The More Things Change…

I’ve been writing this column for about a decade and I still haven’t run out of things to say. Some folks may suggest that this reflects my personality, but I believe it’s because the insurance industry—and particularly the field of professional, independent agents—is so multifaceted and dynamic that there is, literally, no end to the issues and topics one could address about it. On top of this, our business is always changing—I could continue to write this column well into the days when Willard Scott reads my name off a Smuckers’ label. This is not to say that the fundamentals of our industry are inconsistent. I’ve addressed several of them in previous columns, including the fact that ours is a relationship business; that books of business do, and should, belong to the agents who built them; that the product we sell is not a commodity; and that an independent agent should never, ever, put all of his or her eggs in one basket. I always felt that insurance companies sometimes sway with the wind currents while we agents always stay on a steady course (tacking as necessary to stay with the route). The fundamentals I mention are as important to our business as an anchor is to a boat.

I remember years ago when insurance companies wanted us to be just the sales arm for their organization. That changed in recent decades. Agencies do much more than just sell nowadays. Over time, we have invested in our agency management systems, office equipment and training of our staffs to be more than just sales people. We bring value beyond being trusted neighbors, by way of underwriting, claims management and a host of other services that have reduced carriers’ overhead while improving their bottom lines. But, I think the pendulum has begun to swing: Carriers philosophies are focusing more on wanting agents to concentrate on sales; and directing customers to call our franchise with questions.

I don’t know how good that will be—I honestly believe that consumers rely on CSRs and agents for advice and guidance, which is a benefit to clients and carriers alike. A study released in June by the McKinsey Group disputes the idea that the independent agency system is facing a continuing and fatal decline. The study noted that this system includes core capabilities that will help it to survive, despite circumstances such as the commoditization of certain lines of business, blurring of the lines between distribution channels and a pendulum swing away from agent-underwriters in favor of automated and sophisticated predictive analytics. These core capabilities, McKinsey says, include a unique ability to deal with a local target market; expertise about this market and the products it needs; and operational efficiency and scale.

Smart carriers recognize this. Just this week, Hanover Insurance Group validated McKinsey. Hanover’s study said that 60 percent of insurance buyers who have bought direct eventually return to a professional, independent agent. The study, conducted by InsightExpress, surveyed customers who purchased through direct channels a decade or more ago, and found most switch back, citing expertise, convenience, and most importantly, a single point of contact for personal advices that could guide them through questions.

Hanover gets it. But not all carriers have figured this out yet. There are some companies that, despite years of loyalty from their agents, are looking to dilute their agency force—cutting these positions and citing competition and an increased need to compete on price to get business. Agents should be wary of this. I said this 10 years ago, when I was first writing this column: “Don’t put all of your eggs in one basket,” I preached. This maxim is one of the fundamentals that is steadfast for agencies. Those of us who gamble on one or two carriers for our entire careers shouldn’t expect reciprocal loyalty, lest one of those eggs breaks.

The only thing you can count on is change. It’s important to remember fundamentals, lessons and relationships from when we started.

A final thought, related only because I’m discussing relationships: I heard recently from an old friend and elder statesman of the agent community, Marshall Rubinstein, who has retired to Florida like so many of our past leaders. It was a pleasure to talk to him and he asked me to say hello to his friends in the industry.