Are Insurance Agents Going the Way of Travel Agents?

November 28, 2009

Operating an Insurance Agency

In 1999 I wanted to arrange a trip to France.  So like everyone else in 1999, the first thing I did was pull out my Yellow Pages to find a travel agent whose ad looked like they knew something about France.  Then I drove over to the agent’s office and sat down to describe my needs and my budget.  The agent went over several options with me; I chose the package that sounded like it fit my needs, and a week or two later my tickets arrived in the mail.  Later when I needed to change my plans, I called the travel agent and was told I needed to drive back to their office to pay for the difference and have new tickets reprinted. Any of this sounding familiar? As consultants to insurance agencies, we’ve see this exact same business cycle play out every day.  Agency owners are placing ads in the phone book, waiting for their phone to ring, and if it does they are unable to finish the business on the phone due to a lack of automation, so they need to convince the prospect to drive over to the insurance office to complete the transaction.  There is a very large population of insurance agents that believe this is the only way to do business and they have done nothing to change their approach even though the industry is changing all around them. So how will things go in the future for these insurance agents?  Likely about the same as things went for travel agents. When you step back and look at the business model of insurance agencies, you have to understand that it is simply a distribution system.  Just like vending machine companies are a means to distribute soft drinks, and department stores are a means to distribute cosmetics and clothing, and travel agents at one time were a means to distribute travel services and products…insurance agencies are a means to distribute insurance services and products to the consumer. What insurance agents fail to recognize is they are not the only means of distribution that insurance carriers are using, or considering.  Travel agents also failed to recognize this. The bottom line is that providers in any industry are primarily concerned about…the bottom line.  In the case of the travel industry, it simply made no sense for airlines, hotels, and car rental companies to continue paying commissions to thousands of travel agencies to handle their business for them.  It was much more profitable for the travel providers to work directly with the consumer and avoid paying commissions altogether, or work with larger and more efficient travel agents and brokers who offered visibility, marketing, convenience, automation, and multiple services to consumers (i.e. Expedia and Travelocity) so the increased volume of business made it worth continuing to pay commissions. Insurance companies have also been looking at making changes and continue to analyze the economics of their distribution system of independent agents.  And while agents argue they have value because they provide a necessary service and relationship to consumers in their own communities, insurance companies are becoming increasingly aware that consumers in local communities may never even find their local agent, because most of them aren’t driving down Main Street or flipping through the phone book these days to find insurance.  They’re shopping on the Internet. For insurance agents of any size in any community to avoid what happened to travel agents, they must make themselves visible and relevant to consumers and insurance carriers alike, by taking the first step of investing in Internet marketing.  As scary as that may sound to many agents, it is an undeniable truth that your next door neighbor is more likely to contact you for an insurance quote by seeing your website than by walking past your front door. If I wanted to arrange a trip to France today, I wouldn’t need to go through any of the inconvenient steps I went through just 10-years ago, because now I can shop on the Internet, price the different options, and work with a direct provider or a broker who offers me many different travel choices, without ever leaving my home. So 10-years from today, will consumers be willing to go through any inconvenient steps to buy insurance, or will they prefer to shop on the Internet, price the different options, and work with a direct provider or a broker who offers many different insurance choices, without ever leaving their home?  You won’t have to wait 10-years for the answer, or 5-years, or even 1-year, because it’s already happening. If you want more information about how to have an ongoing and growing presence in the insurance distribution system by having Internet visibility, please contact us for a free phone consultation.