Will the pandemic cause the end of agent distribution?

With each new wave of technology over the past few decades, there have been many predictions that this is the end of agent distribution. You know the drill: “Technology can be so much more efficient and remove all that expense related to those human distributors.” I can remember back to the dawn of the Internet when there was all the discussion about disintermediation. I heard that term in all kinds of insurers’ strategy discussions. I never believed agents and brokers were going to be displaced then. And, they certainly have not been displaced. In fact, in the intervening decades, as digital technologies have advanced, they’re still dominant.

Now, we are in the midst of the pandemic. It has been a world-changing event. And it’s also an event that has accelerated the digital transformation of businesses, society, and our industry. The inability to meet in person and the rapid shift to everything online has put pressure on the agent distribution model. So, the real question is: Has the pandemic been the catalyst that finally puts the nail in the coffin of agent distribution (for all those folks out there that that don’t like agents or don’t think they add value)? And once again, I have to answer a resounding “no.”

Myth or reality?

I think this idea is a myth. For complex lines of insurance, mid-to-large commercial line specialty insurance, high-net-worth on the personal side, and other segments, agents will be necessary. There will always be a need for expert advice on risk management. And there will always be a need for intermediaries who deeply understand customer needs and can create that right combination of coverages linked to the right underwriters. These areas will benefit more and more from technology over time. But the agents and brokers are likely to be around for a very, very long time.

It could be a bit different for more simple lines like personal auto, homeowners, pet, travel (you name it), and some of the new on-demand or gig economy types of insurance. There are strong arguments that those lines will migrate more rapidly to direct digital distribution. But even then, it’s not going to happen overnight. It will be a slow evolution. And my prediction is that there will still be agents selling all of those lines in 2030. So, I think that, overall, this is a myth.

Are there people out there that think you should be able just to press a button and get your insurance, so why have human intermediaries? Yes, but I have given good reasons that are oversimplifying, and I believe it’s a myth to assume that agents are superfluous.

So, in that vein, this is your call to action. It is really important to strengthen the relationships you have with various distribution partners and with the technology companies that support you in the distribution space. Agent carrier connectivity solutions, portals, and self-service capabilities all enhance that connectivity. You must form strong bonds and leverage those technologies as much as possible to improve relationships and to provide more value. And finally, it is an omnichannel world with many different channel options. Agents and brokers play an important role in many of those. Customer journeys often involve the use of multiple channels, so agents need to be incorporated into the overall omnichannel strategy.

Mark Breading (mmbreading@strategymeetsaction.com) is a partner at Strategy Meets Action (SMA), a strategic advisory firm working with traditional insurers and InsurTech solution providers to manage unprecedented industry change. The opinions expressed here are the author’s own.

This column was first published on SMA’s blog and is republished here with consent from SMA.

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• Will commercial lines insurers innovate or optimize in 2021?
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