Optimism among the nation’s independent insurance agencies fell among firms of all sizes this year – even the largest agencies reported a drop in positivity from 70% in 2014 to just 33% this year.
These are the findings of software provider Vertafore’s 2015 Agency Sentiment survey, which asked 200 independent property/casualty insurance agencies to answer a number of questions about current and future growth prospects, including one that may reveal the reasons behind this decline in optimism.
Researchers asked agencies about several issues and had them rate how much of a threat the issues were to their businesses. The following four issues surfaced as the top concerns among agencies, and all of them reflected an increase the percentage of agencies who identified them as a threat.
- Use of predictive analytics and other new technologies: 59% in 2015, 35% in 2014
- Increasing need for scale to have more bargaining power: 54% in 2015, 36% in 2014
- Increasing need for scale to invest adequately in technology: 50% in 2015, 34% in 2014
- Generation X’s and Generation Y’s desire to be self-directed: 48% in 2015, 37% in 2014
The biggest perceived threat, and the threat with the most notable increase, is the use of predictive technologies and other new technologies that could allow insurance carriers to be more self-sufficient with risk selection, thus relying less on insurance agents.
Coupled with changing consumer behavior, particularly among Generation X and Generation Y, agencies feel technology may be squeezing them out.
Erik Sandquist, managing director for
Accenture Distribution and Marketing Services in North America, believes producers are right to be worried.
“Changing consumer behavior and the continued rise of the direct channel are threating agents’ dominance of insurance distribution,” he said. “So are new insurance players—with new distribution models—that are making a determined effort to entice customers away from agents.”
Sandquist added that another Accenture survey of insurance consumers shows carrier websites and search engines have surpassed independents as consumers’ preferred source of information about insurance products and prices.
To help combat these challenges, producers are increasingly turning to networks, alliances and cluster groups. Membership in these groups allows them greater power to negotiate with carriers and therefore score more reasonable rates for consumers and higher commission for themselves. It also expands access to carrier groups and products.
This could be key in ensuring the future success of the channel, said Michael Lyman, Accenture’s global senior managing director for insurance.
“Agents need additional capabilities to compete in the future as confirmed by our survey,” Lyman said. “By sharing investments, independent agents can benefit from economies of scale and cost-efficiently access a broad set of core operational capabilities such as agency management systems, customer management solutions and digital technologies, which could help them both improve efficiencies and take share from online competitors with more effective digital channels of their own.”
