Experts have been predicting the death of the insurance agent for a while now – almost since I started this business over 30 years ago.
While the direct channel has taken a significant share during this time, agents still own the lion's market share and remain indispensable for insurance. Let's take a brief look at some Accenture data on the personal car and housing market for proof.
Direct share in car insurance has ended up. Direct distribution gained a 10-point share over the past 20 years and grew from a 20% market share to approximately 30% today. But it has only gained a share in the last seven years. In homeowners' insurance, the direct channel has gained a nine-point share over the past 20 years, and only two shares over the past seven years
The agency's channel saw its car market share fall 1
Within the agency channel, independent agents have done a little better than exclusive agents, losing only six points in a car while maintaining the same proportion of homeowners (more on this in a future blog).
Data from Accenture's global financial consumer studies for financial services also indicate that demand and satisfaction for agents is robust in the insurance field. Consumers' three main preferences for interactions are: 1) direct telephone, 2) online service and 3) personal. Other forms of interaction, such as smartphone apps, instant messaging and automatic phone channels, are far behind.
Similarly, consumers are generally satisfied with the service they receive from agents with 75% of the reports that they are either satisfied or very satisfied by 2020, up from 73% in 2018.
If agents are really on the verge of extinction, should someone tell insurance consumers.
The result of all this is that exclusive and independent agents still control about 80% of the housing market and 65% of the personal car market. The effect of COVID-19 also does not seem to have accelerated a transition to the direct channel, based on early results.
This raises an important question for understanding the industry today and its future course.
Why have agents been so resilient to all the digital changes and business model innovations that drive predictions of a directly dominated future?
The human touch in a digital world
It all depends on consumer preferences. Although the list of things a hypothetical customer can value in a product or service is of infinite theoretical length, you can sort the list into three categories:
- Functional – what does it do for me?
- Emotional – how does it make me feel?
- Personal and social impact – What does it do for me and for society?
Direct distribution and digital innovation are both good for delivering functional values such as saving time, saving money or making tasks easier. People and the agency model are better at others – especially the emotional values of giving a sense of security or safety.
Specifically, technology tends to drive improvements in the function category. Better technology saves us time, simplifies complexity, helps us avoid hassle, and reduces the effort required to perform a particular task. It can also have some knock-on effects that reach into the emotional category by reducing our anxiety and making us feel rewarded.
But most of the emotional category, and all personal and social effects, are human domain. This is not to say that technology has no role in helping people meet these consumer demands, but the core of the experience requires a human touch.
In addition, and perhaps most importantly, as clients' needs increase in complexity, they seem to prefer the convenience of knowing that an agent is available nearby should something go wrong, even though most of their interactions with the agency are via phone.
And that, in my opinion, is why agents are still with us — and will be in the foreseeable future.
Which raises another important question about the future of the industry: how can carriers deliver consumers the best of both worlds?
We will explore this rich topic in my next post. In the meantime, if you want to talk about the agent's or any part of the industry's surprising endurance, I'd love to hear from you.
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