How insurance agents can compete with direct carriers amid increased pressure.

How insurance agents can compete with direct carriers amid increased pressure.

Several years ago the divide between an insurance agency and direct carrier was stark. On one side you got a real person, personal service, and a firm handshake – and on the other a discounted rate, a call center, and talking gecko. You either wanted to pay a premium for a local agent or didn’t.

Today the differences are not so cut and dried. Direct carriers are working hard to peel clients away from insurance agents by offering services and tools aimed at making the agent channel appear outdated and clunky. Here’s why:

  • Technology is changing the way people communicate and consume information. Online tools and resources provided by direct carriers take place of some services previously only available with an insurance agent.
  • Direct carriers have the resources to innovate new technology and advertise its benefits to insurance consumers.

Moreover, In the last several years, the bigwigs at the direct insurance carriers have largely implemented the Net Promoter Score (NPS) system, allowing them to better quantify the value of client relationships. The data confirmed what insurance agents have known for decades; that there is a direct and measurable link between client loyalty and overall profitability. Consequentially, they initiated internal processes aimed at improving client relationships, including:

  • Automated systems aimed at increasing the frequency and personalization of touchpoints. Essentially they’re using technology to better connect with clients and improve their overall experience, particularly by filling communication gaps between onboarding, claims, and renewals.
  • Improving claims handling. This includes offering new tools (mobile apps) for reporting and tracking claims, speeding up time to compensation, and improving the experience with representatives.
  • Allowing for more autonomy, such as creating simple and intuitive methods for clients to research and modify policies without the need for an agent.

Direct carriers are also using regular customer feedback from NPS surveys to better understand what’s resonating with clients and ways they can improve. Furthermore, they are actually making changes – particularly with frontline employees – based on the feedback to improve the client experience.

A study from research firm Bain & Company suggests that these methods are working. They recently surveyed over 150,000 insurance consumers across P&C and Life to learn more about how they feel toward their respective carriers. They utilized the NPS, which grades loyalty on a -100 to +100 scale, noting:

The average NPS of the largest providers is +30, ten points higher than two years ago. This surge confirms that more companies have acknowledged the benefits of earning loyalty and have made solid progress.

This shift signifies a 33% increase in client loyalty for direct carriers over two years. This data should cause some alarm for insurance agents, as the direct providers (equipped with billion-dollar marketing budgets) are eroding the perceived service gap between the two.

But the objective of improving client relationships goes beyond competing with insurance agents. Bain & Company also found that a loyal client’s lifetime value is worth, on average, “nearly seven times that of a customer who’s a detractor of the carrier and two to three times that of a passive customer.” Loyal clients are proven to purchase more policies, be retained longer, cost less to service, and make referrals that close more often than traditional leads. No wonder direct insurance carriers are making a conscious and concerted effort to improve client loyalty.

It’s not too late for insurance agents

Insurance agents still have a distinct edge over direct providers due to their ability to develop meaningful relationships with their clients. The personal service they provide cannot be replicated (at least not completely) by direct insurance providers. But, if agents are not making the most of this competitive advantage, their perceived value will continue to decline, and they will lose market share to the big guys. The fact is: because direct carriers are stepping up their game today’s insurance consumers now expect even more from insurance agents.

At Rocket Referrals, we conducted research to identify the specific behavior of insurance agents that resonated with clients. By and large regular and meaningful communication was the largest contributor to customer loyalty. Clients needed to feel that their agent was not only there when they needed them, but also had their back behind the scenes, and was actively reaching out to them throughout the year. When personalized communication was absent the client felt they were overpaying and migrated to a different provider (like a direct provider with improved customer service).

But there’s one more thing to consider. Bain and Company also noted that “while earning goodwill among customers is necessary, it isn’t insufficient for generating superior revenue growth. Leaders must also motivate customers to actively promote the company.” This suggests that, although regular and meaningful communication is critical to client loyalty and retention, it alone isn’t enough to increase client referrals. That is unless the communication has language that encourages clients to recommend the agency to their friends and family, and makes it very easy for them to do so.

What processes to implement

An insurance agency’s goal should be to send highly personalized touchpoints that both maintain personal relationships, and leverage them to increase profitability via referrals, higher retention, and cross-sales. This is achieved by first evaluating the loyalty of individual clients (with the NPS), and then using psychology-driven content to influence desired behavior.

This doesn’t mean to start automating pointless emails to your entire book of business. Rather, it’s about putting together a proactive campaign—agency-wide—of reaching out to clients more regularly and in a personal and meaningful way. This alone will make a tremendous impact on client loyalty. But it’s important to make sure the communication you send matches to the current feelings a client has toward your agency.

Several recommended touch-points include:

  • NPS surveys sent every 6 months that encourage written feedback
  • Targeted testimonial and online review requests
  • Handwritten welcome cards to new clients
  • Handwritten loyalty cards to promoters
  • Policy review a couple of months before renewal
  • Returning phone calls
  • Handwritten birthday cards
  • Handwritten holiday cards
  • Periodic meaningful content
  • Handwritten thank-you cards for referrals
  • Encourage promoters to leave testimonials and reviews

At the end of the day, insurance agents adopting the business-as-usual mindset may have a difficult time competing in today’s market. The direct insurance carriers are getting smarter and learning how to entice customers that are interested in more than just low premiums. The best way for agents to compete is by leveraging technology that helps them highlight their true differentiator – the relationships they develop with their clients – while also focusing on listening to clients and providing service tailored to their unique needs and demands.

Related Posts

© 2022 Rocket Referrals