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Turning Web Efficiencies into Competitive Advantages

By Matthew Josefowicz, Analyst, Celent Communications, LLC

In the last year or so, the insurance industry has generally stopped regarding the Web as a terrifying challenge to established distribution channels and started understanding the potential power of the Web to make existing channels more efficient.

While the revolution in direct Internet sales predicted by the likes of the now-defunct eCoverage failed to materialize amid a palpable lack of consumer demand, the Web is enabling an important evolution in the way in which agent sales, especially independent agent sales, are conducted.

In particular, the industry has seen how effective implementations of agent extranets—Web-based systems that give agents and brokers direct access to a carrier's core systems—can reduce communication costs by as much as 90% and reduce processing times for policy originations, changes, and inquiries from days or weeks to hours or minutes.

38% of the top 100 Property/Casualty carriers and 54% of the top 100 Life/Heath carriers have already implemented some form of agent extranet, with roughly half of those in each segment providing the ability to the agent to write new business over the Web.

Using agent extranets, carriers can support more agents without a corresponding growth of internal staff. Agents also benefit, spending more time selling and less time processing. Most importantly, agent extranets can dramatically reduce the time between initial quote and binding the policy, a critical interval that often can last as long as 30 days or more, and during which many sales are lost.

At the same time, the importance of the independent agent is growing. For the first time, the majority of life insurance products in the U.S. are distributed by independent, as opposed to career, agents (the majority of property/casualty products have long been distributed by independents). Despite the marketing and branding advantages enjoyed by the national captive agent forces, many consumers are turning to independent agents for a greater choice of "best-of-breed" products from multiple providers.

Now more than ever, expanding market share depends on expanding independent agent distribution—expanding the number of agents and capturing more of each agent's book of business.

For carriers that distribute through independents, the agent is the most important customer. Agents are the only "customers" that do business with the carrier every day. Most agents do the majority of their business in each area with one to three carriers with whom they feel most comfortable and from whom they received the best service. To the agent, service is more important than price. Giving an agent the ability to process policies quickly and easily means they can spend more time selling and make more money.

This promise of efficiency is as important as the specific product set offered when recruiting new distributors. Many carriers who've implemented agent extranets have reported significant gains in agent recruitment by emphasizing the ease-of-use advantage of working with them, rather than focusing exclusively on their product sets, which are harder to differentiate.

When planning their agent extranets, carriers must consider the input of their agents carefully through focus groups and individual contacts between sales managers and agents. They must understand the agents' "pain-points" in dealing with the carrier and reduce or eliminate them.

This input gathering is an important chance to carriers to learn more about how their processes compare to their main competitors for each agent's attention, and adjust accordingly.

Once the system has been designed and launched, the next step is to recruit agents to use it. This effort must consist of more than announcing the availability of the system through direct mail, email, or conference calls. The agents must be shown specifically how the new system will make their lives easier and enable them to sell more. If at all possible, agents should be introduced to the system in person by their sales representatives.

The proverb, "Tell me and I'll forget, show me and I may not remember, involve me and I'll understand," applies to maximizing use of an agent extranet system. Training is critical to driving adoption and comfort. Although many carriers view in-person training as an unnecessary expense and try to substitute Web-based training or documentation, in-person training is a critical opportunity to accomplish four important things:

1. Increase the personal relationship between the sales representative and the agent2. Make sure the agent understands the new system and its direct benefits to him or her personally 3. Gather feedback and learn where the system needs to be improved 4. Learn how your system compares to any others the agent may be using.

Launching and maximizing an effective Agent Extranet is a critical step for any carrier that relies on independent distributors. Creating efficiency is the key component to agent recruitment, and the process of developing the system and training agents is a unique opportunity to build relationships with agents and learn more about others who are trying to do the same thing.

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