Insurance Agencies are DOOMED
“This is a service based industry” I was told by the officer manager of a large niche insurance agency, who believed they needed to ‘get the customer on the phone’ to compete with other agencies and gather necessary information from the applicant.
The Regional Sales Director of a large insurer told me that they needed to sit across from the customer and “get a read on the them to adjust my pitch” because insurance was ‘all about the relationship’. He also said that he didn’t want the customers basing their decisions solely on price, because they were choosing him instead of the product.
The owner of another agency recently shared with me that “all applicants were liars”, and that an all technology solution would eliminate his ability to screen the lies and get to what the customer really needed because that was the entire point of the agent.
In three insurance companies, someone within a decision making role believes that a person-to-person sales approach is more important than an all-online customer experience.
Today’s agencies have built very successful businesses based on local marketing, fostering relationships within their local communities, and building reputations. There are a few examples of right place right time, but for the most part, the success of most agencies was good old-fashioned handshakes and tee-times.
Enter millennials.
Studies have shown that 1) the vast majority of millennials own a mobile phone, 2) prefer using their mobile phone for data instead of voice, and 3) will comprise more than 50% of the workforce by the end of 2020.
From this, we can surmise that millennials would rather work from their phone instead of directly with an agent, and that they make up more than 50% of the insurance agency’s customer base. We could go into further detail about millennials preferring social media referrals from friends and followers over traditional advertisements, and that a growing percentage don’t regularly read magazines or even watch standard cable television, but that would be a different article.
The point here is that the relationship focused approach within the traditional agency doesn’t exactly match the behavior of over half of their potential customer base. It makes you wonder, are agents expecting these new customers to conform to how THEY do business, or are these agencies changing the way they do business based on the behavior of these new customers?
Let’s review that question for a moment. If we look at the largest agency management software in the market and ask a very simple question, ‘what tools do they provide to the potential end user customer?’ The answer is none. They offer tools to existing customers, but in insurance, customer retention is all but guaranteed, because, as it is well known, it’s a pain to apply for an insurance policy. Customers are a lot less likely to jump ship and sign-up with another agent when the application process takes so long to complete.
What are agencies doing to cater to these new insurance buyers? To answer this, I conducted a micro-experiment: I searched for “commercial insurance agency” and took the top ten results, which were skewed towards my geographic area and reviewed their sites to determine whether 1) their site loaded on mobile, 2) they offered a service for applying for insurance online? 3) they were on a social media platform (i.e. Facebook, Twitter, LinkedIn, Instagram, etc.)?
A quick caveat before getting into the results. 1) A millennial would most likely not search for commercial insurance, instead they would take to social media directly and either search or request who to use from their followers, 2) the page may load on mobile, but ease of use was not reviewed, 3) if it was clear that the “online quote” was going to result in a call back instead of an all-online experience, it wasn’t counted, and 4) if their social media hadn’t been regularly updated, it wasn’t counted. Onto the results…
- 9 of 10 loaded on a mobile device (better than I expected)
- 0 of 10 offered a completely online application (1 seem to offer a completely online application but completing it resulted in another insurance company’s name and a request for a call back)
- 5 of 10 were somewhat active in social media; i.e. they had a profile, but most weren’t actively maintaining it. (Facebook dominated, with some using LinkedIn and one using Twitter, but no active posts)
To keep this as simple and neat as possible, the question is whether insurance agencies are still using old methods to reach new customers. With 0 out of 10 offering a completely online experience, the answer is clear.
But, why are insurance agencies doomed? Because the traditional approach is embedded in their core beliefs and business models. By relying on the approach to “get the customer on the phone”, these agencies are forcing their potential customers to do business their way instead of the other way around. Agencies that are not already scrambling to address the upcoming new customer base are of the belief that ‘the old way is the best way’. After all, it’s how they built their business and they didn’t see this changing anytime soon.
But it is changing…
As soon as a new player enters the game (hint: Lemonade), the buying behavior will switch from the person-to-person to the all-online experience. Agencies offering a virtual agent solution and who use social media as a critical business tool, instead of the ‘I was told I need to have it’ link at the bottom of their web page, will quickly overcome those that don’t.
There are fantastic up and coming companies offering technology-centric solutions, but these companies are hyper-focused on a single product, such as Lemonade for Homeowner’s and Renter’s insurance. These companies offer a near-perfect, completely digital experience, and are the masters for that particular line of insurance. And… they market and sell direct-to-consumer.
The community-based agency typically offers a cornucopia of products, so can absorb the loss from customers who switch to the all-digital experience for one line of products. But, Lemonade is not alone. One-by-one, agencies will lose customers to Lemonade-like companies, who have perfected the buying experience for a particular line of insurance, and they’re just getting started. [queue the shooting gallery video]
Putting this all together…
Agencies that haven’t significantly altered their business from person-to-person to include an all-digital approach will begin to lose customers to the companies that market and service those customers directly. Judging from the 0 of 10 agencies in my micro-study that have adopted this business model, the community insurance agency will product-by-product and one-by-one fall to the technology driven, hyper-focused insurance companies, thus, dooming community insurance agencies.
For more information, see this great read on Disrupting Insurance by Rob Moffat.
Feel free to reach out to me on Twitter.
