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Vertafore’s Agency Survey Reveals Concern About Disruption Increasing

Staff Writer | October 21, 2015

Insurance agencies of all sizes are less optimistic about future growth is the key takeaway from the second annual Vertafore survey, conducted in partnership with the analyst firm Aite Group.

Based on year-over-year results, the biggest drop in sentiment comes from large agencies where only 33 percent claim to be “very optimistic” compared to 70 percent in 2014, according to the survey report, “How Independent P&C Insurance Agencies Thrive in 2015’s Competitive Marketplace.”

The primary culprits driving industry uncertainty are carrier adoption of predictive analytics (59 percent), Google’s entry into the insurance market (54 percent), and self-directed preferences of millennials (48 percent).

To negate market threats, the majority of large agencies reported an increase in technology budgets, specifically for self-service, cloud, and mobile technologies. Meanwhile, small agency technology budgets remained stagnant near 60 percent, and the group of “very optimistic” agents dropped from 25 percent to 11 percent.

Aite Group conducted the survey among 200 U.S.-based P&C independent insurance agencies during September 2015. The following survey findings uncover key factors impacting agency optimism year-over-year, in addition to strategies used to combat new market threats or disruptions.

Large Agency Optimism Nose Dives

The dramatic drop in overall optimism suggests that the ripple effect of the industry’s ongoing digital disruption has finally permeated the entire independent agent channel. The most notable shift in optimism and growth projections year-over-year was among large agency respondents, revealing a 53 percent decrease in the percentage of “very optimistic” respondents (from 70 percent last year to 33 percent this year).

In contrast, findings show only slight differences in sentiment among the total number of smaller agencies year-over-year (25 percent to 11 percent “very optimistic”), implying they’ve already been dealing with the disruption. Similarly, only 29 percent of all agencies, regardless of size, are now focusing on aggressive growth, compared to 42 perhaps in 2014. The focus of maintaining current sales levels jumped up to 12 percent, up from 5 percent last year.

 

Analytics, Google, Millennials Pose Biggest Threats 

Of the dominant threats identified in the survey, agents of all sizes singled out predictive analytics as the biggest threat to the future of their business, with 59 percent moderately to seriously threatened by carriers integrating risk analytics solutions. The worry stems from carriers becoming more self-sufficient, further displacing the independent agent.

Another major threat expressed by respondents is the influx of new market entrants providing access to insurance products and information to consumers online. Examples include companies outside of the P&C industry providing competitive insurance products like Walmart and car dealerships, as well as new premium aggregator websites like Google Compare and Zenefits. More than half (54 percent) of agents surveyed now feel moderately to seriously threatened by these competitive newcomers.

The uptick in online insurance resources is driven by new digital demands from the next generation consumer. In fact, Vertafore’s survey found 48 percent of agents feel threatened by the self-directed preferences of Gen X and millennials as it relates to the agency’s ability to keep up with digital demands in the future.

Technology Investment Helping to Reverse Doom-and-Gloom 

To address key threats, four out of five agencies reported increasing their IT budgets over the last 12 months. Midsize and large agencies are planning to invest in technology budgets to drive productivity and enhance customer engagement. This year’s survey identified advanced customer self-service capabilities (47 percent) including websites and IVR, as well as investments in cloud services and solutions (43 percent) as primary drivers for budget spend within the next 12 months. Investments in mobile (40 percent) in the form of mobile-friendly websites and apps also made the list of technology budget priorities.

Surprisingly, agents are welcoming the emergence of usage-based insurance policies such as Progressive’s Snapshot, through which consumers receive discounts for good driving behavior. Half of all agencies feel the introduction of usage-based insurance policies will have a positive impact on their business, with only 11 percent predicting it will have a negative impact. Agents likely view usage-based insurance policies as a value-add opportunity to more effectively meet customer demands and attract prospects. In fact, Vertafore’s survey found more than half (56 percent) of agents have already seen increases in customer inquiries for such policies, and 62 percent expect demand to increase.

“The insurance industry is on the verge of disruption in the way we work and do business,” says Guy Weismantel, vice president of marketing at Vertafore. “New self-service technologies are popping up daily, contributing to the evolving role and future of the insurance agent. Rather than shying away from change, our survey shows that agents are embracing and integrating technologies into their operations to enhance the customer experience. The future of insurance is not about displacing the agent; it’s about strengthening and reinvigorating agent services with technology.”

 


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