Writing Off Insurance Agents, Again, is not a Safe Bet

As a young legislative staffer back in the onset of the 1980s I was given two early lessons: one had to do with attending the same meeting with a reporter, reading about it the next day, and wondering if I was at the same meeting; the other was to never underestimate the power of the independent insurance agent, and never believe the rumors of their imminent demise. The first lesson I remember almost every day, and the second lesson came racing back to me when I read the piece in the January 19, 2015 New York Times, “Insurance Via Internet is Squeezing Agents.”

The news of the insurance agent’s demise, to torture Shakespeare, is and has been greatly exaggerated now for decades, not that there aren’t challenges to their continued existence as they currently know it. But the idea that the Internet, after all sorts of other potential predator-like previous efforts at the integration of financial services (before the subsequent disintegration of financial services), would be the force that finally fells the professional insurance agent is still hard to believe. If anything, the Internet provides the agent with an opportunity to expand their market presence without leaving the office, and be even more competitive than before on a much wider platform.

It is not the Internet, in and of itself, but rather in whose hands the Internet is placed that is the real culprit in this story. The Internet is not a demon, and many of us have come to appreciate the sheer power that modern technology has brought to our business platforms: the Internet in the hands of some technology companies, insurers and even some agents is more the problem. And it is not just a problem for the agent but for the insurance consumer themselves. The commoditizing of insurance through the Internet (or whatever the next technology portal may be) is the real danger to the market, to carriers (whether they appreciate that or not at this point in time is another story) and certainly the insurance agent. Giving the insurance-consuming public the idea that insurance is a thing, a commodity, to be bought rather than a service to retain takes the very DNA of insurance out of the corpus; to convince the insuring public that insurance is to be bought on price alone, or without regard to risk profile, or in an amount of time faster than it takes to do just about any- thing else (it should at least beat the time to hard-boil an egg, one would think) is to dumb down the insurance intelligence quotient even further than it has already gone within the general public.

The insurance agent and broker is the connection between the consumer and the complicated world of insurance, explaining terms and coverages on the underwriting side, and guiding through the claims processes on the unfortunate side. They are the person to whom much of the public entrusts their economic security, and the person they may even turn against if it was found that their economic security was not properly protected. I have never under- stood the concept of entrusting things most cherished to a disembodied voice or worse, a modem. The Internet, as a tool, actually allows the insurance agent to do more, for more, thus enhancing the service aspect of the agent/consumer relationship, but it cannot ever be mistaken for the agent and the value they bring to the insurance transaction.

Just as the insurance agent community has largely been responsible for preventing its earlier demise by re-inventing the profession in any one of a number of ways, they now have another opportunity to seal their fate to a profitable future and satisfying career by doing double-time in their education of the general public that insurance is not a pizza or take-out Chinese or anything else you want quick and easy; that an agent provides an important—even critical—service which may cost a couple of dollars now but could mean many more dollars in appropriate coverages or effective claims processing; that insurance is not Google, not virtual and certainly does not come with a re-set button when things do in fact go bad.

As for the efforts of Google and others to “Uberize” the insurance process and really drive the insurance purchasing process to one just of price and not cover- age, well, we are seeing firsthand the downside of the Uber business model as it attracts justified criticism around the world for cutting corners in, ironically enough, the issue of insurance coverage, among other weaknesses. It will be up to the regulators in insurance, just as it has been the regulators in transportation, to make certain that the Internet has not fostered a series of shortcuts that actually shortchange the insuring public. Some regulators have been dazzled by new technology and have scoffed at the old laws whose best days they say are long past. There was wisdom in those laws, and many of them have withstood the test of time regardless of the trends in modern technology (remember, the telephone and the desktop were both once considered new technology that would change the world and leave many, like insurance agents, behind).

The regulator should be as concerned about Google and Walmart getting into insurance as they were when financial services integration, or the creation of “financial supermarkets” as they were referred to in the early stages of that chapter in this industry’s history. Both business models are premised upon a commingling of personal information mined from multiple sources, and just as there was appropriate concern about insurance and banking being done by the same people inside a bank branch there should be similar concern about buying insurance and covering risks through the likes of a Google, Facebook and even Walmart who look to or have entered the insurance business, either directly or through partners and surrogates. Issues that regulators have beaten carriers and banks over the head about for years need to be raised with those technology companies that have already achieved integration of financial services, but under the disguise of technology.

The toughest part for the agents, believe it or not, will not so much be in trying to beat the competition from the technology companies like a game of technology Whac-a-Mole as it will be in taming the use of the Internet by the very customers they seek to court. Encouraging the public to work a little harder at some- thing as important as insurance, rather than seeking the same instant gratification they achieve with a Facebook post or a car service hail via app, will not be easy or necessarily popular. In a world of stiff com- petition in automobile and homeowners insurance and tight insurance company margins, this message may not be received so well by the carriers either, certainly among those who have invested heavily in Internet-based marketing. Agents, for their part, will have to, again, convince the insuring public and carriers that the value proposition of selling insurance as a service which can only be provided by agents is a good proposition, that the commission add-on to the premium paid by consumers is good value, and that eliminating the agent is more deleterious than eliminating the amorphous “middle man.” Perhaps the challenges from the Googles of the world may even bring the carriers and agents back together again to provide the one thing that Google, Walmart and others won’t ever give: good customer service.

I won’t bet the mortgage in Vegas that the insurance agency force won’t decline and wither over time, and the forces against them look as formidable as any that they have confronted in the past. But I learned at the very outset of my career that the predictions of the demise of the insurance agent are even less reliable than those about the weather.[IA]