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Why Predictions That InsurTech Would Replace Agents Have Flopped

Remember back in 2016 when the independent agent was called “a dead profession walking"? Here's why independent insurance agents are not only still around, but thriving.
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why predictions that insurtech would replace agents have flopped

I am an independent insurance agent. And in case you haven't heard, I'm still here.

Not only am I still around, but I'm thriving. I am selling more policies, helping more consumers and driving more premium revenue than ever.

Remember back in 2016 when the independent agent was called “a dead profession walking"? I recall not being able to read an insurance publication without being bombarded with the message that “the insurance agent is dead." Then, “InsurTech" moved the doomsday clock to mere minutes to midnight as rising direct-to-consumer technology was poised to ravage my book of business. My clients would jump ship by the dozens, lured away by the flawless direct customer experience that was impending. I was caught in the crosshairs.

That year, Carolyn Bronson of Insurance Business America wrote an article, which explained the “seven reasons the insurance agent is a dead profession walking." Again, the piece centered around emerging direct-to-consumer technologies. The piece explained how technology would “transform the sector to favor online brokerages and direct-to-consumer sales," and continued by comparing “insurance purchasing to the transition of travel agents to online sites like Expedia or Kayak."

Yes, I would certainly compare protecting your most important personal and professional assets to booking a boozy beach trip to Mexico, but I digress.

This mentality was blindly thrust into the market by 100% digital InsurTech carriers such as Lemonade, which was featured in a Forbes article published in May 2019, “First, Fire All The Brokers: How Lemonade, A Millennial-Loved Fintech Unicorn, Is Disrupting The Insurance Business." In the article describing the creation of Lemonade, founders Daniel Schreiber and Shai Wininger were described as “holed up in a room with a whiteboard" where they sketched out the concept of being “online only, no paper or insurance brokers." Then there are the “thought leaders" who have never bound a single policy—the concept was significantly pulled back.

When direct distribution struggled, the narrative flipped and the value of the independent agent distribution model was put on full display.

In 2016, the InsurTech movement was based on the idea that digital broker platforms could easily shop for coverage, replacing any human underwriting or decision making and return a recommended coverage package. Sounds great in theory, right?

However, what was actually offered to the market was quite different. The technology left insurance customers to comb through pages of manual data entry fields, only to find a menu of meaningless rate indications from multiple carriers at the end of the rainbow. Upon selection, the unsuspecting shopper was then dumped on an insurance carrier's website, often prompting them to start the data entry and quoting process from scratch. This less-than-stellar experience was topped off by an offer for a bindable rate 2.5 times higher than the initial indication. The ironic part is the people behind this process were the very people preaching about seamless customer experience. Seriously.

In sum, these early broker-replacing options provided consumers with little more than an incomplete process of little value and significant frustration. It proved that not only were independent agents necessary for distribution, but technology between carriers and systems wasn't ready for a complete overhaul of the agent-consumer relationship.

This brings us to a culmination of sorts, a shift in professional mentality where the independent insurance agent fits within today's ecosystem. Undoubtedly, technology will break through as it always does. But the days of fragmented and disappointing direct online shopping experiences will be replaced by platforms that have the capabilities to rate and bind products within a single interface.

Yet, within this reality comes a rebirth of the agent, a shift in the paradigm that will create value in other facets of the chain.

In an article entitled “Will Technology Replace Insurance Agents?" Lev Barinskiy wrote about how chatbots, artificial intelligence (AI) and machine learning are “changing the landscape of the insurance industry."

Barinskiy discussed how “some in the insurance business remember the days when carriers relied on an agent's gut feeling when it came time to determine risk." Many things have changed since then, with carriers now relying solely on machine-learned pricing models and AI underwriting metrics to dictate appetite and price.

“While agents continue to interact with clients via phone, in person and over the internet, carriers are experimenting with technology to direct interaction with clients," Barinskiy continued.

