Personal lines distribution: From agents first to agents last?

Let me begin by saying I am a big fan of agents, and I believe they will play a vital role in personal lines distribution for a long time to come. Clearly, direct distribution models in personal lines, and the prominent companies that feature them, have gained traction and market share over the last two decades. The insurtech movement has now presented new options for digital distribution, such as direct digital via web/mobile. And now, all the talk is of the potential for embedded insurance that incorporates insurance at the point of sale. These new options usually (although not always) bypass the agent.

SMA asked agencies and carriers how they expect personal lines distribution will change in the next five years. Both agencies and carriers cite continued consolidation in the distributor space as the number one way the landscape will change. However, close behind are expectations that direct distribution will significantly increase, insurtech will play a big role in reshaping distribution, and big tech companies will enter the space.

So how does this relate to the tag line of this blog, “From Agents First to Agents Last?” In the past, when an individual needed insurance for their car, motorcycle, home, apartment, or personal property, they would reach out to their local agent. The agent may have been captive or independent, but the point is that the best path to obtaining insurance coverage was to get the advice of an agent. And in the case of an independent agent, a customer would get advice on which carrier best met their needs. Thus, historically the approach for personal lines insurance has been “agent first.” Now in today’s digital world, many digital on-ramps lead a customer to insurance. In some cases, this results in completely digital interactions, from needs analysis to policy issuance. This would be an “agent-none” scenario. However, in many cases, an agent is still involved somewhere in the process. Perhaps “agent last” is too extreme a term, but even when the insurance buying process begins at a comparison site, digital retail site, or showroom floor, they may ultimately be connected to an agent to complete the transaction.

An example that brings this idea home is the recent launch of HUB International’s VIU platform. This digital platform enables individuals to compare choices and prices for auto and homeowner’s insurance – as many comparison sites do. However, the transaction is not end-to-end digital. The final purchase always ends with an agent. This approach provides agents with the opportunity to provide additional advice that may lead to cross-sell or up-sell opportunities. It also establishes an agent of record that can be available for policy services, if appropriate.

Many similar examples exist for other comparison sites, insurers’ mobile apps, affinity group sites, and other digital on-ramps that connect prospects with insurers. Even in embedded insurance examples where the insurance is purchased as part of the automobile or home sales transaction, there may be an agent of record assigned to follow up and be a human connection point for the customer for future needs and renewals.

Will direct models and digital on-ramps spell the demise of the personal lines agent? Many have been predicting as much since the dawn of the Internet and digital communications. Yet agents are surviving and thriving. They are consolidating for scale to support their own digital capabilities and enhancing their relationships and expertise to stay competitive. While there is little doubt that the percentage of personal lines insurance transactions that go completely digital will steadily increase, there will likely still be agents in the picture for the foreseeable future – even if customers don’t come to the agent first.

This blog entry has been reposted with permission from SMA.