Someone said to me recently: “price is table stakes”.
And certainly, we pushed back on insurance companies all the time when they tell us that we should be able to sell their products (health insurance, auto insurance, life insurance, any type of insurance) for 20% more than their competitors, right?
Well, the truth is, price is only table stakes. And we have to be price-competitive to increase our insurance agency sales, or we simply aren't going to get the business - but the focus on price is something that is going to cause a lot of problems for agencies who don't understand how to develop real value for their clients in an increasingly competitive insurance business.
My advice for insurance agents is to always use data so that you understand the price, whether you are selling life insurance or any other type of insurance sales. You should understand the insurance industry well enough so you know how to get the cheapest price possible. However, don't make low prices your main selling point in your agency. In a future that is going to be driven largely by algorithms, you can't simply beat an algorithm. Focus your insurance marketing and lead generation on fresh, exciting marketing ideas that center customer service and personal relations, start selling on social media as well as face to face, and make the most of your real human connection with your customers.
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.
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:
- Be the lowest cost provider
- Dominate a niche
- 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.
Always keen on helping others make their dreams come true, Tony and his team have helped independent agents grow into more than 250 independent agencies. This has made OAA the number one ranked Strategic Master Agency of SIAA for the last 5 years, and one of Oklahoma's 25 Best Companies to Work for.
Tony loves to share his knowledge, insight and wisdom through his bestselling books as well as in free mediums including podcasts and blogs.
Tony and his family are members of Crossings Community Church, and he is very active in community initiatives: he’s chairman of It’s My Community Initiative, Inc., a nonprofit working with disadvantaged people in Oklahoma City; and chairman of the Oklahoma Board of Juvenile Affairs., and he has served through many other organizations including the Salvation Army, Last Frontier Council of the Boy Scouts of America, and the Rotary Club.
In his spare time, Tony enjoys time with his family. He’s also an active outdoorsman and instrument-rated commercial pilot.