This statement certainly brings up a multitude of thoughts, including ownership of client expirations. One very large advantage that independent agents have is direct control over the distribution point: the customer. This has created a brick wall between a client and carrier on what can and can't be done, which means the independent agent is in the driver's seat.

Until the independent agent distribution model can be more accurately replicated by technology, agents can dictate the customer experience from end to end, carrier to carrier. Broker-friendly technology seems to be accelerating with venture capital backing the trend. But arming agents with tech? Five years ago, you would have thought that the idea was absurd! Doesn't it seem like a complete backtrack of the “dead agent walking" narrative?

What will the independent agent's weighted value be in 2022? The answer depends on the segment of business. While I disagree with industry folks who say the personal lines market is rapidly being commoditized, the middle market commercial is a different animal—one that requires greater human involvement. However, InsurTech is not yet fully capable of digitizing that need. But by and large, my feelings remain the same regarding all lines of business. Consumer buying habits are very hard to shift and it's human nature to seek out a specialist to handle things in our lives that we either know nothing about, don't care to know anything about, or most commonly, don't know and don't care to know about. Until technology can do a thorough job of educating consumers on complex risk structures of both personal and commercial insurance portfolios of consumers, agents will be alive and very much well.

In an August 2021 article featured in PropertyCasualty360.com, “The Rise of Insurtech Does Not Mean the Fall of Insurance Agents," Ken Gregg argued that “it's important for an element of human touch to be a part of the insurance formula. Technology can help make the customer journey a smoother one, but insurance agents are here to stay." Gregg noted that “insurance as a service" has been around since medieval times and the industry has succeeded in part due to the benefits of using agents to reach customers.

This is an interesting point of validation. If we look at raw facts, the only real lines of business that have seen successful uptake on a direct-to-consumer technology platform have been simple, low revenue coverage lines, such as renters and small commercial insurance, which most agents would gladly pass on. Gregg's conclusion was “the future is hybrid"—and I wholeheartedly agree.

The market has dictated the desire for a “technology when you want it, human touch when you need it" insurance experience. There are more than 83 million millennials in the U.S. according to U.S. Census Bureau—and 45% of them own a house with 78% of non-homeowners looking to buy a house in the next nine years, according to Liberty Mutual.

Millennials were once thought of as the generation that would ultimately kill the independent agent distribution model. But the desire for an independent agent is still alive and well. According to Liberty Mutual and Safeco's Agent of the Future study, “Understanding Millennial Insurance Consumers," 23% of millennials prefer the independent agent channel over alternative distribution.

That said, there is work to be done. Agents must not be satisfied with the current technology solutions within their agencies. The tape that is holding together an ecosystem of outdated technology and InsurTech solutions is cumbersome at best. Many traditional technology providers have been slow to engage with outside solutions for fear of needing to abandon the all-in-one branded platform approach they've invested in so heavily.

Further, data flow controls and deep implementation requirements by legacy systems have caused an increasing disdain by independent agents, some of whom are going to such lengths as to build their own systems to fight the technology blocks.

We may as well call broker InsurTech “TimeTech" because that's what it'll take to automate and streamline the entire independent insurance agent customer lifecycle—from client data intake to rating and marketing accounts to quote presentation, policy binding and new client onboarding. Then, we'll have to move on to the most underserved digital piece of the process: client servicing, cross-selling and retention efforts.

Digitizing these workflows will finally release independent agents from the ball and chain of wasted time, money and resources. No longer will agents be held captive or be able to hide behind time-wasting processes, such as manual data entry and paper pushing.

TimeTech will produce an armed and dangerous independent agent, left with nothing else to do but market. Tech-enabled agents will become irreversibly embedded within their spheres of influence while offering a digital experience that will rival any direct digital broker.

At the end of the day, you know what's behind those digital agencies? A human being picking up the phone to follow up on an inbound lead!

Ryan Mathisen is CEO of Glovebox.

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Wednesday, February 2, 2022
Technology