(Image credit: Dollar Photo Club.)
I’ve been observing a trend that touches all parts of the insurance industry—namely, that small agencies are consolidating into larger, one-stop-shopping agencies that serve more customers with a full spectrum of insurance products and financial services. Looking at what this means for the carrier, we start with the understanding that the carrier and agent are joined at the hip financially. The carrier has to be able to respond to these market changes with better products and services, and will need to be more responsive to the agent. Business as usual will not lead to competitive differentiation for the carrier, who wants to be the one-and-only for these new full-service agencies. In order to be the carrier of choice for the multi-product, one-stop-shop agency, the carrier is going to have to step up and provide a range of high quality products, services and technology.
Out here in Nebraska football country, we’re famous for the option game. Running a multiple-option offensive strategy may be the only way carriers can achieve the kind of nimbleness they’ll need to address this evolving ecosystem. Carriers will have to:
- Serve more customers, and serve them differently
- Enlist these new super-agencies to help them
- Bring in better technology and use it in a smarter way
- Answer to Millennial expectations by ramping up their game on transactional insurance
- Broaden their underwriting capability
With the new consolidated agencies thinking about the spectrum of products they can be offering their customers, the carrier then has to be thinking about that too—because the carrier is dependent on the agency for its business, and wants a piece of whatever they’re selling. The carrier is getting 85 cents of the premium dollar, and they have the technology, resources and infrastructure to provide easier, smarter delivery of their products than they’ve been able to do. So they need to get busy inventing what the agency can sell, or cross-sell, proactively anticipating the needs before the agency goes to another carrier.
All this will require better portal technology and the underlying understanding that’s there’s a new ecosystem evolving. Successful carriers will become information brokers—they’ve got data on millions of policyholders, and they must use that information and make it accessible to their agents and other third parties. Data has shown, for example, that the more policies held within a household, the greater the percentage of renewals. Thus the same customer will have to be served in multiple ways, and data can help identify these matches. Technology will have to be more nimble, fluid and secure to achieve this seamlessly.
The new super-agencies only need carriers that are truly working with them—give them access to information, do business on equitable terms, and develop the contiguous product sets being demanded by the customer. If they’ve got poor or legacy technology, poor underwriting, and/or it takes forever to get things done, that carrier won’t survive in the new ecosystem.
Need for ‘Imagineering’
The elephant in the room, of course, is the stagnant U.S. economy. Because they have no more money than they did eight years ago, customers who may have been with the same agency and carrier for years are suddenly waking up and shopping for better deals. If you’re an insurance company and you want to grow, how do grow when the economy’s not growing? You can’t raise premium rates because of inflation—you’ve actually got to bring in more business, more units to insure. The industry needs to take a cue from agency consolidation and start looking at new business models in order to grow revenue.
The insurance industry needs a shot of what started the Disney empire—something Walt Disney called “imagineering.” We can’t keep doing things the same way we’ve been doing them for the last 40 years. For the carrier, that involves expanding and improving the product set, reworking the technology, and advancing the business model. It’s time to get our game on.