Reclaiming Customer Service—and Reclaiming Personal Lines

A presentation in late 2010 by Robert Hartwig, president of the Insurance Information Institute, included a passage indicating the historic percentage of the personal lines market written through the independent agency system. The graph is rather dismal, showing not only a substantial shrinkage of market share, but a potential recent acceleration in lost market share.

What is wrong with the personal lines sector of the independent agency system? First, agents are no longer providing the level of customer service they should, and are instead allowing companies to do so, leading to a devaluation of agencies. Secondly, the ability to brand the agency name is disappearing along with agency service. Third, agents are allowing the Internet to be claimed by the direct-to-the-consumer (DTC) companies.

Thirty years ago, all satisfaction of customer needs emanated from and culminated at the independent agency. This agency-centric service process created value in the eyes of the consumer for the local entrepreneur. When agents allowed service to be usurped by their companies, they allowed their primary source of value to be transferred from agency to company.

Examine the key customer functions of quote, policy issuance, endorsement issuance, billing, collections, renewals, ongoing questions and claim initiation. Thirty years ago, the agency quoted, often issued the policy, billed and collected money from the customer, answered questions, sent out renewals that were created at the company and then sent to agents, answered all customer questions and most importantly, claims needs were initiated at the agency (with many agents having some draft authority). Agents created and customers perceived value. Today, the companies perform many of these functions, label it as the “ease of doing business” and ultimately receive the value.

As service is transferred to the company, agency branding capability is destroyed as a result. Agencies historically branded their agency through the frequent opportunities they had to “touch” their customers when performing customer service. When everything emanated from and culminated at the agency, the customer came to know the agency brand.

40,000+ local independent agencies, performing local service and scoring localized touch points can each effectively microbrand with their local customers and within their neighborhoods.

The third major problem is that agency companies (and agencies themselves) seem to think that if a customer utilizes the Internet to search for an auto insurance quote, then that customer must not want an agent. This is nonsense.

The Internet is a tool to meet customer needs; it is part of our complex world of building human relationships. The Internet is not utilized to vote against agents, but to search for information and satisfy human needs. It can become an effective tool for everyone.

Agents must begin to solve these problems by reclaiming customer service. They must build on their customer service to brand their agency, and they must develop interactive websites capable of providing all elements of interactive service so that all sales and service emanates through and culminates at the agency website.

Of course, changes must also take place at the company level. Carriers must re-engineer themselves for low overhead. They must recognize the strength of the agency system is service, and that customer service done locally is superior. Companies must build the technology to move all customer service back to the agency level and provide technology that works through, not around, the agency interactive website. To recreate an effective personal lines independent agency system, companies must redesign it to reach DTC cost structures.

Customer’s needs are the same today as they were 50 years ago. They certainly have a need for low cost and efficiency, but they also have a need for accessibility, trust, accountability, the personal touch, friendliness, knowledge and compassion. Companies must recognize their centralized strategy for service is inferior to the capabilities of a neighborhood service agent. The company presence should almost be non-existent within a strong agency system.

Over the last 30+ years, the independent agency personal lines system has lost its value compass. Today, the market forces of customer needs and technology will increase the power of the neighborhood. The independent agency system is wonderfully positioned to return to its roots—and be a force in personal lines.

Steve Doucette (steve.doucette@greatnorthwest.com) is the founder and lead executive of Great Northwest Insurance Company and of Hawaiian Insurance and Guaranty Company.