Insurance pros talk trends reshaping distribution

Mergers and acquisitions, shifting demographics and consumer buying habits are reshaping insurance distribution as we know it.

I recently had the opportunity to talk with independent agents and carrier representatives about these topics at the 2019 Insurance Networks Alliance annual meeting. The INA is the only organization focused on the critical role of insurance networks to the independent agent distribution channel. More than 200 people attended the event, representing 35 agency networks, 40 markets and 20 service providers.

I was not surprised that the trends having the most impact on insurance distribution dominated discussion among this group of insurance pros.

Number of independent insurance agents is shrinking

According to research by Conning Inc., there’s been more than 4,000 mergers and acquisitions since 2010. That’s about 500 a year. Simply put, the number of independent insurance agents is shrinking. A whopping 75% of the deals were led by private equity firms with the top 10 firms holding the bulk share of premiums. This pressure-cooker environment for growth and scale is driving many agencies to join networks. Today the top 10 agency networks engage with nearly 45% of all agencies.

Demographic trends are also having a big impact on distribution. A large aging population means more customers are retiring and driving less, which impacts the insurance they need. On the younger end, fewer new drivers own a car thanks to rideshare services like Uber and Lyft. Other services from companies like Airbnb, Bunker and Verifly are shaking up traditional distribution models.

Insurance agents need to prepare for more diverse client base

Age isn’t the only demographic in the mix. According to 2017 data from the U.S. Census Bureau, minority groups accounted for 97% of population growth from July 2010 to July 2017. Soon, the number of people in the U.S. who use Spanish as their first or second language will dramatically increase. Agents need to prepare for a more diverse client base.

Carriers are keenly aware of this trend. “Your membership groups resemble home towns all over this country. This is one reason why we really want to aggressively grow our distribution, particularly with newer agents. Partnering with networks is one of the ways we do that,” said Paul Morrissette, Senior Vice President, Chubb Insurance, who participated on a carrier panel that I moderated at the INA meeting.

Tech makes it easier to shop for insurance

Consumer buying habits are changing in step with digital technologies that make it easier than ever before to shop for insurance. Consider that more than two-thirds of Millennials who own a smartphone have used it to make a purchase. Consumers expect buying insurance to be as easy as “One-Click” on Amazon, with access to products and information 24 hours a day.

Agencies are deploying a variety of apps and web portals to meet these new demands and enhance customer experience. In addition, Big Data is giving agents new tools to find markets, customize products and personalize service, while managing costs and processes.

Customized guidance wanted

Another carrier executive told me, “Small business owners want to work with independent agents, and they want customized guidance from them. At the same time, they want all of us to value their time and money and their digital expectations.”

“We’re trying to see the future in terms of how the customer sees it. We’re making sure we’re able to provide full digital service, provide a quote and issue experience that’s intuitive, consultative, fast and easy.”

So what does the future agency look like?

Most of the folks I spoke with shared a similar view about the agency of the future. Agents need to understand customer expectations and anticipate needs. Customers want fast engagement, digital experiences and tailored services and solutions. Agencies need to embrace technology, and understand and adapt to changing customer demographics.

Agencies need clear strategy & vision

Furthermore, agents need to use technology and leverage big data to find opportunities that will grow their business. They need to develop a clear strategy and vision to take their business further. Finding the right talent and the right partners are key to success.

The best agency networks work with independent agents to help them achieve the next level with a consultative approach, training programs, access to carriers, perpetuation planning, profit-sharing and other incentives that allow the agent to remain independent, while building a stronger business and improving revenues.

It’s true that consolidation means there are fewer agents. Shifting demographics and consumer buying habits are not making it easy for independent agents to succeed. The good news is that buying insurance is still very personal, and many customers want the kind of advice that only an agent can provide.

Best independent agents will see opportunities to grow stronger

The best independent agents will see opportunities to grow stronger and clearly focus on what’s most important, the customer.

Related: 

• 5 considerations for P&C insurers in 2019 and beyond
• Why partnership is the future of insurance industry growth
• 7 powerful agent strategies for the new P&C insurance shopping journey

John Tiene is CEO of ANE, Agency Network Exchange, an alliance for independent insurance agents in the mid-Atlantic region, headquartered in Monmouth Junction, N.J. Tiene has been recognized for his service to the P&C insurance industry, and has been an advisor to industry leaders for more than two decades.