Exciting, Attractive Time For Independent Agents

N/Aketplace is changing and the pressure increasing, but agents can use this to their benefit by understanding their target market, recruiting and maintaining aggressive new talent, and building a strong customer franchise, management consultant Fred Eppinger told agents at the <%=company%> Annual Convention this year.

Eppinger, director and partner with McKinsey & Co., an international consulting firm, said, "I believe that the independent agent can and will win in today's market. The market pressure will continue, but even in that new competitive marketplace the agent's role is clear. There is a need for cost-effective professional advice. But among agents, there will be winners and there will be losers. And the winners will emerge because they know their markets, they deliver against their promise, and they attract the best people."

Technology Good and Bad
The increasing market pressure, Eppinger explained, is due to several factors: increased technological usage, more aggressive carriers, growing professionalism within the agency channel, and new and aggressive entrants. Eppinger believes the most important factor, however, is growing consumerism with higher expectations of service and increased sophistication. "There is a growing segment of people who want it all," he said. "The implication is simple—while people are going to value service and advice, they are not going to put up with a cost-inefficient platform."

Technology introduces both opportunities and challenges to this end. "Technology is a great thing. It's good for your customer relationships, and it's good for your carrier relationships—and it has allowed you to compete with these other channels while getting your costs close enough," said Eppinger. "But technology has another feature to it that must be considered—it increases the transparency in the marketplace of the price of your products. Can you convince people that there is a value to independent advice and service?"

Eppinger asserted that consumers "want independent, cost-effective advice. So you have an advantage going in. But mediocrity doesn't cut it." Eppinger cited McKinsey & Co. research that showed customers of "mediocre agents" (as defined by the study) were twice as likely to switch carriers or agents for a 10 percent discount than customers of "good agents." In fact, 30 percent of customers with "good agents" said they would not switch carriers or agents for any discount. "People saw a difference between those agents that reached out and knew them, and those that didn't. That means that you can build customer loyalty."

Eppinger defined "good agents" as those that have deep understanding of their customers and consistently deliver against their promises. "It's not about strategy; It's about execution," Eppinger maintained. "This is an industry of events. Most people couldn't care less about insurance until they need it—and then it's the most important thing in the world. The question is, at that moment of truth, do you deliver or not deliver?"

Agents and Opportunities
Eppinger also stressed the need to attract and keep aggressive agency talent. "There's going to be a shortage of good talent out there, and an execution-based business is going to win if its people are more proactive than their's," he said. "So, will you attract the best and the brightest to your enterprise? Can you get them, can you keep them, can you excite them?"

The new competitive entrants are not going to go away, Eppinger warned, urging agents to view banks in particular as an opportunity. "Clearly they don't bring insurance expertise, but what they do bring are customers. I think we are going to see terrific partnerships between agents and banks—and much more transparent communication between them about accessing those customers and really providing the services they need to manage their risk."

Eppinger sees the presence of direct response companies as an opportunity to emphasize the value of the agent. "There will always be a segment that is attracted to the direct companies. As independent agents get their costs close and aggressively provide service, it is well within the power of independent agency system to define the market beyond just price-only," he said.

In this effort, it is the carrier as much as the agent that will make the difference. "It has always been important to match up with the best carriers," said Eppinger. "It's twice as important now to choose carriers that are aggressive, that are going to help you win by giving you the best products, the best services, the best technology. And if they don't give it to you, get rid of them.

"If you keep your focus, this is going to be a very exciting and attractive time for the independent agent," he said.