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McKinsey & Company is perhaps the largest management consulting firm in the world. Two-thirds of the Fortune 1000 use their services including most, if not all, of our insurance companies. They have prepared a report entitled “Agents of the Future: The Evolution of Property and Casualty Insurance Distribution,” which updates earlier ones and represents serious and empirical research. The implications for the P&C agency industry, and for your agency’s future, are serious.
The conclusions they reach are not new. We have been reading about similar predictions for at least a decade. But during that decade many of the things they discuss have been evolving in a direction which is not favorable for the traditional agent. They do not predict an end to our business, but that it will radically change over the next 5 to 10 years. The changes are being driven by not only technology but other forces (like marketing) with which the local agent is not financially or operationally prepared to compete.
You have heard me talk about the dangers of commoditization before. McKinsey also discusses this and you should pay particular attention to the implications of it for your business.
If, after reading the report, you think to yourself “this does not affect me” consider the following please:
How do you account for the reduction in the number of agencies over the past 10 years? What about the of the commission cuts we have seen in the last five years? What about the fact that most of our companies do now market online as well as use direct employees to sell insurance? Why do you think our companies invented, and so enthusiastically recommend, their own service centers? Have you lost sales or customers to GEICO, Esurance (why do you suppose Allstate purchased Esurance?) or other virtual carriers and sellers? Have you seen an increase in turnover in their own personal auto books over the last decade?
Next time I will review some of the salient points of the report and how I see their impact.