Inside the Evolution of the Personal Lines Customer

Fad or trend?

It’s important to know the difference before you invest in sales prospecting.

“Fads come and go, but trends indicate a genuine shift in society,” says Kelly McDonald, diversity marketing expert and author of “How to Market to People Not Like You” and “Crafting the Customer Experience for People Not Like You.” “With a trend, things are not going to go back to the way they were.”

Bottom line? Trends matter. So which ones matter most to personal lines? Two trend categories—demographic and lifestyle—offer the most insight for independent agents. And both can lead you to new business.

Untapped Markets

In Washington, D.C. and four U.S. states—California, Texas, Hawaii and New Mexico—racial and ethnic minorities are now the majority, accounting for more than 50% of the population, McDonald says.

The same shift is happening elsewhere—but have you noticed? As McDonald explains, we tend to remain within our own neighborhood, oblivious to significant transformation happening just miles away. “Drive by any grade school and look at the playground,” she says. “Across every major U.S. market, the majority of the child population is non-white. Fast-forward 10 years and you can imagine how different the face of your own town will look. These kids and their families just might be your key untapped market.”

McDonald tells agents customers don’t mirror the longstanding insurance industry profile: male-dominated, white and older (although the industry is making progress attracting younger, more diverse professionals). “Successful agents have already tapped the market of those who look like them and live near them,” she says. “The key is asking, ‘Who am I not getting? Who are the 10% I’ve never talked to?’ Remember, they have the same insurance needs as current customers—auto, homeowners, commercial, life, health.”

Claudia McClain, president of McClain Insurance Services in Everett, Wash., agrees it’s dangerous to make assumptions based on national statistics. “The best thing agents can do is look into the fabric of their own communities,” she says. “It’s incredibly important to let real numbers influence your decision. Don’t assume you know your town’s true population trends. There’s almost always a surprise.”

In fact, spotting and understanding just one trend in your community can transform your business. “Remember, you’re looking for that one area of focus, that single big opportunity to boost business,” McClain says. “Do your research. Explore. Pay attention to neighborhoods that are going through gentrification.”

That might involve making small adjustments to boost your visibility with the group you’re trying to reach, by taking steps like adding a second language to marketing materials, advertising in targeted publications or offering seminars for specific groups. But McDonald cautions that no agent should jump to marketing tactics before becoming operationally ready.

“That means putting out the welcome mat and making sure you have key programs and services in place before you throw open the doors,” McDonald says. “I know agents who took time to understand the daily realities of their Hispanic market, many of whom had manual labor jobs. These families couldn’t meet during regular 9-to-5 hours, so simply offering after-hour appointments made a huge difference. Add in word-of-mouth recommendations from those satisfied customers, and you can see the boost from such a simple change.”

For McClain, the language barrier has been a significant factor in the agency’s operational readiness. “With the influx of highly educated professionals from all over the world to the tech industry on the West coast, we have many clients for whom English is not their first language,” she says. “Although they are fluent, they prefer email communication. I’d estimate 60% of our online leads come from these clients, so we’ve had to make certain our value is adequately conveyed, even electronically.”

Whichever target market you identify, do what’s necessary to make people feel welcome—but don’t single them out. No population exists in a vacuum, and no one wants to feel patronized. “There’s no need to create material that is distinct for each customer group,” McDonald says. “Reaching out and having a presence is what’s important.”

Lifestyle Lessons

Beyond targeting ethnic or social groups, agents must also consider lifestyle trends that cross demographic boundaries. Some trends can provide a marketing opportunity or sales opening. Are you prepared to serve clients who are…

ON THE GO? Pew Research reports that as of January 2014, 90% of American adults have a cell phone, with 58% owning a smartphone. Additionally, 32% own an e-reader and 42% own a tablet. And the 80million+ members of the millennial generation are the first consumers who knew no digital communication before smartphones.

This mobile technology has empowered buyers to make informed decisions. Today, shoppers search and post opinions moments before or after leaving an agency. They expect on-the-fly payment methods and demand quick response. When a disaster happens, they look to their devices for immediate emergency information.

All that means agents need to provide customers with content optimized for mobile use. Many agents, including McClain, utilize responsive website designs that can configure to the device the customer is using, whether it’s a smartphone, tablet or desktop.

