How to Shift the Personal Auto Conversation Away from Price

“It’s how you know you’re getting a great deal on car insurance.”

“15 minutes could save you 15% on car insurance.”

“7½ minutes could save you on car insurance. Welcome to the modern world.”

These are just a few of the price-centric slogans that bombard auto insurance consumers and prospects every day.

In a market ripe for disruption from not only direct writers slashing prices but also newcomers like Goji, Coverhound and Wal-Mart’s, independent agents must change their strategy in order to maintain a competitive edge.

“If the value proposition is price, the market’s efficient—it’s going to find something more efficient than you,” says Cody Cook, vice president and product manager of personal auto at Erie Insurance.

Fifteen years ago, “you had to go to an agent to get a price and basic information about the products because you couldn’t get it somewhere else,” says Brandt Minnich, vice president of marketing at Mercury. “Today, I can go on multiple sites and find out all kinds of information about auto insurance, and I can find dozens of prices right away. So that’s not the winning piece for an agent anymore. The reason you need an agent is to decipher through all the noise and provide the best options for what coverage and price makes sense for you.”

In the foreseeable future, pricing will remain highly competitive for personal auto—and consumers will continue seeking out easier ways to save. That means in order to maintain market share, independent agents must shift the focus of the sale away from the price point.

Auto Pricing Trends

In the last 12-18 months, “there’s been a little bit more activity in terms of rate increases in the auto line,” Cook says. “I don’t expect that to change, though I do expect there to be maybe a little less rate activity in 2016.”

“A number of carriers have cited increasing frequency trends, and we’ve seen similar things in our data as well,” Minnich adds. “I expect to see some rate increases this year, probably in the low- to mid-single digits in aggregate. It’s not going to be off the charts, but it’s going to be a noticeable increase—probably in the 4-5% range.”

Karen Bailo, agency distribution business leader at Progressive, says the company’s customers saw rate changes of about 4% in 2015 in response to loss trends and future predictions. “A likely result is some modest rate adjustments next year,” she says. “That will vary by state—we’ll see some states with modest adjustments up and some states with modest adjustments down.”

Long term, however, Bailo anticipates the industry’s underlying macroeconomic drivers remaining “relatively consistent,” she says. “As we think about all the changes in vehicle use, OEM technology, population growth and more, there’s certainly an indication that frequency of auto accidents might decline due to enhanced vehicle safety features. On the flip side, severity for each accident is going up due to more expensive onboard technology in newer model cars.”

Moral of the story: “The price can change,” Minnich says. “Price is a very important component to people’s decision making on buying insurance, but for an agent to have success, they can’t rely on just having the lowest price. If all you do is say, ‘I can save you $10 a month,’ as soon as the customer finds some other means or mechanism to save $10 a month, what reason would they have to stay with you?”

Moving Beyond Dollars

Trying to compete with Geico and Esurance based on hunting down the lowest price tag—a strategy that requires you to become what Minnich calls a “price peddler”—is a losing game. “The best agents are not quoting platforms. That activity can be automated,” Cook says. “If you’re an agency reporting based on price, your customers can find that somewhere else.”

Instead, position yourself as a trusted insurance partner who not only offers competitive pricing and competitive products, but also articulates your value in laymen’s terms. For most agents, that means delivering a customized insurance buying experience for each customer.

“The growing independent agents that are successful, they’re visible, they’re trusted and local, they’re people that can be seen in their community, they understand product differences,” Cook says. “That requires them to know the person. These aren’t just widgets—they’re people with preferential differences, and they communicate on different platforms.”

“Consumers today have expectations of interacting with their providers in multiple ways,” Bailo agrees. “I don’t think it’s really a matter of targeting consumers that want to interact online vs. those that don’t. There’s an opportunity for agents to think about their customers a little differently.”

Bailo says the smartest approach is one that’s “omni-channel”: Today’s customers “prefer to work with an independent agent, but they prefer to work with that agent how they choose,” she explains. “Sometimes they want to pick up the phone, sometimes they want an app, sometimes they want to go online. It really depends on the customer and the circumstances. As technology is evolving, agents have access to more ways to meet their customers’ needs.”

“Some want texts, some want calls, some want letters—it’s a complex world and we all consume media differently,” Cook agrees. “You can’t be all things to all people, but try to communicate on those different platforms that are common and at least be flexible enough to meet the customer where they want to be met. Agents need to be on multiple platforms with a consistent message, not just available to the point of sale.”

An “if you can’t beat ‘em, join ‘em” philosophy isn’t going to work for personal auto because price isn’t the independent agent’s value proposition. It never has been. “Insurance, even personal auto insurance, is more complicated than the average American truly understands,” Cook says. “The advice the agent gives, the breadth of product offerings they provide and sell to the customer—as long as those value propositions exist, it’s going to be difficult to automate the things an independent agent provides.”

Jacquelyn Connelly is IA senior editor.