Big “I” Scores McKinsey Report as “Off Base” on Independent Agency System

Big “I” Scores McKinsey Report as “Off Base” on Independent Agency System

ALEXANDRIA, Va.— Robert Rusbuldt, Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) president & CEO, finds serious flaws with much of a recently released study titled “Agents of the Future: the Evolution of Property and Casualty Insurance Distribution” by McKinsey & Company.

“McKinsey’s proclamation that it is ’The End of an Era for the Local Insurance Agent’ is dead wrong,” says Rusbuldt. “A number of studies over the last several decades have decreed the demise of the independent agency system, and they have all been wrong. Independent agents are resilient entrepreneurs who know how to adapt to marketplace changes.”

In remarks before the Big “I” board of directors at their recent meeting in San Antonio, Texas, Rusbuldt made the following points regarding flaws in the McKinsey study: • The report ignores the growing trend to “buying local” and the independent agents’ use of social media to magnify their local presence and involvement in the community to drive more traffic to their agency.

• McKinsey uses an oversimplified comparison to travel agents and disintermediation. Despite rhetoric to the contrary by the direct carriers, personal lines is more complex than basic travel reservations.

• McKinsey doesn’t adequately take into account the IA channel market segmentation towards affluent customers who prefer relationships for personal lines.

• McKinsey assumes that the investment in digital capabilities marginalizes the agent rather than aids the agent-customer relationship to add value.

• Agents have the opportunity to organically leverage SEO so that they are well positioned for digital consumer searches. McKinsey’s conclusions encompass all agents, exclusive and independent, and there are fundamental differences between them: independent agency carriers compete for the business of their agents, causing them to take different considerations into account in managing their agency force vs. exclusive carrier relationships with their agencies.

“The Consumer Agent Portal, LLC is providing consumers an electronic pathway to finding and doing business with independent agents, and they are working with agencies on digital marketing, social media, local optimization, and much more, enabling agencies to do business the way consumers want to do business, while adding the value that independent agencies provide,” continued Rusbuldt. “TrustedChoice.com is quickly becoming the way more consumers search for an agent, and everything points to the fact that consumers still want to do business with a local agent if at all possible.”

To McKinsey’s credit, noted Rusbuldt, their study does provide agents with several recommendations as to how they can position themselves for success in the future including:

• Develop a value proposition that is compelling for both carriers and consumers.

• Define and reach target markets, rather than just being a generalist in your local market.

• Increase your digital presence.

• Be more flexible in how you communicate with your clients.

• Develop new ways to get in front of your audience, both to develop new prospects and to reach out to your existing clients.

• Deliver more tailored and deeper expertise, such as bundled insurance packages for personal lines & industry- tailored advice for small commercial risks.

• Use technology to be positioned to do more with less.

• Increase scale, whether through organic growth, mergers, banding together, outsourcing certain functions.

Rusbuldt noted the Trusted Choice® co-brand for independent agencies dovetails with TrustedChoice.com, the way consumers are looking for local agencies now. The Trusted Choice® co-brand, the consumer agent portal, Best Practices, and much more are preparing independent agencies to effectively compete both now and in the future.

”While independent agency market share in personal lines has been relatively static in recent years, many things are converging for the IA system to increase its personal lines marketshare,” continued Rusbuldt. “While McKinsey says ‘Auto insurance – which accounts for 70 percent of personal lines premiums – is fast becoming commoditized,’ agents can successfully counter the emerging perception of auto insurance as a commodity by ‘going opposite’ with their marketing strategy and fully embracing a local, relationship based strategy leveraging technology and fully embracing the Consumer Agent Portal (CAP).”

Rusbuldt also noted the independent agency system is growing. The 2012 Future One Agency Universe Study showed that between 2010 and 2012 more than 1,000 new independent agencies were formed.