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Increasingly those of us in the insurance agency business are hearing that many of the products we sell are “commodities”. Our insurance company partners are opening all manner of alternative sales channels to reach customers because – they don’t need agents. Or in some cases customers don’t want agents.
I think that what we are hearing is true to a very large degree.
The first alarm regarding “disintermediation” was sounded 15 years ago and agents were afraid then that technology would dramatically disrupt our business model. Of course, nothing much happened and so agents went back to sleep in their 100 year old paradigm. What has happened in the intervening period is that the technology, and the changes in consumer desires and behaviors, has finally caught up to the warning.
In less than a decade the independent agency channel has lost 7% of market share in personal insurance. This was a period in which the ability for consumers to purchase insurance online and direct was just beginning. What will the end result be? I don’t know but I do know it won’t be good for agents who don’t do something different.
What should agents do differently?
Again, I don’t have all the answers. But I do have one. Customer engagement. In “The Coming Jobs War” by Jim Clifton (the CEO of the Gallup Organization) says that “when customer engagement increases, sales increase. If a customer rates his partnership with your organization as a 5 on a 1-5 scale versus a 4 or lower (most executives believe a 4 is a good score, but it isn’t), he’ll do three things that less engaged customers won’t:
Buy more frequently
Spend more per visit
Pay a higher margin”
So, to compete for sales of products available without an agent agents need to develop higher levels of “engagement” with their customers. What does this mean?
It does not mean service levels but relationship. It means partnership. It means that the customer believes the agent is a partner in their business or relationship. It means that the sale of insurance must become relational not transactional. This is obviously much easier in larger commercial lines accounts but will be absolutely critical in the sales of personal insurance. Luckily, technology will be available to make this easier, and more cost effective, than ever before.
But make no mistake, the traditional agent business model – particularly in personal insurance – is dramatically and permanently changing. Those who do not change with it will perish. How long until we get there? No more than 5 years!