3 Ways to Compete in Tomorrow’s Personal Auto Market

Some industry watchers believe the independent agent has no role to play in the personal auto market of tomorrow.

But according to the latest Big “I” Market Share Report, the independent agent channel maintained 31% of the $200-billion premium personal auto market in 2015.

“Independent agents have done a really good job as a group hanging on to market share in personal auto over the past few years,” says Amy Shore, president of Property & Casualty Sales and Distribution for Nationwide. “We all know change is coming—the personal auto market is going to get smaller. But is that going to happen in 2025, 2030 or 2040? We don’t know.”

In the meantime, here are three creative ways to make sure you stay competitive as the personal auto market continues to evolve:

1) Give clients more control. Shore says today’s personal auto market offers some “real opportunity for agents to differentiate themselves with customers, because today’s customers are more open to doing new and different things.”

In particular, “we hear more and more from customers that they want to have more control of their rate,” says Michael Grove, senior vice president, senior product manager at Safeco. “Customers want products that are more reflective of how they actually drive, rather than products that are based on a bunch of variables they may or may not understand.”

The most obvious way to give your clients more control over their personal auto insurance experience is to introduce them to a usage-based insurance (UBI) program. Karen Bailo, agency distribution business leader at Progressive, notes that consumers in the direct channel utilize UBI more heavily than those in the agency channel—which is a big opportunity for you to sell more policies.

Progressive, Safeco and Nationwide all offer proprietary UBI products that monitor and track driving habits by way of a plug-in device or mobile app. Although this “is an area where agencies have been hesitant to participate,” Bailo says, “by not participating in these programs, agents are missing out on big discounts for some of their customers.”

“Agents sometimes shy away from even asking the question because they just assume everyone’s going to say no,” Shore agrees. But in customer focus groups, Nationwide has found that up to 50% of drivers are open to using UBI to earn a lower rate—and according to Shore, the average customer who signs up for Nationwide’s UBI program earns a 22% discount at their next policy renewal.

David Arango, senior vice president of Property & Casualty, Personal Lines for Nationwide, notes that some discounts go as high as 40%—a number he says is “justified” from an underwriting standpoint. “That is a huge discount amount, but that goes to show you that driving behaviors are extremely predictive of risk.”

Note, too, that UBI is especially appealing for millennial and Gen Z drivers, who “have grown up being tracked on their smartphones,” Arango says. “We’ve seen across-the-board utilization of our UBI product, but clearly, the younger generations are more comfortable with having their driving monitored in exchange for the opportunity to get a lower rate.”

On that note, if you have clients with teenagers, UBI is a great way to get their attention, too. “Adding a youthful driver is a significant life event in a customer’s household, and using this telematics data allows parents to see how their child is driving,” Grove says. “They can track things like hard brakes and rapid acceleration in order to help their kids become better, safer drivers.”

2) Take advantage of carrier technology. Why do so many consumers flock to direct writers for personal auto insurance? Besides cheap prices, much of the appeal lies in tech-savvy tools that enhance convenience and ease of doing business.

Not many independent agencies have the resources or infrastructure to boast the same capabilities. But Grove believes that by taking advantage of the tools available through their carrier partners, independent agents can easily compete with the level of technology-related convenience offered by not only directs, but also up-and-coming InsurTechs.

“The independent agent needs to evolve, but as carriers, we also need to give agents those tools,” Grove explains. “That way, if that customer says they’re getting a quote from GEICO, the agent is able to offer the same digital capabilities while also leveraging all the knowledge and expertise the agent has to sell.”

Whether that means text-to-pay billing options, online portals for review of claims status or downloading an ID card, or some other form of mobile self-service capability, “today’s customers want to do simple transactions for themselves,” Shore says. “If I’m an agent and I know my staff is going to be able to get my customers enlisted in taking advantage of those options from carriers, that allows them to then in turn focus on the interactions with customers that really matter.”

“We all have to find ways to work more efficiently,” Bailo agrees. “Encouraging customers to go paperless, self-service online or use a mobile app for ID cards or making simple payments can help free up time for an agent to invest in new opportunities and get back to doing what they do best: providing customers with personalized counsel and service.”

3) Leverage your agency’s specific operating style. Shore believes personal lines in general remains an area of opportunity for independent agents—but only those “who do it well,” she cautions.

Different agencies have different operating models. “Maybe they succeed by focusing on nonstandard auto and being a low-cost, high-transaction non-standard auto agency. Or maybe they focus only on high net-worth customers,” Shore suggests. “It really depends on how that agency is wired. Agents need to honestly assess the operating model of their agencies and the capabilities of their staff, and that should dictate who they go after.”

Of course, no matter your operating style, “you really can’t afford to be overly dependent on any single line of business for your revenue stream,” Shore points out. “Having your eggs in lots of baskets always makes sense. But I wouldn’t be afraid of continuing to focus on personal auto. I think we still have at least a good 10-year run on auto being the largest portion of p-c premiums for the industry.”

Jacquelyn Connelly is IA senior editor.