How independent agencies and insurers can build better relationships
In a July 2021 report “Optimizing the Independent Agent Experience,” the research and advisory firm Celent explores the evolving relationship between carriers and independent agencies in a time of massive industry change. Based on a survey of 225 independent insurance agents in May of 2021, the report focuses on what agents want from carriers and what are the most important factors when agencies choose which insurers to work with.
Here are our top findings and key takeaways:
1. 76% of agency employees would send more business to carriers that improved technology and were easier to work with.
While technology is clearly important to agencies, it was not listed as the top priority when it comes to working with an insurer. Findings from the report show that the top two factors when choosing a carrier are price and ease of doing business.
That said, technology and modernization strategies certainly help control cost and provide more opportunity for more accurate and faster communications and transactions—and in turn, make doing business easier.
It’s worth noting that the third-ranked factor was “relationship with the carrier,” beating out other factors such as good claims and risk management services—a clear sign that insurance remains a business centered on relationships across the ecosystem.
2. The importance of compensation from carriers varies among generations and agency size
While commissions fell low on the list of factors when choosing a carrier, the importance of compensation and preferred agent programs was high for particular groups:
Principals—Commissions and preferred programs were most important to agency principals, with approximately 80% listing these two factors as key to the carrier relationship. For producers and CSRs, the importance of compensation was markedly lower.
Midsized agencies—Compensation was ranked higher in importance for midsized agencies with revenues between $5 million and $25 million. The report concludes that large agencies likely assume they will receive attractive compensation programs, while small agencies likely assume the opposite. Midsize agencies, however, are most likely to aspire to preferred programs and may not qualify year over year—compensation stability is key.
Gen Z—The younger the generation, the more important compensation is. Across all generations, Gen Z rated the importance of commission and bonuses the highest and rated preferred programs relatively low compared to Millennials and Gen Xers. On the other hand, the oldest generation—Silent Generation born 1925-1945—ranked commission and bonuses the lowest among all generations, preferring perks over cash. Gen Z is clearly drawn to cash.
In all, insurers looking to improve their relationships with independent agencies may want to focus on compensation programs for younger principals at midsized agencies, as they are likely to continue to value cash over other perks. And as the older generations continue to retire, these younger principals will be key to positive relationships between carriers and agencies.
3. Top insurers provide the most ease of doing business
As mentioned earlier, price was the top factor for agencies selecting which carriers to work with. However, when asked how their top insurers are performing, the top two performance factors were relationship with the carrier and ease of doing business, with 88% and 87% ranking those two factors a 4 or 5 on a scale of 1 to 5, respectfully.
This data proves that while agents say price is the number one determinant of which carriers to work with, relationship and ease of doing business actually beat price. Agents are not placing business where the best price is; rather, they are placing business where it is easiest and where they have the best relationship.
4. Portals reign supreme
When asked what technologies are most important to agents, 86% say an easy-to-use carrier portal is a “have to have” or “really important.” This does not seem to be news to insurers, as data shows that in 2021, insurers are investing in replacing or upgrading their portals.
This begs the question: What makes a good portal? Agents were asked to rank the importance of 18 technology features. The feature with the highest “have to have” ranking was that the portal supported all lines of business, with 29% of respondents saying they would not place business without it.
Following closely was “easy help”, with 28% declaring it a necessity for doing business, and this feature was the highest-ranked “really important” factor, at 60%.
Other highly ranked features were the ability to support all transaction types that support all lines of business, followed by the ability to download into an AMS, then reporting tools. Survey data also indicates that receiving multiple quotes from the same carrier is more valuable than a comparative rating tool. This means agents are more interested in seeing a side-by-side comparison of different policy limits from the same carrier to provide a range of choices to the policyholder.
As direct-to-carrier competition continues to grow, the importance of a strong portal that provides independent agents multiple quotes from the same carrier makes sense. Simply stated, agencies want the ability to complete their tasks quickly and with as few keystrokes as possible—and effective portals are crucial to their relationship with carriers and the agent’s ability to quote competitive rates to end-insureds.
A look into the future
The overall conclusion from Celent’s study is that insurers must continue to innovate in order to strengthen agency relationships and drive production in a highly competitive market. There is ample opportunity and incentive for carriers to improve the agent experience and reduce costs as channel complexity grows.
Meanwhile, the agency landscape is also changing, with younger, more tech-savvy principals and staff. Carriers must continue to assess their capabilities and ensure they are delivering the functionality agencies believe are most important.
Agencies expect good prices, but value relationships more. Agencies are interested in carriers who innovate, deliver exceptional claims services, provide ease of doing business, and also take into account factors such as compliance, compensation, and onboarding.
Insurers must make it easy for agents to place business and must align with capabilities that support prompt and efficient agency transactions. These conclusions prove that insurance is an industry with a lot of potential and a bright future supported by good relationships and good tech.
Celent’s survey and report were produced in partnership with Vertafore. The analysis and conclusions are Celent’s alone, and Vertafore had no editorial control over report contents.