The insurance industry is a product-driven business where the products are provided through conventional agent-to-customer sales methods. Until now, the industry believed that was just what the customers wanted. However, a recent Accenture study reveals some surprising findings: 67 percent of insurance customers surveyed would consider buying insurance from an organization other than the traditional insurer/agent channel. Of those, 23 percent would consider buying coverage through online service providers such as Google and Amazon.
This unlikely scenario is already playing out in China, where customers are starting to buy insurance in ways that bypass agents. While the practice has not caught on in the U.S. to any measurable degree, the market upheaval is poised to be industry-altering: Accenture’s figures suggest that 91 percent of respondents are getting no love from their agents or carriers.
Moreover, the survey revealed a “switching economy” pattern; consumers are changing providers. The research revealed that 51 percent of U.S. consumers switched service providers in the past year due to poor customer service experiences, up 5 percent from 2012. Consumers are expressing dissatisfaction and many are doing something about it.
What that means to U.S. insurers: there’s a potential $1.3 trillion in revenue at stake thanks to unsatisfactory customer service results. However, it’s unclear whether consumers are ready to let go of the traditional sales model. In an environment of consumer-driven demand for fast response and even faster delivery, is the traditional insurance agency model in danger?
Behind the numbers
Erik Sandquist, managing director of Accenture’s distribution & marketing services, says Accenture has conducted the survey for several years and has also surveyed the personal lines market in the U.S. He says they’ve seen these trends develop. This year, however, was the first time the company had asked consumers if they would consider buying insurance from a source other than agents.
“One thing that stood out was ‘consumers’ willingness to consider alternative industries from which they may seek information and purchase insurance products,” he says.
Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, says replacing providers is an idea that could spread. “I don’t know of anybody who hasn’t seen the auto-switching ads. That idea has been planted for auto insurance, and there’s really no reason why people won’t carry that idea over to other insurances, as well.” That, Weisbart says, requires a trigger. To him, that’s where the notion of changing providers falls short. Consumers, he says, may not be happy, but there may not be enough to push them into action. “Even if you think you’ll save money, you’re probably not going to get around to it unless you have something with your current carrier that rubs you the wrong way,” he adds.
That kind of consumer reticence seems in line with what John Nichols believes. Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA), says changing providers isn’t new. He also says that technology isn’t necessarily going to be the death knell for agents.
“There has been distribution via technology for at least 20 years. I know several firms that have an Internet methodology that’s supplemented with a call center or some form of human interaction with a licensed, educated advisor. I think it’s a reach to think the advisor’s being circumvented,” he says.
The customer-agent disconnect
That could be good news for the life insurance industry since the larger issue isn’t keeping customers, but rather creating customer interest in a product that is often viewed as unnecessary. Weisbart says that people under the age of 60 are buying less life insurance than previous generations. His concern isn’t whether they will switch providers, but whether they will buy at all.
“If they did, I think they would tend to in a simplistic way – buying one or two years’ worth of salary in death benefits – without really doing any kind of analysis on what they need or what policy to buy, which is what an agent would help them think through,” he says.
Agents, Weisbart adds, aren’t making that connection with their customers, and it’s driving them to online sources of both information and coverage. Sandquist sees that as a problem of focus. “Many insurance companies have, historically, been product-oriented or distribution-oriented. Moving to a customer-centric mentality is a bit of a change.” Still, he says, it’s a transformational shift that they need to undergo.
It’s also a shift that comes with a few road blocks. Weisbart says the life insurance industry has two problems it needs to overcome. The first is getting consumers interested in the product. “People can think of plenty of other things to do with their money,” he says. Second, consumers are inundated with offers. “There’s a lot of competition for those dollars,” Weisbart adds. “It’s important for agents and customers to understand how important this stuff is.”
Because consumers typically don’t have an abundance of discretionary income, Weisbart says the life insurance industry has always struggled to connect with the middle class buyers. Not a new problem, he says, but certainly a big concern for agents and insurers. However, he points out another road block getting in the way.
“Even if you can get someone’s attention and have them in a mindset that makes them willing to consider what to do here, this is a difficult subject,” he says. Plus not everyone understands the financial impact of their investments, he adds. “There is quite a bit of evidence that a large number of people are, relatively speaking, financially illiterate. They just don’t understand a lot of key concepts to making sense of life insurance, the main one being that they don’t have much of a sense of a future financially.”
Still, customers aren’t closing the door on interactions with their agents or insurers. Sandquist says part of the Accenture research that didn’t make it into the survey showed that segments of customers actually preferred using agents during the entire buying process.
Some consumers, he says, tend to be multi-channel in their approach to buying, but reach out to an agent to get more information, guidance or to make the purchase. Sandquist says this could be a real opportunity for insurance companies to align their channels to provide a seamless experience to those types of consumers.
Capitalizing on need
That kind of behavior is where true opportunity lies for agents and insurers, the experts say. As consumers become more comfortable around digital channels, life insurers are poised to take advantage of the digital connection with customers and play it to their benefit. Nichols is confident that even in the digital aspect of a consumer’s search, agents can and should be present and providing that sought-after information.
“You can pull them in to your website and give them access to all the necessary resources,” he says. “Alternatively, I would also provide in-person experience and position myself as an expert or a resource for financial literacy.” In that way, Nichols believes the agent and advisor will not be circumvented. He says the value of the adviser is “king” in the consumer’s buying process. Some of the questions agents and advisors can answer, he says, are “Do they have the right purpose? Do they have the right beneficiary designation? Is it in a trust or not? All of these issues are not anything you can take for granted. It’s not like buying a loaf of bread – there’s a level of complexity that affects not just the insured but those they love and future generations,” Nichols adds.
Selling consumers on that level of service isn’t difficult. It takes a little relationship-building and a bit of ingenuity. For example, when Weisbart was a college professor years ago, he was involved in a research project. The project had the team interviewing 25 outstanding insurance agents. Weisbart still remembers one agent’s sales tactics.
“He would make an appointment to see a married couple and would go to their home. He would tell the husband to sit opposite his wife. He’d take his finger in the form of a little gun. He’d say to the guy ‘Bang, you’re dead.’ He would then turn to the widow and say ‘Now let’s go through the estate taxation form that you have to fill out.’ He almost never left without a sale.”
In that scenario, the agent was able to impart the importance of the life insurance policy and align himself with the consumer as a trusted advisor. To those customers, life insurance had suddenly become a much-needed commodity. That’s the value of the agent, in Nichols’ opinion. “We have the education, the training and the knowledge to provide that information and give the consumer the comfort and financial security to protect them and their loved ones,” he says.
Also, Nichols says that disruption in the market in the form of mobile payments, e-signatures and the like are technologies the industry can embrace because, he says, they won’t detract from the agent’s purpose. “Our purpose will never be disrupted.”