Insurer/Distributor Bonding Made Possible by Digital Capabilities

Well, now we know. Insurance’s direct sales didn’t drive the agency channel out of existence. It’s thriving. Customers still enjoy working with agents. Agents still enjoy working with customers and insurers. The greatest change brought about in the past few years is the steady retirement of Boomer agents and the increase in agency mergers and consolidations.

Insurers are now faced with the reality of competing for shelf space — due to fewer agents with a smaller crop of new agents to fill the void. They are also faced with creating products and service processes that will fit the new generation of agents and the next generation of customers. Insurers need to become… digitally attractive. They need to fit with the flow. They need to bond with the agent.

It’s a two-way relationship. Independent agents crave great relationships with their insurers. In a new Celent survey report, commissioned by Majesco, they found that “those that make the placement decision (the leaders who choose the priority insurers for their agency) are very satisfied with the relationship with their current preferred insurer(s) — perhaps because…they are able to choose where to place the business and can choose to place it with the insurer they prefer.”[i]

This is great news for insurers who work with independent agencies for both P&C and L&A. It means that if they go through the hoops of creating a positive sales environment with processes that work and have reasonable pricing, agents will choose them, and the relationship will be the insurer’s to lose.

Inside the mind of the independent agent

Any insurer of nearly any type or size, should be fascinated with the perspectives of independent agents. Because agents are still the largest channel for insurance sales, insurers need to keep tabs on what they are thinking and how they perceive insurers. Even for insurers with captive agents, agency service can be the make or break point of growth.

Majesco is interested in the agent and agency viewpoint as well, so we regularly research all aspects of distribution management in order to keep our customers and partners ready for what’s to come. In August 2021, we asked Celent to execute a study on our behalf. Celent interviewed 231 captive agents, roughly split between 1/3 life agents, 1/3 P&C, and 1/3 who carry a mix of both. The Celent report, Reshaping the Distributor Insurer Relationship, provides some interesting insights … some of which will surprise you!  We will be discussing the report results in our next webinar which we encourage you to attend.

Today we’ll discuss a few of the agent insights in the Celent report across some very concrete details of the insurer/agent relationship.

• Interaction Preferences — How do agents want to do business with their preferred insurer?
• Current Satisfaction — Are independent agents, on the whole, pleased with their preferred insurer?
• Current vs. Future Level of Digital Interactions — If an insurer is going to meet agent expectations for the next three years, which capabilities will need to become digital?
• Anticipated Future Satisfaction — If insurers meet expectations, just how satisfied will this make agents with their preferred agent relationship?

Let’s listen to the agents and see what they have to say.

How does the agent like to communicate with the insurer?

Insurer/Agent communication is complicated. Some tasks are straightforward. Others require nuanced communication. Some communication falls into the category of advice. Other communication requires equations, reports and varied presentation options. It shouldn’t be a surprise then that the question, “How do you prefer to communicate with your preferred insurer?” would need to be broken down into subsets.

When it comes to interaction preferences, Celent chose to solicit both the high-level view and to dig into interaction preferences across the varied functions of the broker/insurer relationship. What they found was actually quite interesting.

“The Silent Generation and Baby Boomers were more likely to prefer to use technology (for communication) than the younger generations. And surprisingly, almost 30% of Generation Z said they prefer to do everything via phone, email or in person rather than use technology alone to process business – the highest percentage across generations.”[ii]

Yes. You read that right. The older agents prefer to use technology to facilitate their communication and the younger generations trend toward wanting to pick up the phone. Looking closer at the actual results, we see more of a middle-road. Most agents prefer any and all forms of communication. In general, most agents like to use the technology to get started and then pick up the phone for confirmation or further discussion.

Digging a little deeper, we find out that younger agents are still in the learning cycle. They are most comfortable with a voice telling them something because it can be explained. As they mature in their positions, they will likely lean more on the efficiency of the technology and less on the expertise of the insurer on the other end of the line.

But, there’s another twist. Gen Z and Millennials switch jobs and occupations more frequently than the Silent Generation, Boomers or even Generation X. Onboarding and educating agents needs to happen more quickly and with a more intuitive format. So, Celent’s suggestion is that,

insurers “can build additional tools, training and advice support into their portals.” They can build recommendation engines. They can consider gamification techniques for learning.  

Are independent agents pleased with their preferred insurer?

Surveys are great for pointing out the differences between varied groups. In this case, insurer satisfaction varies widely. Agents who are empowered to place the business are most satisfied with their preferred insurers. (96% are very satisfied or somewhat satisfied.) But when the end customer is allowed to make the choice without agent involvement, only 84% of agents are very satisfied or somewhat satisfied. What will improve satisfaction throughout all groups is an overall increase in digital capabilities.