SHARING EVERYTHING? Americans are much more willing to share these days—from cars and bikes to parking spaces and homes. In a 2014 survey conducted by Chubb, more than a third of respondents would rent someone else’s home, a quarter would rent out their vehicles and a third of boat owners would rent out their boats.

New companies are taking advantage of this sharing mentality. The revenue from car sharing, a service offered by companies like Zipcar, is predicted to increase to $33 billion in 2016. Especially popular in large cities and on college campuses, car-sharing services enable users to reserve a vehicle online and then pick it up and drop it off at an assigned parking spot. Users are automatically billed when they return the vehicle.

And sharing can get seriously personal: Travelers can now rent rooms in private homes instead of hotels (airhnb.com) or a parking space at a private residence (parkatmyhome.com).

“All this sharing creates gray areas,” says Bill Wilson, director of the Big “I” Virtual University. “An insurance agent must understand customer behavior to provide solid advice. If you’re sharing vehicles or using space at someone’s home, what’s covered and what’s excluded by a personal policy can get complicated pretty quickly. You have to understand the exclusions and how and when policies apply.”

In her 37-plus years in insurance, McClain says she has never seen clients come up with more creative ways to use their property than in the past two years. “Many times, people aren’t even aware that they’ve created an issue, so agents have to keep open communication to make sure we’re identifying potential risks,” McClain says. “Sometimes, the market has yet to develop specific coverage that might apply. In other instances, we simply need to recommend a different policy to provide enough protection.”

SERIAL RENTERS? The American dream of owning a house with a white picket fence is dated, particularly for people born between 1975 and 1995. In some cases, people are unable to buy a home because of high housing costs and under- or unemployment. In other instances, renting is a choice made for lifestyle flexibility.

Plus, the number of married 25- to 34-year-olds dropped from 55% in 2000 to 45% in 2010—the lowest level since 1862, according to McDonald. For perspective: In the 1960s, more than 80% in this age range were married. Fewer newlyweds means fewer starter homes. In fact, the U.S. Census Bureau shows that more adults ages 24 to 34 are renting than ever before.

Despite the high proportion of renters nationwide, the Insurance Information Institute reports that only 35% of renters have renters insurance. “That points to tremendous business for personal insurance agents in this market alone,” Wilson says. “Chances are likely when you educate renters and they learn their landlord’s insurance doesn’t cover possessions, you’ve got a sale. Renters insurance is one of the industry’s best bargains—vital protection for a pretty low premium.”

LIVING ONLINE? An identity is stolen every three seconds, with children targeted 35 times more often than adults. Social networking has increased cyber-bullying, potential defamation and “e-personating”—criminals faking a social networking profile.

For agencies, cyber threats provide tremendous service opportunities, including identity theft protection. It’s important to review with clients what is and isn’t covered under a homeowners policy—most don’t cover personal liability. And certain online behavior might be excluded, even with a personal injury endorsement or umbrella policy that includes personal injury.

“When you consider the growing connectivity between daily life and the Internet—from smart TVs to security systems and thermostats like Nest, which link online—you begin to grasp the cyber risks we all face,” says Allen Anderson, chief underwriting officer of personal lines for Selective Insurance Company of America.

Playing to Your Strengths

Watch, research and understand the implications of each trend on the products and services you offer. “You have to be open to the changes coming,” McDonald says. “Ignoring them is really not an option if you want to grow your agency.”

Anderson adds that trends play to the strength of the independent system.

“Focusing on customer lifestyles—taking the time to understand the nuances of daily life—helps to uncover risks and point out exposures they never even considered,” Anderson says. “That’s where you prove your value. That’s where you create a nearly limitless sales base, one that has actually been there all along. You just needed to see it.”

Amy Skidmore is an IA contributor.

SIDEBAR: Coverage Evolution

What if driverless cars become common by 2020 and account for the majority of cars on the road by 2040?

“When electric bikes first appeared, it took more than five years to find a market that would cover them,” says Claudia McClain, president of McClain Insurance Services. As of July 2013, units sold annually in the U.S. topped 159,000—double the volume posted a year earlier.

“Turns out a motor, no matter how small, excludes a bike from standard homeowners or renters policies,” McClain says. “We needed and helped create a whole new product. Now we have a dedicated landing page on our website to promote this specialized coverage.” —A.S.