From the Front Lines: Personal Auto

How did you get started at your agency?

I began my insurance career in 1987, right out of college, in a small independent insurance agency in Southeast Missouri. In early 1989, as my fiancée, now my wife, was approaching graduation, we began to look at areas where our job prospects were better. We decided on Columbia, Missouri, and I was hired into my current agency in June 1989 to produce personal lines, life-health, farm and small commercial.

Over the years, changes in ownership gave me the opportunity to become a shareholder in the agency. We are a small agency—typically fewer than eight employees. Our close relationship with our clients has allowed us to thrive. While other agencies often do not view personal lines as a vital link in client protection, we understand just how important these coverages are.

Why personal auto?

I understand and appreciate the importance of personal auto coverage. The industry has, to its detriment, routinely attempted to relegate personal auto insurance to commodity status. Certainly, it is a data-driven product which lends itself well to automated delivery. And as states routinely have financial responsibility statutes that are met with placement of this coverage, the fact that most everyone is required to carry a PAP allows the consumer to think that all policies are the same, and the only thing that matters is the price.

Unfortunately, the industry itself often feeds this perception. Watch television for an hour. How many times is the consumer told their personal auto policy should cost less than what they are paying now—without mention of coverage?

My view is much different. Without a doubt, the situation most likely to result in substantial financial loss for the average individual or family is an automobile accident. Improper coverage or insufficient limits can destroy a family’s financial well-being. As someone who has always taken pride in the relationships I have with my clients, discussing exposures related to personal auto has given me opportunities to place multiple lines of coverages for these people. Understanding how the coverage form works, as well as understanding the market, have been enjoyable endeavors to me.

Biggest personal auto changes over the years?

Technology. Whether in rating, underwriting, policy delivery, processing changes, marketing, or claims, it is unlikely that any other widely held coverage form has been as influenced by technology as personal auto.

When I began nearly 30 years ago, I rated auto risks manually, using an underwriting manual, published rates, and a calculator. You had interaction with underwriters, and completed applications went to carriers in anticipation of them entering data on the company’s end with the ultimate goal of receiving an issued policy. Changes were done in the agent’s system and forwarded for processing to the carrier.

These days, the agent rates inputs the application and necessary changes directly into the company’s system—thus taking on much of the expense at the agency level. If an application hits all the edits, there is little to no underwriter involvement, drastically reducing agent-underwriter interaction. Certainly, much of the influence of technology is good, but some, not so much.

What do you say to a first-time personal auto client?

The same things I say to anyone seeking guidance in managing their risk: They must seek the counsel of a competent insurance professional. I suggest they seek a relationship with an independent agent and not just a one-time use of that agent. Our business is a relationship business. Personal auto coverage is a vital part of the client’s need, but in no way is it the only need they have. We certainly understand that price is relevant, but coverage is the beginning, middle, and end of conversations we have with our clients. There will always be someone to do it cheaper, but the agent should be sufficiently knowledgeable and know there will not be someone to provide coverage more efficiently than what they offer.

Advice for a fellow agent?

Understand the product you are placing. Understand that personal auto coverage differs from state to state and from carrier to carrier. Find carriers that are committed to the market in the states you intend to write and read and understand their coverage forms. Seek good, quality education. There are so many opportunities for an insurance professional to learn the coverage forms they sell. They have no excuses at claim time. Remember, all carriers and all coverage forms are not created equal!

Favorite success story?

We see success every day in our agency. Our measure of success is multifaceted, but I feel consistency is a strong indicator. Any time I visit with a client with whom we have had a relationship for 10, 20, or 30 years—that is a success story. The agent or agency that sees personal auto or personal lines as a whole as some type of short-term or less valuable relationship than other types of coverage they offer is selling themselves—and that client—short. Success is sitting across from a client who, after a claim is paid—quickly, correctly, and within the limits afforded—says, “Thank you, I appreciate the job you do.”

Future of personal auto insurance?

Personal auto coverage will remain a viable income stream both for agents and carriers for the foreseeable future. I am convinced that the agent who markets personal auto as a tool within a complete personal lines risk management portfolio—which includes homeowner, personal umbrella, inland marine, life insurance, disability income, long-term care, and other necessary coverages—will continue to build and maintain a valuable book of business. I hope to see a time when agents and carriers see the value in this line of coverage and cease presenting it to the buying public as a commodity.

Certainly, as the personal auto market hardens—inevitable once technology has squeezed out all but the most razor-thin of margins—losses will begin to outpace premium. At that time, the insurance professional who has sold the value of this vital coverage instead of its price will prove their worth.

Undoubtedly, near-term issues such as transportation network companies, the sharing economy, and future technology such as autonomous vehicles will affect this market. I see those changes as exciting opportunities to continue to do what we do best—help individuals and families manage their personal risk.