In late 2015, I moved from my native Spain to New York to join CoverWallet, a very early-stage startup, as its first hire. CoverWallet was hoping to digitize insurance distribution.
As part of our work, we consistently saw insurance agents spending lots of time manually filling paper forms, submitting quote requests individually to carrier portals while having to input the same information over and over (and over), scanning PDFs one at a time, and getting on the phone with individual clients and carriers to confirm and distribute information as basic as insurance cards and proofs of coverage.
We visited dozens of insurance agencies that looked very much like this one:
It was 2015 but the day-to-day of these agents was similar to the early 90s. They were spending the majority of their time doing repetitive, administrative tasks, rather than out in the field talking to new and existing customers.
Based on the ‘technology’ they were using, it was as if Silicon Valley decided insurance agents weren’t worth the effort of bringing beautiful and smart software to make their lives easier and to help them grow their businesses. CoverWallet focused on building an amazing commercial insurance agency that was ultimately acquired by AON.
These experiences had a lot to do with the reasons I started Agentero in 2017 to bring digital innovation to independent agents and their customers.
Re-Introduction: Silicon Valley <<>> Insurance agents
The last five years have been a whirlwind in insurtech. Next-generation carriers have raised billions of dollars to bring new products directly to hundreds of thousands of consumers. There’s exciting product innovation happening in all the business lines: home (Openly), auto (Clearcover), life (Haven Life), renters (Lemonade), and many smaller and new ones (flood, earthquake, pet, etc.).
With thousands of customers across the US buying directly from such carriers, one could (mistakenly) think that insurance agents are on the way out. Not so fast! That might be the latest in a very long list of incorrect forecasts predicting the demise of independent agents (McKinsey, Agents of the Future, 2013).
The reality is that despite all that insurtech investment and the success of traditional direct carriers like GEICO and Progressive, insurance agents still distribute the majority of the premiums in the market. In fact, there are more independent insurance agents than ever before, almost 1 million strong in the USA. Agents sell over 50% of overall premiums (a higher share than ever before), and this share continues to grow.
Most carriers depend on the agent channel to distribute and serve the majority of the market. That equates to hundreds of billions of dollars across millions of policies! Why is this? Well… insurance products are complex to buy and compare and they are often sold in bundles and require customization. Agents are critical to the ongoing customer relationship.
We believe it’s important to recognize the big social and economic impact that insurance agents have, especially in these challenging COVID times. Starting and building an insurance agency is one of the tried and true paths to middle-class still left in the country. It is hard, honest work, and millions of families through generations have sent their kids to college and contributed to their communities through this noble career.
As with other considered purchases, customers do a lot of research on their own and are more informed than ever before. They still want advice, but it needs to be authentic and independent. Customers want to be in control throughout the process and feel empowered and enabled to make the right decision on their own.
Agents are the present and future of insurance distribution–but they must become more digital. One of the biggest changes in the insurance channel is the shift from captive agents (those that sell policies from a single carrier), to more independent agents. This means agents need to be more knowledgeable about a broader set of products from multiple carriers, and about their customers’ coverage needs and financial goals. The gap to getting the right products into the right customers’ hands keeps getting wider. Technology is the only way forward and we are building Agentero’s products to help agents delight customers in this new environment.
Real estate offers a good comparison: realtors didn’t disappear with the Internet. In fact, there are more realtors than ever before, and both their lives and the consumer experience has improved dramatically thanks to technology. Insurance agents produce about the same aggregate level of commissions as realtors, yet when it comes to VC investments, real estate tech has attracted 5X more investment than all of insurtech (the ratio is even higher comparing agent tech for both sectors). The result: most independent agents today are not equipped to deliver the digital experience today’s policyholders expect. That needs to change.
Read part II here
At Agentero, we are creating a smarter, more intuitive insurance ecosystem. We are building the largest technology driven network of insurance agents to strengthen their ability to compete in today’s digital market by combining data-driven technology with market access to tech forward carriers.