Truth #1: Insurance agents and brokers are not dead, they are not dying and they will not be replaced with robots.
Contrary to popular non-industry opinion and possibly serving as blasphemy to many InsurTech counterparts, insurance agents and brokers are here to stay.
Even with technology advancements and access to increasing amounts of data, the following remains true:
- The U.S. insurance and regulatory system is massively confusing, fragmented and opaque.
- Spending $500+ for a packet of paper and a promise drives most buyers to seek independent human affirmation.
- It requires less energy and time to obtain advice from someone you genuinely trust than it does to become an expert on your own.
- Insurance is an emotional purchase. You buy it in case something bad happens, and if something bad happens, you want to eliminate surprise.
For all these reasons, agents remain essential. In fact, with the prevalence of new and better forms of technology, the trusted human advisor is even more critical. This opinion isn’t just anecdotal, it’s based on experience…
In a previous life, my partner and I started one of the first U.S.-based “direct-to-consumer” platforms for small commercial insurance. We dealt with thousands of customers and learned a ton.
One thing became very clear and caused us to shift our model early on: over 80% of our customers contacted us at some point, even though they had the ability to go all the way through and purchase on their own. Half contacted us at the beginning of the process. Half contacted us during the process, often when they received insurance quotes. We built an optimized and automated buying experience. However, they still wanted help and affirmation that what they were doing was correct. Insurance can be complex, and our customers wanted verification from an experienced advisor.
You may be surprised to know that even with billion dollar advertising budgets, direct auto insurance companies only account for 20% of total premium in the personal auto space. That is lower than I would have expected even though these product lines are far more digitally mature and homogeneous than many others.
All of this was incredibly eye opening for us and one of the reasons that we started QBIS, a company focused on wrapping experts with modern and efficient technology.
If we agree that agents are a necessary and required function in the insurance value chain, we can move to the second truth.
Truth #2: The way insurance has been transacted for the last 50 years is dead.
Many insurance agents and brokers are discouraged from prioritizing small premium accounts because they earn little or no margin. Competition has driven premiums down, reducing the agent’s overall income. At the same time, manual paper-based processes are still required to service the customer. This means agents end up spending as much time attending to small premium customers as they would attending to larger, higher margin opportunities. These customers get shuffled to the bottom of the stack.
The result is a lose/lose paradox: a lengthy and depersonalized experience for the customer and zero or negative margin for the agent.
This small account paradox runs throughout the industry and ultimately the customer suffers most. The lack of solutions to combat the embedded manual processes deserve most of the blame for this. Just because an account is small does not mean that they should receive a sub-optimal experience.
Only recently have alternatives to the manual process been presented and taken more seriously. Pushing this change has been shifting macro demographics and tremendous amounts of InsurTech capital flowing into the industry. The status quo is finally being challenged and we will all be better because of it.
What This Means Going Forward
First and foremost, there will be no room for fakers. The insurance agent of the future will need to be a true professional advisor; an expert in his or her craft with a dedication to delivering value. Understanding market, coverage and pricing dynamics inside and out will be essential. Anyone who falls short of this will quickly be exposed by the next generation customer and the social media ramifications can be catastrophic. So if your heart is not in it, don’t do it.
Next, successful agents will embrace technology early. While it’s true that there are not many clearly defined InsurTech winners right now, billions of dollars continue to flood in. We are amidst a tide change and the future will be very different. The agents educating themselves and experimenting with different technologies today will be the ones who benefit the most tomorrow.
The successful agent of the future will spend the bulk of their time on education, continuous learning, relationship management and marketing. It will not be spent on administration and processing. They will be wrapped by technology that will do most of this for them. Real-time information at their fingertips, instantaneous transactions and multi-pronged lead generation strategies will be the norm. Again, an early understanding of the new technologies that enable these processes will be critical.
The principal challenge for the agency will be changing old habits and redefining operations based on new ways of doing things. Change is never easy but a top-down commitment to understanding and reacting to the expectations of these new customers will be essential.
This can start with a dedication to recruiting younger generations into the organization that have fresh perspectives, ideas and insights into modern customer psychology. Technology can serve as a conduit for this, as these younger employees become ambassadors for quantifying, understanding, recommending and deploying new technologies and new ways of operating.
If you are an agency still allocating a significant portion of your time to things like scanning, filing, faxing and emailing, STOP. There are better ways to do these things now. Understanding and embracing these intermediary technologies is the first way to change culture and take baby steps to becoming an agile and adaptive agency that will thrive in the future.
The insurance agent is here to stay but the way they work with customers is shifting. The long game is about re-positioning resources to focus on consultation and relationships as opposed to paper-pushing and administration. The technology-enabled agency will become ubiquitous over the next 5- 10 years, so right now the edge will reside with the early adopters.
These early adopters will be the ones who are ahead when the ecosystem changes and they will be the agents who will be best positioned for long term success.