Agents & Brokers: Evolution, Not Disintermediation
Since the explosion of the Internet, there has been a consistent underlying murmur about the disintermediation of the insurance agent/broker (producer). The fact is, there will generally always be a need for producers of one form or another, but the roles producers play will continue to evolve over time.
The role of the producer will demand higher level of skills than what producers in the past have had to develop; this is true across lines of business, life, annuity, health and property/casualty.
[Previously from King: Program and Small Commercial: Flight to Profitable Safety and Growth?]
While it's true for more commoditized products, such as simplified life, auto, home, BOP, etc., the sales model will skew more to a direct business than producer-driven businesses, and there is an increased need today for producers who can bring expertise to the table that the client does not (or want to) possess.
Property/casualty: who manages the risk?
In the property/casualty market, commercial clients may be elevating risk into the C level with Chief Risk Officers, but they are, often as not, trying to keep their staffing to a minimum and much of the risk being overseen is operational risk as opposed to transferable risk. Commercial clients are relying upon their producers to identify what can be done to help the organization lower its overall risk and finding new ways to transfer what can't be mitigated. For larger clients, they rely on their producers to bring expertise in specific areas along with skills on how to balance a very broad portfolio of risk, plus find the most cost-beneficial markets for placing risk. For smaller insureds, lower middle-market, and Main Street accounts, the producer is the de-facto risk manager.
The rise of cyberrisk is a great example of the difference between large and small markets. When does a client need cyberrisk and what can be done to manage this risk overall? While all producers are learning at least the basics, large brokers are developing practices around this area. Smaller agents are having the roughest time getting up to speed on new risks, available products and underwriting requirements due to the lack of resources available to them.
Personal lines are the most at risk for disintermediation, but the producer will continue to play a role, for many reasons. For some consumers, it's choice. They prefer to be supported by a live person who can explain the choices, options and requirements. For other clients, as they start to move up the economic ladder, they need assistance in developing a comprehensive plan for protecting themselves. Sometimes, it's market pressure. In the UK, where on-line sales and aggregators seem to have completely displaced the producer, agents are seeing a resurgence of business from the most unlikely of market segments – young drivers. Insurance for new drivers is so expensive and hard to place; younger drivers have been turning to agents to help with placing insurance. The old saw plays well here, "It will never be 'either/or,' it will always be 'both.' "
Next Page: Life/Health: Shift to Advisor Role
Tom King is a Senior Director of Insurance at Pegasystems, the leading provider of business process management (BPM) and customer relationship management (CRM) software solutions. View Full Bio
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