Meeting expectations in digital interaction. Which capabilities need to become digital?

Insurers have been investing in the future, many of them attempting to bring digital processes to the agency. Agents are expecting that these improvements will increase and cross all of their functions. For example, new business quoting is only considered by 40% of agents to happen digitally with their insurer. In the next three years, 59% of them expect to be able to quote using a digital process. License management would be an excellent place for insurers to grow their digital capabilities. Only 49% of agents seem to be using a digital process, yet 61% consider this to be an area their insurer should digitize in the next three years.

Agents are also ready for additional changes in policy inquiries. Though it’s a nice touch-base point with insurers, 60% of agents feel that they should be able to utilize more of a digital process in the next three years. Information on demand is an essential aspect for agents who need to win the business and keep the business.

Agency interaction is also variable based on P&C vs. Life agents. The Celent report points out that their level of digitization isn’t equal.

“For property casualty agents, the five activities with the highest level of digital interactions today are getting reports, policy changes, renewals, compensation and commissions, and policy inquiries. For life agents, the top five digital activities are getting reports, compensation and commissions, updating and managing licenses, policy changes, and renewals. Property casualty agents are more likely to be handling policy transactions in a digital manner and life agents are more likely to be handling agency management transactions in a digital manner.” [iii]

In all interactions, though, insurers are increasingly going to need to provide digital options.

“Insurers need to be investing for the future. Agents have high expectations for increased digital interaction across all types of activities.”[iv]

How satisfied will agents be with insurers who make their lives easier?

It might be stereotyping, but if there is one thing that agents are good at, it is thinking through a process and how to improve it. That’s the nature of selling. The person who sells has to think ahead for their clients, for their business and for themselves, tweaking pitches and processes to land the business and then keep it. This makes agents good at thinking ahead, envisioning and anticipating the outcomes of future scenarios. Celent took advantage of this in their survey.

For example, Celent asked agents about their preferences about policyholder self-service for certain tasks. The agents came back with more than data. They came back with insightful context regarding what should be allowed via self-service and what must be guarded for the security of the business. Celent also asked agents to look out into the future of their preferred insurer satisfaction. This is highly relevant to an insurer’s technology decisions, shedding light on the prioritization of service improvements over the next three years. Celent said, 

“While agents don’t expect insurers to become significantly less effective, they do believe insurers will become more efficient. And although they expect more transactions to be automated, meaning less human interaction, they don’t foresee any negative impact on personal relationships.”^[v]

The larger the independent agency is, the more likely it is to view insurer technology as crucial. 

“Large agencies—those generating over $10M of revenue annually—are 50% more likely to say they believe future investments will impact the insurers’ effectiveness in working with the agency. They also report an expectation that the personal relationship will improve, moving from 40% to 54%. Clearly, those insurers that expect to work with large agencies in the future will continue to face pressure to digitize their operations.”

The case for catering to distributors

There are, of course, dozens of areas that insurers would be best-served to adapt now and reap the rewards later. Data makes its own case for a new approach among insurers. How can an insurer’s use of data dramatically improve the effectiveness of agents at the same time it reduces loss?

A great example would be the collection of agency data. Transactions tell stories. Is the customer at risk for shopping their policy around? Are they at risk for fraud? Customer touchpoints can potentially shed light on the past and the future. How closely aligned is the technology that resides in the insurer’s back office with the technology at the independent agent? Agents want technology that is easy to use. They want more help from insurers with their technologies. Is this desire a potential bridge into better use of transactional data?

What about communication channels?

Celent’s findings seem to indicate that insurers should be less concerned with pushing agents to use particular communication channels and instead prepare for the seamless use of all of them. And, maybe this is the great takeaway.

The future of insurance is going to include stronger insurer/distributor relationships. Agents want it. Insurers need it. Customers will benefit from it.

Yet, many insurers aren’t ready to deliver on their part of the relationship. They need a fresh look at the benefits and the full opportunity. They need a roadmap on how to make the organization as attractive as possible to agents across most products and geographies. In our next look at the Celent report, we’ll take a close look at insurer options. What is the best path forward for an insurer that is concerned about growing their business through their agency partners? For another look at what drives Agents and brokers, revisit my blog on “Consumer-Grade” Digital Experiences for Agents and Brokers,” or view our webinar, A New Digital Experience for Agents and Brokers.

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[i] Carnahan, Karlyn, Reshaping the Distributor Insurer Relationship: A Survey of Independent Insurance Agents, p. 4, September 10, 2021

[ii] Ibid. p.10

[iii] Ibid. p.17

[iv] Ibid. p.18

[v] Ibid. p.19