Independent Insurance Agents not Immune to Digital Disruption, According to Accenture Report
New York, Jan. 6, 2015 – Changing consumer behaviors, new technologies and the evolving competitive landscape may disrupt independent agents’ traditional strengths in customer service and risk management, according to a new report by Accenture.
The report is based on a survey of over 1,100 U.S. independent property and casualty (P&C) insurance agents, who were asked to rate the relative importance of a wide range of issues, from growth strategies and value drivers to operational competencies.
The agents who were surveyed saw the increase of insurance carriers’ direct sales via the online channel as a serious competitive threat, with 39 percent of respondents citing such direct solutions as their greatest source of competition. Nearly three-quarters (71 percent) of the agents said that threat took the form of lower prices, while 48 percent saw better brand recognition and more effective marketing as key elements of the competitive threat.
When asked about the most important digital capabilities, “web-based service and claims” were rated the highest by agents, followed by “web-based quoting.” Survey respondents placed a relatively low priority on mobile and social media capabilities.
“Changing consumer behavior and the continued rise of the direct channel are threatening agents’ dominance of insurance distribution,” said Erik Sandquist, managing director for Accenture Distribution and Marketing Services in North America. “So are new insurance players - with new distribution models - that are making a determined effort to entice customers away from agents. Leading independent agents will take advantage of innovative digital technologies and big data analytics to develop greater customer knowledge and insights, improve their ability to reach their target markets, and deliver a superior customer experience.”
Independent agents torn between keeping customers and growing their business
The survey indicates that agents place a higher priority on keeping and servicing existing customers than on finding new business. When asked to rate the most critical operational competencies, agents put “retaining customers” at the top of the list, followed by “servicing customers;” “attracting new customers” was ranked only third.
In rating information available to independent agents, the agents placed the highest value on insights into existing customers, while qualified lead lists were ranked last on the list. However, when agents were asked what they would do with more staff, finding new business rated highest among priorities, followed closely by cross-selling and up-selling new business.
“Independent agents, as a group, carry enormous weight within the P&C insurance business, representing more than half of total premiums written in the industry,” said Michael Lyman, global senior managing director for Insurance within Accenture Strategy. “It is understandable that they are focused on keeping existing customers, especially in light of capital constraints that make it challenging for most agencies to add sales capabilities to grow their business. New technologies can make agency operations more efficient, but they can also be used to create new digitally driven market opportunities to boost reach to new customers. The question is how to make these technologies both affordable and easy for agencies to use.”
Independent agents downplay their ability to provide differentiated advice while consumers value them for such services
Despite their strong focus on customers, agents downplayed their ability to provide differentiated and superior advisory services as a competitive advantage. Access to competitive products, improved customer experience and better brand recognition were viewed as more important sources of competitive advantage than the superior advisory services they could offer to their customers.
“According to a recent personal lines consumer survey we conducted, independent agents have been surpassed by insurance company websites and web search engines as consumers’ preferred source of information about insurance products and prices,” said Erik Sandquist. “However, insurance consumers trust the advice provided by independent agents more than any other source. Independent agents are well positioned to understand customer needs, provide risk management advice, and recommend personalized and tailored solutions. Serving as an effective risk manager will increasingly require insights derived from the Internet of Things and big data.”
Mutualizing investments to access additional capabilities is an option that agents need to investigate
The report also indicates that many independent agents join others in an association, alliance or cluster, but while small businesses in other industries may do this to bolster their limited resources or to meet and network with peers, insurance agents’ goals are principally to enhance access to carriers and to increase their commission. Membership in these groups gives agents greater power to negotiate with carriers than they would have on their own, and the survey reveals that this is more important to them than support in operational areas such as marketing, agency management systems, technology and 24/7 call centers.
“Agents need additional capabilities to compete in the future as confirmed by our survey,” said Michael Lyman. “It is also clear that they are not seeking to develop these capabilities with the help of industry associations, nor to adopt them from carriers. 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.”
Accenture surveyed 1,158 independent agents in the U.S. in mid-2014. The data was collected and analyzed using TrueChoice Solutions’ patented real-time preference analytics platform. The survey explored a wide range of issues, from growth strategies and value drivers to operational competencies and customer insights. It explored independent agents’ views on their business relationships, operations and preferences across 12 priority areas. These priority areas covered 85 individual elements that were ranked in order of preference.
Accenture is a global management consulting, technology services and outsourcing company, with approximately 319,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com
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