Strategic Planning 2003
Everyone was positive about the future of insurance agents. And everyone agreed that the insurance agent would be a different animal in the next twenty years. And it is apparent that there will continue to be consolidations in the agency industry as Mom-and-Pop shops that have supported its owners for their entire careers are folded into more professional businesses. There will always be room for small agents in the system, but even the small agents will be as professional as the larger agents and will be involved in different areas of customer service in the future than in the past.
I’d like to share my view of the future of the insurance agency industry -- one that was generally agreed upon by the attendees.
Over the next three to five years, the key to agency operations will be efficiency through integration. Agency systems will speak to each other and share data to avoid duplication of effort. More importantly, the Internet will aid in the integration of carrier systems with agency systems and will finally permit the SEMCI (Single Entry Multiple Company Interface) standards for which we have all been striving for during the last decade.
But the most important short-term integration for the long term future of the agency system is less publicized – the integration of the agencies’ database systems with either internal or third-party marketing programs. This integration is the true beginning of CRM (Customer Relationship Management) for our industry. This integration is of global implications to our industry. Our continents were once a singular land mass that changed and evolved over time into our current geography. And like that global event, first systems, then human transition to CRM will evolve slowly and quietly, but will certainly affect our lives and businesses to a degree that we cannot even imagine yet.
I suggest that the true affect and the change in agency operations and business model will occur over the next ten to fifteen years. Here’s what will happen:
Continued technical advances in automation and the maturation of the internet from a game and shopping tool into an essential part of our lives will cause non-technical processing of insurance to migrate directly to the customers, themselves. For instance, customers will be able to go on-line from a car dealership, enter the information about their new or replacement vehicle and get an ID card downloaded immediately. Globally shared databases (privacy issues aside) will permit legitimate authorities to input an accident victim’s name and address and identify insurance information. Intelligent editing (with built-in underwriting exceptions) will defer transactions to the agent when necessary but we already know that Pareto’s Principle (the 80/20 Rule that dictates that 80% of all transactions will “flow” while 20% will be referred) applies even if a learning curve is necessary over time. By then transactions will be standardized and simplified to permit anyone to a) make simple changes to their insurance policies, b) inquire about billing status (the most frequent transaction in the industry) through the agency directly to the carrier systems on a “24/7” basis, and c) do inquiries and claims reporting via e-mail to their agents at any time, day or night, to be addressed by the agency staff during business hours. Commercial clients will be able to generate certificates and access their coverage limits, forms, and schedules directly from your agency management systems.
Insurance agencies will diminish their roles as transaction processors and will become the technical experts and relationship builders that will permit them to stop SELLING INSURANCE and begin PROTECTING ASSETS for a living.
Imagine surrounding your clients with a counseling effort that analyzes their current and changing exposures with the single purpose of protecting their assets to the degree that they (the client) permit. Price will always be an issue, but will assume its proper role as a secondary issue, only important if a carrier is far out of line with its competitors. And the price-shopping that we have taught our customers and prospects so well over the last twenty years will diminish as well because the client’s Financial Counselor (who used to be his insurance agent) touches auto insurance, homeowners insurance, umbrella coverage, all corollary personal lines, protection against any forms of commercial or business exposures, life insurance, health insurance, long term health care, mortgages, college funding, investment strategies, tax planning and estate planning. I’m sure that people smarter than I have already thought of expansions to that list that would involve protecting the client’s assets.
If you insure or secure all of these forms of asset protection devices can you really imagine Joe Public shopping for his auto insurance since your renewal is $20 higher this year? And, by the way, agents will most likely be primarily brokers with the ability to place insurance into which ever carrier would best serve the needs of the client (and for whom the client is the right underwriting “fit”).
