Survey Reveals ‘Innovate or Die’ Mentality Among Insurance Agencies
Staff Writer | October 17, 2014
Vertafore announces the results of its survey, “How Independent P&C Insurance Agencies Are Thriving in Today’s Competitive Marketplace.” The key takeaway reveals a widening gap among agencies, with 70 percent of large agencies “very optimistic” about future growth, compared to only 25 percent of small agencies. The survey was conducted in partnership with analyst firm, Aite Group.
Primary contributors to the findings included increasing commoditization and reliance on personal lines, such as auto insurance, and limited technology adoption among smaller agencies. In fact, although personal auto insurance sales represent a majority of small agency revenues, 39 percent of respondents noted their businesses have not made or do not expect to make any changes to combat the direct-to-carrier shift.
Despite these challenges, the survey identified multiple growth opportunities as nearly 50 percent of fast growing agencies invest in advanced technologies, diversify into fast-growing lines such as cyber-liability insurance, and expand strategic partnerships with carriers.
“Our primary goal for conducting this survey was to delve deeper into the current state of the independent agency market and get a better understanding of what factors are driving or inhibiting growth,” says Todd Eyler, research director at Aite Group. “What we found is that the agencies that are thriving are those that recognize the profitability, scalability, and agility that technology can bring to the table. Findings from the survey can be used as a playbook for agencies working to bridge the growth gap by finding profitable solutions to counteract disruptive industry changes.”
Aite conducted the survey among 194 U.S.-based property & casualty independent insurance agencies between August and September 2014. The research was conducted independently with no influence from Vertafore on the findings. The following strategies identified by the survey have been consistently adopted by fast-growing agencies to overcome industry challenges in an increasingly competitive insurance landscape.
Diverse Product Lines, New Markets Key to Growth
According to recent McKinsey research, 28 percent of consumers purchase auto insurance directly from carriers, compared to 13 percent who purchase directly from agents. This increase in commoditization of personal auto insurance has placed a heavy burden on agencies (particularly smaller ones with less than $1 million in revenue), where personal lines often account for 80 percent or more of their sales.
To help offset the decrease in sales of personal insurance, 44 percent of all agencies have diversified into new coverage and product types including, homeowners insurance, commercial lines, and emerging markets such as, cyber liability, identity theft protection, and worksite insurance products. These strategic product lines are providing agents with more opportunity to deliver value in poorly understood product areas. Findings supporting the trend of diversification include:
• Large agencies often utilize a higher percentage of commercial package and property insurance than small agencies. Large and mid-sized agencies often comprise at least 41 percent of total annual sales. Small agencies utilized less, according to the report.
• Homeowners insurance is helping drive growth in agencies of all sizes. 58 percent of agencies of all sizes have experienced growth in homeowner’s insurance sales over the last 24 months.
• Among the new product lines, cyber liability insurance is emerging as a fast growth offering, with 50 percent of large agencies reporting an increase in sales for this type of coverage over the last 24 months.
Customer Engagement, Self-Service Technology
Despite the slowdown in commoditized product lines, fast-growing agencies that invested in customer service initiatives are experiencing positive results. Agencies of all sizes cited better customer service (50 percent) and improved cross selling (49 percent) as important drivers of growth in personal lines insurance. Similarly, nearly half of all agencies reporting fast growth (47 percent) have deployed advanced customer self-service capabilities on their websites including, chat, video conferencing, and mobile.
Strategic Partnerships with Carriers for Analytics, Marketing
In addition to product line diversification and customer self-service capabilities, Aite found an increasing number of large agencies forging partnerships with carriers as a means of gaining access to their marketing and technology capabilities. Nearly two- thirds (63 percent) of large agencies have partnered with insurance companies to access their full range of marketing management tools, while 56 percent are partnering to leverage their predictive analytics capabilities and build more targeted prospect lists.
The benefits are twofold: Insurance companies are able to market new, valued-added products in a more localized and personal manner, while agencies increase efficiency and engagement with customers as a result of access to advanced technology.
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Visioning, Setting Scope, and Execution Planning Critical for Successful Digital Strategies, Says Novarica
- ITS Implements QA Best Practices for Rockford Mutual
- FireLight® by Insurance Technologies Features New Advanced User Experience Capabilities and Wizard Designer
- InsurTech Startup Betterview Launches New AI Driven Roof Report to Immediately Identify Roof Condition & Characteristics
- Larger Insurers Extending their Analytics Leads and Piloting Artificial Intelligence, says 3rd Annual Novarica New Normal 100 Benchmark
- 360Globalnet Augments Services and Implementation Capabilities
- TechCanary Incorporates in Canada as TechCanary Insurance Software of Canada ULC
- XL Catlin to Build World’s First On-Demand Cyber Insurance Solution with Slice ICS
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA is pleased to present the 2014 Webinar Series. We have many topics for you to choose from and attendance is open to all ITA members. The webinar topics are current and exciting — ranging from predictive analytics to telematics and will focus on the direction insurance carriers need to follow for the future. All webinars are presented by insurance IT professionals along with some of the leading analysts and consultants in the field. There is no cost to attend an ITA webinar. For more information and to register for the webinar, click the “title” of the webinar below.
BLOGS AND COLUMNS
It has become a common refrain over the past few years to view the practice of enterprise architecture (EA) as something that time has passed by, much... READ MORE
One important trend in society over the past decade is our increasing ability to create and consume a seemingly unlimited amount of digital content... READ MORE
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE
Fraud detection has always been and will continue to be a critical component of claims management. Learning the lessons from current claims Straight... READ MORE
- Vendor Views