In a recent New York Times column, technology reporter Conor Dougherty proclaims, “to the list of jobs threatened by the Internet, add one more: insurance agent.” Dougherty proceeds to discuss the rise of online insurance comparison sites that allow users to access information about the range of personal and small commercial policies. “These portals, which promise savings by showing consumers many price quotes so they do not have to shop site by site, are putting pressure on insurance agents, who collect ten percent or more of their policyholders’ payments,” he explains.
Indeed, comparison sites participate in a larger internet culture of community, information sharing, and reviewing – popularized by sites like Yelp and user-directed tech forums. Google, the world’s most prominent search engine wunderkind, has dipped its toes in the water with Google Compare for auto insurance, which already operates in Britain and launched in California last week. In fact, the prospective service is already licensed to do business in more than half of states, roughly 26 according to an Insurance Journal report.
Although the potential transition to online comparison and away from small independent agencies may appear to affect primarily personal lines, it could certainly spill over to the P&C side of the equation as business owners begin to question the necessity of the “middle man” agent.
Considering that the insurance industry as a whole is rapidly aging, (a quarter of industry professionals will retire by 2018) attracting millennial talent and the online ease they bring to corporate teams is a constant refrain; the threat posed by online insurance platforms accelerates those concerns.
In an effort to gauge local concern on both the commercial and personal lines side, Louisiana Comp Blog spoke to Ross Henry, CEO and owner of Henry Insurance Service in Baton Rouge and Eric Vocke, co-owner of Capstone Insurance in Metairie and Mandeville, to get their thoughts about the “threat” and where it really lies.
Ross Henry: “I will begin by saying this is not the first threat we, as independent agents, have faced and certainly it won’t be the last. To paraphrase Mark Twain: the reports of our potential demise have been greatly exaggerated. The independent agent channel was threatened when mortgage companies and banks got into our business. The advent of direct writers (Geico, etc) has been considered a threat. However, in many lines, the independent agent channel seems to be gaining market share, and specifically in personal lines, we are at least holding steady. Much is made of the agent’s commission and how “cutting out the middle man” will save ten percent.
In reality, most independent agencies are run very efficiently and provide a valuable service not just to clients but to the carriers as well. In other words, if agents are not involved there will still be a significant expense for advertising, processing, administration, and the like. Generally, large organizations cannot operate as efficiently as smaller ones can, therefore, the ten percent “savings” vanishes rather quickly; take a look at what Geico spends yearly on advertising – nearly $1 billion, or approximately seven percent of premium collected. On another note, big secret here, some of these “direct” are actually licensing local agents. Many people shop online but many of those ultimately buy from an agent they trust and know.
There is such a strong push to commoditize our product in order to drive stock price and dividends. However, the critical element lost in the shuffle is the client. Insurance, even the most quotidian of policies and transactions, usually has some element of confusion for the average consumer. We often hear stories of clients with coverage provided by one of the large TV advertisers who have been sold personal auto liability limits which are woefully inadequate to protect the assets they accumulated over a lifetime. An independent agent is a local, professional, trusted advocate who can truly help you discover exposures, manage your risk, and provide choice-of-coverage options. Considering that complexity of service, we don’t cost more than going the direct route. Why wouldn’t a consumer want someone to handle this complicated transaction for them? In a day when time is so precious, we offer the luxury of an army of knowledgeable professionals to help you navigate these often murky waters.”
Eric Vocke: “Clients shopping for personal insurance need support from an experienced agent that has dealt with the area and can offer solutions to them and buffer the carrier’s underwriters. Online sites seem to be price driven only. In reality, there are many factors to consider before and in addition to pricing. First, you need to determine the eligibility of the property with the carrier before pricing even begins, and sometimes that carrier’s financials become a concern to the homeowner and they have questions about how they handle claims. So price is not always the answer in homeowner’s insurance, nor should it be with any insurance policy.
Lastly, and most importantly, agents help navigate the claims process. Filing a claim for a homeowner’s policy is just the start of a long and sometimes convoluted process. It is an alien process to ninety-five percent of the homeowner’s in the nation. There are adjusters, claim centers, team leads that oversee adjusters, managers that oversee the team leads, estimating software and material price changes, scope of damages conflicts between the contractor and the adjuster, release of funds, recoverable depreciation, and possibly reopening of claims after they are closed. People don’t realize the value of their agent until they have him or her calling in on their behalf and getting answers from the carrier when things appear to be unsatisfactory. When given the opportunity to choose a local agent or someone online, I think people feel more secure with their largest investment in having a local person they can visit, trust, and rest assured that their agent is in their corner.”
Editor’s Note: Google is not the only corporation to dabble in online insurance and comparison shopping. This Insurance Journal piece explores the challenges of the online comparison model and the consumer’s tendency to stop at a quote.
Image Credit: Internet Retailer: Portal to e-Commerce Intelligence