Insurance agents need to add products to survive

By  Mark Williams

The Columbus Dispatch Sunday December 1, 2013 8:43 AM

The days of insurance agents making a living by selling just auto and home insurance might be coming to an end.

Just as travel agents have suffered from the arrival of online travel sites, insurance agents are finding that more drivers turn to the Internet to shop for insurance or call an insurer’s toll-free number â€" instead of an individual agent â€" for help.

Nationwide Chief Financial Officer Mark Thresher said the insurer is telling agents who sell Nationwide home and auto products that they need to sell other kinds of insurance, too, including business policies, plus financial products such as annuities and mutual funds, if they are going to thrive.

“They need to focus more on financial services, commercial and more-complex individual products,” he said.

Half of Nationwide’s new auto policies now start online, and renters are turning more to the Internet for insurance as well, he said. That leaves homeowner policies and umbrella policies as ones where consumers are more likely to need advice from an agent.

But Nationwide is not the only insurer seeing the shift.

“It’s become more and more difficult for independent agents to compete for consumers who prefer to purchase insurance via the Internet,” said Jeff Rieder, president of the Ward Group, a Cincinnati consulting and research firm.

“For many independent agents, they risk becoming irrelevant, and that’s the point Thresher is trying to make,” he said. “They need to find other services that they can sell to the consumer.”

Agents like the personal lines of business, focusing on homes and cars, because the business is more predictable, consumers need coverage regardless of what the economy looks like, and customer-retention rates remain high, he said.

“For agents, it’s a very predictable source of revenue,” he said.

A recent report by consulting company McKinsey & Co.’s insurance practice obtained by insurance website PropertyCasualty360.com noted the effect that the Internet has had on insurance agents.

“Where agents once served as the front line in risk selection and pricing, advances in predictive models are making this role obsolete,” the report said. “The agent was once the face of the insurance brand; now, customers increasingly use multiple channels to connect with their carrier.”

The report noted that travel agencies that survived the Internet age have become bigger and more successful. The same figures to happen to insurance agents, it said.

“The local agent channel is undergoing tremendous change, and not all agents will survive the transition. Those that do, however, will likely be well-adapted to thrive in the new distribution environment,” according to the report.

Thresher said Nationwide might end up with fewer locations, but those that are left will be bigger and more successful, with the ability to sell a broader range of insurance and financial products.

Rieder said the problem with selling financial products in addition to the more-traditional types of business is that it can be difficult for agents practicing alone or in small agencies to have the broad and deep expertise to sell the full range of offerings.

John Gates, principal owner of the W.E. Davis agency in the Brewery District, said the agency always has tried to sell clients an assortment of insurance products to meet their needs.

The agency sells property-and-casualty insurance needed by most consumers, plus commercial, life and health insurance.

“You have to treat clients in a holistic approach. You can’t just sell them auto insurance,” he said.

“Tell me about the risk you have and let me insure them the best possible way.”

The trend toward the online purchase of insurance is here to stay, said Kyle Anderson, spokesman for State Auto, which counts on independent agents to sell its insurance products.

“You can’t ignore it,” he said. “We acknowledge that there is good demand and expectation to that kind of business from the Internet, phones and tablets.”

Still, the company intends to keep its relationship with independent agents who the company believes can provide policyholders with the kind of expertise they need to ensure they get the proper coverage.

“People do want someone they can talk to,” he said. “It’s not a decision to be taken lightly.”

mawilliams@dispatch.com