The integration that will make Customer Relationship Management possible will be a wide variety of intelligent marketing programs and your customer database. For instance, if you decide that all customers with homes valued over $250,000 should have umbrella policies and Long Term Care Policies, you will be able to set up a routine that automatically puts qualified customers into both marketing tracks with letters, scripted phone calls and other marketing programs automatically being generated over a designated period of time. If you wish to send flood solicitations to all customers within specific zip codes, your marketing software will be able to access your database to do so with no further programming or effort on your part. Software already exists that takes the agent a great deal of the way to this end, but without the intelligent integration capability with the primary agency management database.
One key to CRM is the integration of agency databases with agency-controlled marketing and having the time to implement true customer relationships based on fulfilling the asset-protection needs of each customer with tailored programs. Once we have evolved from “processing shops” to true financial counseling firms, the opportunity to fully serve our clients will be ours. Vendors and technology will eliminate a great deal of processing from our workload – for those agents who permit those efficiencies. But, like our systems today, most of the agency force who own agency management systems do not utilize all (or even a majority) of the features of those systems.
Utility will follow technology in the agency system. Some agents will never “get it” and will remain processing shops for the rest of their careers. We can give them power tools but they will still use rocks to drive nails. Others will proudly implement a small portion of technology’s capabilities. They will use hammers, considering them a great advancement over rocks (and themselves as automation “experts”). But they still won’t know what to do with the automatic nail drivers supplied to them. And a select few, using their systems to the fullest extent possible will adopt CRM and advance to the next stage of agency development. They will use the automatic nail driver and anything else we can provide to efficiently build because they recognized that their job is not just to drive nails, it is to build houses – not to “service” insurance policies, but to provide shelter for their clients’ financial assets. And they will use anything and everything available to them to accomplish their goals better.
Are you ready for the change? Begin now to Plan with an eye always focused on strengthening the relationships between your agency and its clients. Push your automation vendors to provide you the documentation and training needed to utilize the advancements within every update and version of their software.
Training appears to be the weakest link at both the vendors and within the agencies. Vendors try to save money by providing on-line and documented training, counting on the agency’s employees to basically ‘self-train’. I can assure you that the knowledge base of the trainers were not achieved through self-taught manuals or on-line. Why do they expect the agency to learn that way? We may buy their systems and their upgrades, but we tend to live with the sometimes enigmatic documentation and on-line training provided by the automation vendors. We assume that any training deficiencies lie with our own employees. If your employees with years of experience on the system cannot fully comprehend the training modules, it’s not their fault. Don’t hide the fact and try to proceed with the system. Make enough noise that the system vendors provide you with sufficient training to fully comprehend their programs and procedures. Worse yet, trained employees leave and new employees are trained by agency staff who do not fully comprehend the system or its functions. If the existing employees know 50% of what the vendor staff knows about its system and those existing employees try to teach the system to new employees, it should be expected that the new employees will learn only a portion of the 50% that is understood by the in-agency staff, a mediocre training experience, at best.
Instead, we believe that system utilization, now and in the future, will be deficient until both vendors and agencies expend sufficient funds to properly train new and existing staff members in the full utilization of the system. I believe that the best system vendors will establish universities of system education at their locations to which all new employees of agencies must attend to get a full system utilization exposure. Existing employees will be sent to the university on occasion to take refresher courses. Real time on-line courses can also be offered over the internet at much lower cost to provide training in a remote classroom environment to avoid travel costs to the agencies. This education facility is mandatory if the advances being made by the system vendors are to be fuly utilized by agencies seeking to convert from processors to Customer Relationship Managers.
Systems are being continuously upgraded using the internet and ASP technology to take the complexities out of system operation and to relieve the agency of the processing role. Some agencies will avoid this change. They will eventually be absorbed by other agencies as their owners retire. The smart and progressive agencies will welcome this change in technology and will implement changes in training, education and sales methodology to adapt to CRM. The key to success (aside from the obvious change in mental attitude at the agency) is the renewed emphasis on training on all facets of systems operation and integration as process gives way to marketing integration and CRM methodologies for dealing with insurance customers.