Ultimately, the majority of commercial-lines agents are likely going to have to offer risk management as a core service if they expect to ward off the threat of disintermediation. Indeed, small-business clients are starting to resemble personal lines consumers more and more, a price-driven market with policies increasingly commoditized. As that trend plays out, agents who have little else to offer except quote and coverage comparisons will find themselves being marginalized and often elbowed out of the transaction.

This isn't some far-off concern. There is a market segment already keenly interested in buying their small-business insurance direct from carriers, without an agent or broker to help them or advise them. A survey by Deloitte of 751 small-business insurance buyers last year found that 16% were “very likely” to buy direct if given the opportunity, while 35% were at least “somewhat likely” to do so. Together, that means half of the market may be at risk for agents.

However, this certainly doesn't mean all small-commercial agents are doomed. Deloitte's research found that many independent agents still have a strong foundation on which to fortify their relationships with small-business clients.

For one, trust in agents among the respondent pool was quite high, in the neighborhood of 80 percent for a number of service categories, such as guiding clients through the claims management process and serving as their advocate with a carrier if a claims dispute arises. Nearly three-quarters surveyed also said they trusted their agent to serve as their loss control advisor and offer tips on how to mitigate their exposures.

The trust issue is very significant, because among the 48% of respondents who said they were “not very likely” to buy small-business coverage without an agent, two-thirds said it was because they “don't trust an insurance company to deal with me fairly,” which was far and away the biggest reason cited.

Satisfaction levels among the survey respondents were also pretty positive, with 31% “very satisfied” with their agents, and another 52% at least “satisfied.” Given such high ratings, it's no wonder that more than half hadn't changed their agent in over a decade, including 28% who had never done so.

Still, even agents with strong client relationships cannot afford to take their small-business customers for granted. Insurance consumers remain very price-sensitive, and the small-business market is no exception. Indeed, Deloitte's survey found that nearly half said a price hike by their current insurer or a lower price offered by a competing carrier would be “very influential” in deciding whether to move their account.

Meanwhile, 40% of respondents who had changed agents said they did so because they didn't get the best price available from their prior producer. Combine that with the 84 percent who said they expected to get a price discount if they abandoned their agent and bought small-business coverage direct from an insurer, and you can see the makings of a market disruption.

So, what should agents do to differentiate their value proposition and maintain their place in the distribution chain?

• Don't panic. At first blush, those who seem most inclined to buy direct are smaller accounts that may be difficult for independent agents to serve profitably. They are also very price-driven, which is not the niche targeted by consultative brokers emphasizing the value of long-term savings generated via loss control and risk management advice.

Perhaps a segment of this market is simply destined to transition to the direct sales channel. But if that is the segment your agency happens to serve, you may have to go after bigger clients with more complex needs, or find another line of work.

• If you can't beat 'em, join 'em. Carriers selling direct to consumers may try to avoid channel conflict with their existing distribution force by referring clients to agents for service and cross-selling—although likely at a lower commission rate, since the acquisition costs are being absorbed by the carrier. In that case, a direct sale could be a win-win-win for the insurer, the agent, and the buyer.

• Added-value is the key. No matter how an agency conducts its business, remember that every client is in play—if not vulnerable to being solicited by direct writers, then certainly by other independent agencies. What will your agency do to stand out and make its services unique and essential to clients? If direct-to-consumer insurers offer a sizable discount for discarding the intermediary, that means agents are going to have to earn that extra premium to remain in the distribution chain.

• Holistic service is crucial. To convince policyholders that an agent is worthy of retention, they are likely going to have to be more than just a sales intermediary. Deloitte's survey found that only four in 10 small-business respondents characterized their agents as taking a consultative approach—that is, offering advice on risk identification, loss control, and claims management. More agencies will need to go this route to preserve their clientele, especially as direct selling expands.

• Consider a new compensation model. Truly consultative agents and brokers may want to wean themselves off pure sales commissions and consider charging a fee for their value-added services. In this way, their expense can be more transparent and their value more easily compared against the savings they generate as risk managers, measured in terms of lower loss costs and smaller insurance premiums.

• Try cross-selling. Agents that have multiple policies with clients are usually at far less risk of losing accounts than those who fill only a single coverage or service need. Beyond property and casualty insurance, more small-business agents might expand their offerings to include life and health insurance, disability coverage, and retirement planning, as well as loss control and safety services.

• Fight fire with fire! What's your digital strategy for sales and service? Independent agencies should build their own robust tech capabilities, delivering information and services via multiple platforms, including mobile devices and social media. Meanwhile, nothing is stopping an agency from starting up their own aggregator website to sell coverage online for multiple carriers.

Most importantly, know your customer inside and out, target your services (as well as the medium through which they're delivered) to meet your clients' specific needs, and be able to document the added value your agency provides. The future is now!