”
At the same time, the report said carriers that are already dependent on independent agents are looking to sharpen their focus on their most productive relationships, culling those agencies that under-deliver. But, despite that, “There is little doubt that most insurers regard the independent agent as a long-term driver of organic growth,” the report said.
The report said there are 38,500 independent agencies in the United States; most are small businesses that generate average annual premiums of between $5 million and $6 million, earn commissions of less than $1 million, and employ seven to 12 fulltime employees, according to IIABA data. The majority work with a small number of carriers: 60 percent of the respondents in our survey said they use no more than five carriers, while a further 33 percent said the number was between six and 10.
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
© Entire contents copyright 2015 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
Fitch Publishes Hilltop Holdings Inc.’s ‘BBB/F2’ IDRs; Outlook Stable
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News