The insurance agency is a traditional business, and the path to success is known and well worn. But it’s changing.

Over the last 50 years, life for the average insurance agency has been pretty good. When considering my next career move in my mid-30s, a friend told me, “If you go into any town, the three largest houses will be owned by the undertaker, the banker and the insurance agent.” He was right, and it was hard to miss success as an insurance agency owner.

Changes in the Insurance Market are Here

But we’re in the midst of an unsettling sea change in the insurance agency distribution business. An unprecedented increase in information availability has been brought by the internet, and it’s changing the insurance distribution marketplace.

Price Competition 

All players in the marketplace will be forced to adjust. The industry itself has been commoditized for generations, but the local nature of the business has prevented the intense price competition that usually follows.

This means that to be successful in the future, agents can’t just adapt old ways of doing business to new tools. They must take these new tools and reinvent the business.

In fact, the traditional insurance agency is a dead man walking.

Information More Available

This is true because the commodity we sell, and the resulting commissions we earn, has been largely protected from dramatic reductions merely because of the difficulty consumers have had getting information. That has changed.

Dramatic reductions of income will follow for agents who merely try to adapt their business to the internet. To succeed, we must reinvent ourselves.


Dominating Your Market

How we must do that is not yet clear. But what is clear are three things that are always true if a business wants to dominate their market. Dr. Michael Moore of Harvard University offers these tips:

  1. Be the lowest cost provider
  2. Dominate a niche
  3. Differentiate their products


Be the Lowest Cost Provider

Number one is a traditional model for independent agents and will be available in the future. But being the cheapest will be increasingly more competitive, and the only way to win at this game is to accept lower margins and dramatically reduce the cost of doing business.

Dominate a Niche

Number two is in some ways easier, because a dedicated agent will be able to communicate with a niche market over a wider geographic area than ever. But competition will be more intense.

Differentiate Your Products

Number three is perhaps the most difficult. The insurance product cannot really be differentiated by the agent. Can the agent differentiate his service? Let’s be honest – the services agents provide are largely the same. How can anyone be truly different?

Insurance is something everyone needs and no one loves. That’s not going to change. How they purchase it will. Are you thinking ahead? You must, because the ground below your feet is shifting.