Diversification plus education equals a successful independent agency

Note to independent agents and brokers: Pay attention to the Geico gecko and former “24” actor who is now shilling for Allstate. They are gunning for your business. Either you can try to go head to head against their multi-million dollar advertising budgets, or you can compete by capitalizing on your intrinsic value as a Main Street insurance producer. The better solution is one that allows you to diversify your business and become a “reliable counsel” for all your community’s insurance needs.

Brandweek Magazine reported that insurance advertising was the biggest gainer among business advertising last year, with ad spending jumping 31.3 percent. In fact, insurance was the biggest gainer in the top 15 advertising sales categories, according to Neilson Monitor-Plus, a media monitoring service. The Brandweek article cited Geico as having the highest spending increase, with a 51.3 percent rise to $470.1 million. Next on the list was Progressive, with a 45.3 increase to $354 million. In total, insurance advertising reached $2.9 billion.

A study by Credit Suisse denoting personal lines auto market share from 1992 to 2004 for agency writers versus direct/direct response writers found that agency market share dropped 3 percent in the past decade (from 30 percent to 27 percent), and direct writers decreased 6 percent (from 62 percent to 56 percent). However, direct response writers saw an increase of 9 percent (from eight percent to 17 percent). Quite simply, insurers using multiple distribution methods — selling through agencies, 1-800 numbers, company Web sites, etc. — are the ones growing the fastest. Also, although direct writers saw a drop in market share, they still wrote more than half of all personal lines auto policies.

What those statistics mean is that the independent agency distribution system is going on a crash diet, and the fat that will be trimmed are one-product agencies. In the old days, auto-only operations were fine, and they made producers a nice living. Those days are over.

The answer to the current advertising/marketing onslaught is diversification and education. Consumers are becoming more Internet savvy, and that means better educated shoppers who know what deals are available. People can buy insurance through the Internet or via a toll-free number. What the successful insurance producer does for his or her customers is expand their knowledge base, answer questions that are not covered by a Web site, and point out deficiencies in current insurance coverages.

Did the customer just buy a house or remodel their existing home? Are their kids turning 16 soon, meaning additional drivers would need to be added to the auto policy? Do they have a business? Research is great as long as you know what you are looking for. But most insurance consumers are not experts in all facets of insurance. You are.

Exploring different coverage needs means you need to have additional products available for your customers. It does you no good to point out the need for renters insurance or business owners policies if you cannot sell them. Either you will leave your customer underinsured or push them toward a competitor who will sell them everything they need, including policies now on your book of business. The goal is to keep existing clients for life while increasing referrals and bringing in new business.

To expand your market base, expand your product base. For a motivated producer, that is not difficult. Groups such as the Latin American Agents Association help provide access to company representatives at meetings and conventions, for example. Such meetings allow general agents and insurers to create partnerships that are valuable and profitable to both parties. Ask existing representatives how they can help you to broaden your book of business. The opportunities are out there. You just need to recognize and take advantage of them.

The business is out there. Geico and the Big Three know it, as do “dual loyalty” companies that use multiple distribution systems. Yet as an independent producer fully entrenched in your community, you have a distinct advantage. You know your neighborhood. Maybe you sponsor a local Little League team or are a member of the Kiwanis Club and/or Chamber of Commerce. People see your agency every day, and you have individual contacts with family, friends and neighbors. And they have individual contacts with their family, friends and neighbors, and can make referrals to the “insurance man (or woman) down the street.”

It is human nature to crave face-to-face personal interaction, something that an Internet website or toll-free number cannot provide. People will trust a familiar face faster that they will trust technology. Use this to your benefit. Let your customers — current and potential — know you are there for them and have all the products they need. It is a Business 101 axiom to “give the people what they want.” For the successful producer, giving people what they need should be the philosophy driving the agency. If you don’t, you’d better believe there is someone else who will.