The Future of P&C - Bright or Bleak?

[Derrick]

This forum is turning into a doomsday discussion board. I feel like we're one thread away from covering bunker building in our backyards.

If you're concerned with change in the industry, hedge your bet a bit. Have other investments, work with carriers who align themselves with the independent agent model (The Hartford is a company who clearly doesn't), and lastly keep writing as much good clean business as possible. We'll be fine...

It's been a doomsday discussion since the 2000's. Every week there is an article in a P&C mag or on an online blog about how us indies and captive agents are going to be pushed out.

I think your point with working with carriers like Hartford has a lot of truth. There are about 40,000 independent agencies with 380,000 agents and God knows how many agents. I think the IIABA and any other indy agency organization really needs to start pushing back at these carriers that want to cut us out by cutting them out. Especially with a carrier like the Hartford who can easily compete with any other carrier. Let's just en masse place them with someone else who is competitive and not trying to cut us out.

People DO get freaked out about stuff like this. I agree It shouldn't worry most of us. I don't agree we should treat it as business as usual, the way it's been done the past 30 years. Keep what works, change what no longer does. Meanwhile, keep a finger on the pulse. Be ready for change.

Not only is the industry changing technologically(?) or its methodology but I think it's important to note just how much the pie in P&C has grown in the last 30 years. I don't have the numbers to back it up, but I'd bet P&C revenue or any insurance revenue has exploded way above and beyond the rate of inflation. I'm not saying the pie isn't going to get bigger, but I don't think it's going to get bigger as fast, which actually might not be a bad thing considering there are more agents leaving then coming into the industry.

As the law stands insurance is required to be sold through licensed "agents". Would an automated, multiple carrier, online model qualify as an "agent" to quote and issue? Or would it only be allowed to generate quotes then pass it to a human "agent" to issue?

I'm not the one to fight progress but the problem with having an online portal for instant quotes/issue is that consumers have no idea what they are buying. Sure, they can be directed to a state licensed CSR probably multiple states away, but there job is going to be to get you on a call and get you out, much like customer service for any of the big corporations. That's why independent agencies work.

You know, it's only going to take a little time for people to know someone who bought state minimums because it was the cheapest, only to get into an at-fault only to get sued and lose their home, savings and any other big asset. Then consumers are going to ask if they want to be that guy that loses everything simply because they wanted to save a few bucks. Just my opinion.

Didn't google already try this an fail? Progressive has this too and I get calls all the time from people saying Progressive said you're more competitive can we go through a quote?

I have people all the time that say they wish they would have switched to an indy agent earlier. If you target the right markets (standard and non-preferred) that $100 to them isn't that big of a difference to go direct. While also embracing non-standard as, in my opinion, the future of the US looks to have some problems in the economy going forward.

 

[insurance1822]

Don't think for a second that Google is done, they'll be back. It's predicted that auto insurance premiums have peaked in 2015. We had a large national convention for SIAA & it's clear that everything Dbag Derrick mentioned is accurate. They predict auto insurance premiums will be 40% of what they are now within 20 years.

Throwing weight around? SIAA has like $450,000,000 w/ Travelers. Travelers cut commissions from 15% to 12% and the SIAA guys almost went fisticuffs w/ the executives. The following year, we wrote more new business then we ever had w/ Travelers.

Allstate, State Farm & now Travelers are "the ship" that steers the course. Travelers cut commissions & got tons of new business. Commission erosion is real & the path we're going is real. The only advantage is business procured through agencies is much more profitable & retains better then the direct markets.

The predictions are that insurance agencies will still exist, but they'll be VERY different. Continued mergers are what will keep us strong which is why I like being part of SIAA. The home insurance market IS growing, but the writing is on the wall for personal auto insurance.

Just wait until Google buys coverhound or some online IA that has the distribution model & infrastructure in place. Then with Googles resources...things will change.

I think we'll all be OK but I think in even 10 years it's going to be totally different and within 20 years it's all but gone.

 

[nyc2phi]

Don't think for a second that Google is done, they'll be back. It's predicted that auto insurance premiums have peaked in 2015. We had a large national convention for SIAA & it's clear that everything Dbag Derrick mentioned is accurate. They predict auto insurance premiums will be 40% of what they are now within 20 years. Throwing weight around? SIAA has like $450,000,000 w/ Travelers. Travelers cut commissions from 15% to 12% and the SIAA guys almost went fisticuffs w/ the executives. The following year, we wrote more new business then we ever had w/ Travelers. Allstate, State Farm & now Travelers are "the ship" that steers the course. Travelers cut commissions & got tons of new business. Commission erosion is real & the path we're going is real. The only advantage is business procured through agencies is much more profitable & retains better then the direct markets. The predictions are that insurance agencies will still exist, but they'll be VERY different. Continued mergers are what will keep us strong which is why I like being part of SIAA. The home insurance market IS growing, but the writing is on the wall for personal auto insurance. Just wait until Google buys coverhound or some online IA that has the distribution model & infrastructure in place. Then with Googles resources...things will change. I think we'll all be OK but I think in even 10 years it's going to be totally different and within 20 years it's all but gone.

