The Next Frontier for Insurance Agents

There has been a lot press lately forecasting the demise of the agent distribution model.

Given this increasingly popular sentiment, I was struck by the comments Mark Thresher, the CFO of Nationwide Insurance, made recently on the current state of its agent distribution channels. In a recent Property & Casualty 360 article, Mr. Thresher stated:

“Customers are deciding to go direct for personal lines, and that’s their choice. So our best agents are growing their agencies in commercial and financial services, and still serving the customers who want an agent in personal lines—there just are fewer of those today.”

This perspective on modern distribution challenges is not just optimistic – it is quite realistic.

It is a different take on the competitive threat that insurance carriers face from direct writers and it presents a tangible strategy for mitigating the impact the direct channel has on long-term growth.

In his comments, Mr. Thresher acknowledges the elephant in the living room – the influence that direct writers have in the personal auto marketplace can’t be denied. However, the inroads direct writers have made in personal lines auto doesn’t mean the rest of the market is now closed to insurance agents. Rather, it highlights a significant growth opportunity and strategic roadmap which insurance carriers should consider following to ensure future agent distribution channel success.

Market statistics bear this opportunity out and show new avenues for growth still exist. According to the IIABA, direct response insurance carriers in North America:

  • Write 18% of the personal auto insurance premium
  • Generate only 5% of the $77 billion homeowners marketplace
  • Write less than 1% of commercial premiums

In order to capitalize on this opportunity, insurance carriers/agents need to shed the vestiges of their past and exploit opportunities to expand their footprint within alternative market segments. Multi-line carriers need to match the capabilities of their agent channels to the breadth of products and services they can offer the insurance market – for example, in commercial lines or financial services. Not only do these segments present a significant upside from a premium/profitability perspective, they often require a consultative sale – an ideal opportunity for agents to demonstrate their value as “trusted advisors”.

"Carriers need to extend their agent vision beyond just personal lines..." 

Carriers need to extend their agent vision beyond just personal lines and implement distribution strategies designed to maximize the impact of their portfolio of insurance offerings. In order to execute this strategy effectively, carriers must break down internal silos and enable agents to present a cohesive, streamlined, “one” company face to their insurance customers. Furthermore, they will need to ease the transition for existing agents learning new skills and/or accelerate the ramp up of the next generation of insurance agents.

This approach is not without its challenges, but there are immediate steps carriers can take to expedite the process. Carriers can do things such as:

  • Equip agents with data-driven sales strategies. Rather than rely solely on the skill of the individual agent, combine data with business process to guide the agent to the next best sales activity - making this available to the entire agent channel and enabling every agent to sell like your top performers (regardless of line business). 
     
  • Optimize cross sell/upsell potential – across all lines of business. Leverage predictive and adaptive analytics to prompt relevant offers that demonstrate an agent’s value as a trusted advisor. Utilize data on past successes and failures to help agents deliver offers with the highest likelihood of converting sales and increasing account penetration. 
     
  • Bridge internal silos. Deploy modern technology that can eliminate the functional gaps that often exist across lines of business, or between the front and back office. Ensure the agent is well-equipped to present a consolidated face to insurance consumers and is positioned to maximize every customer interaction – whether they are talking about a home policy, a package commercial policy or advice on their life insurance needs.

By executing on these strategies, carriers can help agents expand their horizons and cultivate new frontiers of growth for years to come.