A Happy Distribution Force Equals Increased Carrier Profitability

Independent agents represent a “significant growth engine” for insurers that understand how to build strong relationships with their distribution force, according to a new J.D. Power study. But there is room for improvement in the agent-carrier relationship. 

According to the inaugural J.D. Power Independent Insurance Agents Satisfaction Study developed in alliance with the Big "I", carriers with the highest satisfaction rate among agents are able to offer competitive agent commission while maintaining expense ratio discipline—and are ultimately more profitable.

But overall, property-casualty carriers are falling short of agent expectations. The new study shows that among agents, overall satisfaction with carriers is just 696 on a 1,000-point scale for personal lines and 686 for commercial lines—among the lowest scores for business-to-business relationships across all industries in J.D. Power satisfaction studies.

“Consumers tend to be fairly happy with their p-c carrier, and the fact that agents were not was the biggest surprise of the study,” says Greg Hoeg, vice president, insurance practice at J.D. Power. “Or maybe it’s not a not a surprise, because agents are responsible for their clients, and they expect carriers to honor their commitment. It’s a credit to agents that they are being vigilant and ultimately a good filter in improving the end client’s satisfaction with carriers.”

The study examined many topics from the agent perspective, including the quoting/underwriting process, claims process, policy servicing, communications, commissions management, product and service offerings, and insurer risk appetite.

“We have what we call key performance indicators (KPIs)—best practices that have the greatest impact on performance—and insurers tend to meet them at a low frequency in this study,” says Jessica McGregor, strategy and growth director, global insurance practice at J.D. Power. “The study looked at KPIs for both personal and commercial lines, and there were common themes [in agent sentiment] in both areas.”

For personal lines, the top three agent KPIs include factors in product offerings and risk appetite, quoting, and commission. Agents said it’s most important for carriers to be “completely flexible during the design/onboarding of client policies”; the ability to “easily find support information on a carrier’s website to help sell a policy” came next, followed by “total compensation is reasonable to reinvest into the business and achieve a reasonable ROI.”

In commercial lines, agents also ranked flexibility during the design/onboarding of client policies as the most important factor in carrier satisfaction. Having clients “‘often’ or ‘sometimes’ qualify for a program” came in second, followed by the ability to “easily find support information on a carrier’s website to sell a policy.”

What can carriers do to improve their relationships with agents? In line with the results of the KPI rankings, J.D. Power notes that independent agents want p-c insurers with broad risk appetites. Agent satisfaction is lowest when an insurer only offers standard options for policies, scoring 643 for personal lines and 634 for commercial lines. When insurers offer standard coverage but also accommodate specialty risks, overall satisfaction scores jump to 756 for personal lines and 708 for commercial lines.

In addition, the study found that personal lines insurers with the highest commission ratios also have the highest satisfaction among independent agents and maintain the most profitable operating ratios.

“Companies that are willing to compensate well are picky about what agents they have,” Hoeg says. “If you’re going to pay a high commission, you’re a demanding company.” But the study notes that fostering a trusted adviser relationship between agents and carriers gives carriers access to a relationship with the agent’s most valued customers and potential customers—thus improving the carrier’s bottom line.

Overall, Hoeg notes carriers need to focus on ease of doing business with agents to increase sales volume, customer retention and overall satisfaction. “The more you make an agent work to find out things on behalf of their customer, it takes time away from the carrier’s employees and the agent,” he says.

On the flip side, Hoeg points out that agents sometimes make it harder on themselves by not being oriented with a company’s way of doing business, suggesting they change the way they look at a carrier’s digital interactions with consumers. “Agents are still viewed by customers as the expert and the trusted adviser,” he says. “Agents shouldn’t view digital interactions that carriers have with consumers as competition—it’s a tool to help them be more effective in their role.”

Top-performing carriers in the study for personal lines were Auto-Owners Insurance (795), followed by Safeco (742) and Travelers (700). Liberty Mutual performed highest in commercial lines (714), followed by The Hartford (710) and Travelers (705).

Katie Butler is IA editor in chief.