BY JOEL ZWICKER
CAPTIVE AGENTS ARE SLOWLY but surely becoming part of a bygone era. Nationwide announced in 2018 it would transition to a fully independent model, and by July 2020 virtually all their agents committed to Nationwide’s independent agency channel. As a result of their successful transition more carriers are sure to follow suit, as captive agents’ share in the market continues to trend downward.
From 2017 to 2019, captive agents lost 4% market share of all personal lines, while independent agents (IAs) grew by 2.3%, according to a study by Independent Insurance Agents & Brokers of America. IAs also wrote 84.5% of all commercial line premiums in 2019.
The benefits of this transition are undeniable for all involved, from the carrier to the agent. Since Nationwide’s former captives have transitioned to independent, their written premiums have increased by 35%. By refocusing carriers, they can create more programs that support the independent agency channel and like Nationwide still achieve growth in the agency distribution channel without the expenses associated with supporting the captive model.
The success of Nationwide’s move to an IA model may indicate a larger shift to supporting the independent challenge within the next few years, and will give thousands of agents more control over their businesses than ever before. As agents transition from captive to independent, they will need to learn how to establish and grow their agencies in a competitive market place.
As agents transition from captive to independent, they will need to learn how to establish and grow their agencies in a competitive market place.
Independent agents bring a different value proposition
Without the draw of a familiar carrier’s name to attract clients, IAs need to understand and lean into the benefits of establishing themselves as reputable brands. Many consumers have become accustomed to the ease and speed online processes provide. Carriers’ digital infrastructure can make it quick and inexpensive for a person or business to find coverage that works for them and buy it online. While efficiency is a value big carriers provide captive agents, they lack the wide range of offerings that a customer may need. So what can an IA bring to the table for customers that they couldn’t as a captive agent?
The short answer: a trusted relationship with their customers. IAs need to show customers why working with them is a better choice than getting direct services from a carrier — or going with another IA. The flexibility that IAs enjoy over captive agents is the freedom to create personalized plans and mix and match policies from different carriers in order to provide the best outcomes for clients. IAs are on the rise in part because of their carrier-agnostic association. IAs don’t need to push a particular carrier’s offerings when they aren’t the best for their customer.
This is part of the reason that IAs have been increasing the amount of deals they are closing. However, with the forthcoming onslaught of new agents in the market fighting for business, IAs are going to have to step up their game when it comes to communicating with customers. Technology and digital solutions are going to be key in this next phase of industry growth.
Three essential technology systems every independent agent needs
For IAs to be competitive, they must learn to efficiently use three digital tools: a management system, a website and marketing support. All are necessities in an increasingly digital market that has rapidly grown due to the events of 2020. If an IA is missing even one of these, they will have a difficult time competing for business in a modern marketplace.
The right management system is a must-have. Allowing an agency and its entire staff to have a single place to find contact, policy and claim data for each of their clients, also helps an agency properly manage their finances. When looking for a management system, agencies should do proper diligence as it is absolutely going to be one of, if not the most, critical piece of technology the agency invests in. It can either make their business much more efficient or have the total opposite effect.
As an example — one of the first critical questions that should be asked of a management system is if they have an open API. An API allows third-party solutions to easily work with your core data base (your agency management system) and will allow greater efficiencies in your business. Double entry is the bane of many agencies and should be avoided. As an independent agency, you will absolutely need other solutions to aid in growth, retention and overall communication amongst other things
For example, if an IA wants more options for sending emails and text messages to customers, it’s much easier to connect open systems than it is to work from separate programs. A flexible management system that works seamlessly with other technologies is a huge asset for day-to-day operations. Once an agent has used an open management system, they are unlikely to ever go back to trying to make different programs work together on their own ever again.
A website seems like a no-brainer, but there are actually some important considerations that aren’t always at the forefront of an agent’s mind when having one developed. Many agents underestimate the role of a website as a lead generation tool or to attract new business. Search engine optimization (SEO) is key to being findable to your target audience. Creating and setting in place lead generation capabilities for a website is worth the time, effort and costs. Mobile compatibility and content updates/management are just a couple more considerations — and this is before getting into hosting, managing quote requests, and more.
IAs cannot treat websites like a one-and-done deal — they require constant attention, continuous updating and some level of technical knowledge to be effective. IAs need to decide the best approach for creating and maintaining a website. Can they build and run a website by themselves, learning the necessary skills and dedicating time to it on a monthly basis? This is something IAs need to think long and hard about, because it cannot be stressed enough: a website that doesn’t show up on search engines, doesn’t work on mobile devices, or looks like it hasn’t been updated in more than a year can turn potential customers away. Whether making the decision to hire someone to do the job in-house or a vendor who specializes in the insurance industry, having a client-ready website is crucial to the success of your business.
Marketing is an instrumental component of a competitive agency that can often be overlooked. IAs need to know who their clientele are, what they want, and how to reach them. Older generations are unlikely to be receptive toward modern tactics like text messages or emails but on the other hand, younger people generally prefer digital communication to phone calls or physical mail. Each of these communication methods have their benefits, and all are part of a successful multi-channel marketing strategy. For most agents, they didn’t get into the business to become a marketer, but instead to help people. For this reason, a marketing platform that takes these tasks off the agent’s plate is a necessary investment for strategic, effective growth overall.
A marketing platform should integrate with the management system, be easy-to-use, and provide automation and analytics on all messages.
Technology and digital solutions are going to be key in this next phase of industry growth.
Pre-built, customizable content based around different campaign themes means an IA need only take a few moments to personalize information to clients about accidents, risk management, retirement — whatever might be relevant for each individual client. Automation allows IAs to send out communications frequently and efficiently, ensuring clients never have to go long periods of time without hearing from their agent.
Analytics are also a must. IAs need to learn what marketing strategies generate leads, increase sales, retain customers, and contribute to overall growth. A marketing platform with all these tools and insights takes care of the marketing legwork for IAs, providing everything they need to continue growing their business.
The move toward an independent model on the part of carriers is going to change the landscape of the insurance industry, having a larger impact on existing IAs and the way they operate today. Carriers are ultimately in pursuit of reducing costs associated with the captive model, which this model can provide them, but in turn they will also capture more of the independent market – which has been growing in recent years while captive agents have been declining.
This can be a difficult transition for those accustomed to the captive model, but it can create an opportunity to increase revenue and own the customer relationships. As more carriers make this move, new and existing IAs will need to take advantage of any leg up they can get in order to remain competitive and stand out in a crowded marketplace.
JOEL ZWICKER is chief evangelist at Agency Revolution
(agencyrevolution.com). He has helped hundreds of independent agencies improve KPIs and achieve growth objectives. He coaches them in their digital transformation by helping them leverage digital marketing, marketing automation and content marketing. In addition to his years at Agency Revolution, Joel has extensive agency experience. For 11 years he was an independent agent and spent the last eight of those years overseeing the marketing efforts for a large insurance agency. Reach out to Zwicker at email@example.com