A funny thing is happening on the way to the future.
As consumers’ and carriers’ behaviors, attitudes and expectations have been changing, independent agents are evolving to better serve both customers and carriers.
In terms of customers, agents who have been lectured for years about adding value, are positioning themselves to offer products and services their customers want when and how they want them. In terms of carrier-agency relations, agents are maneuvering to where they may now have the upper hand and some carriers need them more than they perhaps ever have.
Heading further into the future, experts say the lines between agency types will continue to blur and brick-and-mortar agency operations may become less important. At the same time having a local brand, including a digital presence in a community and in targeted markets, is so important and will perhaps become even more so in the years ahead.
As they head into the future, agents are positioned to become even stronger as they continue to evolve to meet the needs of customers and carriers.
The main point about the future is that the power balance in the industry has shifted, with insurance carriers now relying much more heavily on distribution than in years past when underwriting was king.
Dennis Chookaszian, University of Chicago professor and the former CEO of CNA, analyzed the carrier-agent shift at an Insurance Journal sponsored conference in July 2018. “If you look at the profitability of an insurance transaction today, maybe 40 percent or close to 50 percent goes to distribution, [while] the underwriter gets 30 to 40 percent and service has come up to maybe 5 percent to 10 to 15 percent,” Chookaszian said.
That’s a big shift from 40 to 50 years ago when carriers derived most of their profitability through positive underwriting results. “Today, the core competency has shifted primarily to distribution and control of the customer,” he said.
He believes large commercial brokers in particular command the power in today’s industry quite simply because they control the customers.