So what are your future plans..?

I believe even 20 years out there will be carriers that won't go that route and they'll adapt to conditions to keep us in the picture but yes agree also that things will be way different.

 

[insurance1822]

Well after 20 years I'll have made my money & it shouldn't matter for me...(or so I hope.)

 

[Derrick]

So what are your future plans..?

I believe even 20 years out there will be carriers that won't go that route and they'll adapt to conditions to keep us in the picture but yes agree also that things will be way different.

But will it necessarily be bad? I think agents and agencies are going to have to specialize and know their customers a bit more. So what if we see more, say, specializing in in-home daycare. Instead of just generically offering such service, agencies will have expertise, as well as carriers that specialize in such coverage in a way that protects said daycare. It's a win-win for either agencies that can jump in that hole early, or perhaps find new niches going forward.

Of course, there are other specific markets out there, but this generic "home, auto, and business" theme will go away. I think we're going to have to target specific markets, as well as have specific expertise for those markets going forward. Or we'll get left behind, like insurance1822 will.

Just my opinion though.

 

[GXR2]

Moore's law affects everyone. This accelerated change touches every aspect of every life and every industry that relies on technology - and that's just about every industry insurance included.

An agent can no longer survive by just being an "authority" on 25/50 versus 250/500. Young consumers are smart and they study online before they pull the purchasing trigger. It's not really that hard to grasp auto insurance concepts and they can be spelled out in a few paragraphs.

Okay I will probably get flack for that last paragraph but it's the truth. Before trhe internet, I would never had said that. It has just never been consolidated into one place before. But it will be.

The value agents bring to the table is the ability to deepen client relationships. The average policy per household is about 1.7. There are many missed opportunities of a deeper relationship.

Everyone needs some life insurance even if it's a final expense policy. If they have kids they must have at least a term policy until adulthood. Every married couple has at least one wedding ring that needs an inland marine policy. You'll be surprised how many people collect valuable things IF you just ask. Those with pets love them like children. They need pet insurance. Homeowners need water and sewer line coverage. So on.

The more you deepen the relationships with your current clients the more valuable you become.

But, that's not enough.

You need to have constant contact with them right after the sale with a thank you card or letter, and at least at the first renewal and every two years afterward.

The keys to success now are:

1) Deepen your current client relationships.
2) Develop a point of sale and ongoing client communication plan.
3) Reach out to the non-standard market and build relationships.
4) Ask for and get positive social media reviews from happy customers.

 

[Heather]

I see the insurers using us to reel the clients in then cutting us out on renewal.

My husband has a pre-paid cell phone store, we get paid for new activations then a few dollars every month when they top up their service, but now they cellular companies have top up cards for sale at Dollar General, the gas station, grocery stores and even text them a link to top up with a credit card so all this completely cuts us out. Then they sell us phones at one price to resell our customers but then offer the same thing on their website for less than they charged us for it. They need him to bring the customer in but after that they don't need you anymore.

I can see insurers doing the same thing to us bring em in then slowly cut us out after we spend our marketing money and do the service work.

 

[Derrick]

I see the insurers using us to reel the clients in then cutting us out on renewal.

My husband has a pre-paid cell phone store, we get paid for new activations then a few dollars every month when they top up their service, but now they cellular companies have top up cards for sale at Dollar General, the gas station, grocery stores and even text them a link to top up with a credit card so all this completely cuts us out. Then they sell us phones at one price to resell our customers but then offer the same thing on their website for less than they charged us for it. They need him to bring the customer in but after that they don't need you anymore.

I can see insurers doing the same thing to us bring em in then slowly cut us out after we spend our marketing money and do the service work.

But then we won't have the incentive to service them. They'll have to call a generic 1-800 number and receive generic answers from "agents," which you will probably never talk to the same agent twice. These "agents" will literally get paid bonuses by getting you off the phone as soon as possible while simultaneously trying to get you to stay even if their product price is uncompetitive now. Are people really going to want to have their insurance handled through a Comcast-like service? If people vote Comcast as America's worst customer service over some cable, imagine what they will do with insurance?

 

[GXR2]

No. Insurance companies know retention increases when assigned an agent. A web portal type site will capture a huge portion of the business in the next 10 years, but you will still have the rare walk in or call in.

Once the portal makes the sale the carrier will broker it over to the closest agent of record to service.

You will no longer get NB commissions as you know of them today. You will only get renewal and bonuses based on service quality, retention, and how policy deep. Whatever you cross sell beyond that you will get NB pay.

This means during year one you will essentially have to service web sales without getting paid.

 

[indienoise]

But then we won't have the incentive to service them. They'll have to call a generic 1-800 number and receive generic answers from "agents," which you will probably never talk to the same agent twice. These "agents" will literally get paid bonuses by getting you off the phone as soon as possible while simultaneously trying to get you to stay even if their product price is uncompetitive now. Are people really going to want to have their insurance handled through a Comcast-like service? If people vote Comcast as America's worst customer service over some cable, imagine what they will do with insurance?

Man, isn't that the truth. I can't tell you how many times I was able to close a prospect just by talking about having to call up a direct carrier on an 800 number for service.