By Victor Pepin, Vice President and General Manger, New England Region, Safeco Insurance
Over the past several years, we have all heard and read dire predictions about the future of the independent agent (“IA”). Most of those predictions were based on assumptions about the fearsome technological and financial power of huge, highly competitive companies who use their might to target consumers directly. But the IA is still here, still relevant, and still a force to be reckoned with. This is particularly true in Massachusetts, where the J.D. Power 2015 Insurance Shopping Study revealed that customers who used a local agent for a new auto insurance policy were more likely than people in other regions to choose an independent agent (61% vs 44%).
In a recent internal research study, Safeco Insurance found that the distribution of auto insurance, by channel, was virtually unchanged from 2010 to 2015. That’s a huge accomplishment when you consider what we were up against during each of those five years. As widely reported, the big-brand, direct-to-consumer carriers spent a combined total of about $6 billion on consumer advertising.
This massive spend was designed to commoditize the product and compete on the strength of web sites and mobile apps. And yet, they gained virtually no ground from the independent agent — not even enough to register outside the margin of error. At the same time, Google — one of the largest and most powerful companies on the planet — entered and then quickly withdrew from the market, having made little to no progress toward its early ambitions.
We can all relax now, right?
Not so fast. There is still plenty of risk for the independent agent to be disrupted by increasing competition. Our study also indicates that 60% of customers would consider leaving their independent or exclusive agent and going direct the next time they shop for auto insurance. Meanwhile, 40% of direct customers would consider an IA the next time they decide to change insurance plans. That’s a lot of potential movement, enough to change the complexion of the market if it ever becomes a reality.
So what’s the upshot? How do independent agents remain competitive and thrive in a market where the landscape is fluid and threats seem to grow and multiply? By doing what we do best, and learning a few new tricks. Where did the IA channel get the strength to resist a $30 billion attack for five years? From decades of building relationships, providing value beyond price and running smart, disciplined businesses. In order to weather tomorrow’s storm, we must start preparing today.
Only this time, we don’t have decades to do it.
LOCAL IS A STRENGTH
In our study, the number of consumers who selected “company is local” as an important factor when shopping for auto insurance grew a whopping 72% from 2010 to 2015. So we know that “local” is a selling point of growing importance. We also know that taking advantage of that fact remains a huge, upside opportunity for most of us. Showing your face regularly at community events will remind people that you’re a living, breathing member of the local business community. Getting involved in local causes (beyond donations and sponsorships) will show them that you’re a caring one.
Even though IAs are “independent” by definition — and there are many strengths that come with independence — the truth is, we’re all part of a community with shared interests and shared risks – Victor Pepin
With more than 20 retail locations in Massachusetts, Eastern Insurance has a large geographical footprint. However, the agency also wants to be known as a local trusted advisor. John Koegel, the agency’s executive vice president of personal lines, told me “Being involved in the community helps us establish personal relationships and remind people that we’re just down the street if they want to come in and talk.”
The agency is owned by Eastern Bank and both organizations share a commitment to giving back to local communities in meaningful ways. Eastern Insurance participates in the Eastern Bank Charitable Foundation which provides community-based grants. Employees can also nominate a local organization for a grant, plus many volunteer with organizations of personal significance.
“LEAN IN” ON DIGITAL
The new rules and tools of engagement no longer apply exclusively to millennials. The rest of us have caught up — social media, email drip campaigns, mobile apps and 24×7 access to digital tools are markers of the “new normal” in business, even small business.
Eastern Insurance recognizes the power of social media. John explained, “Today, an agency must have a strong presence on social media in order to reach customers of all generations. It’s a quick and cost effective way to get your brand and messages out there — which in turn supports customer retention and winning new business.”
INDEPENDENT BUT NOT ALONE
Even though IAs are “independent” by definition — and there are many strengths that come with independence — the truth is, we’re all part of a community with shared interests and shared risks. If a customer has a bad experience with one IA, the reputation of every IA suffers a tiny bit. Likewise, every time an independent agent delivers ease, choice and advice (a combination that no other distribution channel can match) to a customer, it’s a small victory for all of us.
Sharing ideas that work and stories that inspire is to everyone’s advantage. There are so many opportunities to teach and learn from each other — from Agency Checklists to online communities like the Independent Agent Community by Safeco on Facebook. If everyone contributed just a fraction of the ideas they consume, the entire community would grow stronger.
By playing to the unique strengths of an IA, developing our digital muscles and creating a shared sense of “brand” we can guarantee a bright future for the independent agent… no matter what challenges lie ahead.