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This is the No. 1 competitive threat facing independent agents in 2015

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Most of the 38,500 independent agencies in the U.S. are small businesses that generate average annual premiums of between $5 and $6 million, earn commissions of less than $1 million, and employ seven to 12 full-time employees, according to new research.

Accenture discloses these findings in a new report on independent agencies, “Evolving to Compete and Win in the Long Term.” Based on a 2014 survey of 1,158 independent agents in the U.S., the survey explores independent agents’ growth strategies, value drivers, operational competencies and customer insights. The report also details independent agents’ views on their business relationships, operations and preferences across 12 priority areas. 

The survey indicates that most independent agents work with a small number of carriers: 60 percent of the survey respondents say they use no more than five carriers; an additional 33 percent say the number is between 6 and 10. Collectively, the report indicates, independent agents are having a substantial impact on the industry: In the life insurance space, they control 49 percent of premiums.

“Local market knowledge and personalized service, along with access to a variety of carriers, products and price points, have allowed the IA to maintain a large share of the insurance distribution market,” the report states. “The partnership between agents and carriers is mutually beneficial, but also potentially adversarial.”

The report cautions that IAs view direct sales channels a “serious competitive threat.” Nearly 4 in 10 respondents (39 percent) cite the direct channel as their greatest source of competition.

Additionally, nearly three-quarters (71 percent) of the agents say that threat comes in the form of lower prices. And almost half of respondents (48 percent) say better brand recognition and more effective marketing are components of the competitive threat.

“Changing consumer behavior and the continued rise of the direct channel are threatening agents’ dominance of insurance distribution,” says Erik Sandquist, managing director for Accenture Distribution and Marketing Services in North America. “So are new insurance players — with new distribution models — that are making a determined effort to entice customers away from agents.

“Leading independent agents will take advantage of innovative digital technologies and big data analytics to develop greater customer knowledge and insights, improve their ability to reach their target markets, and deliver a superior customer experience,” he adds.

The charts on the following page identify the competitive environment that independent advisors face, agents’ top 10 priorities and the operational competencies they view as key to the success of their practices.