Let’s start by dispelling the myth of the ‘disappearing insurance agent’ once and for all. Agents are the present and future of insurance distribution.
Just look at the numbers: As of 2019, US insurers sold $2Tn in premiums and incurred $146Bn in distribution expenses. You might be surprised to learn that only $12bn (8%) of those distribution expenses were in advertising, given how prevalent insurance ads are. Only about $7bn of insurance ad dollars are spent online, somewhat surprising given the fact that these insurance keywords are often the most expensive keywords.
Where did the other 89% of those distribution expenses go?… Agent Commissions! That’s right, advertising is just the proverbial tip of a massive iceberg. As of 2019, there were almost 900k insurance agents (up from 650k a decade ago). Even after multiple decades of D2C growth by carriers like GEICO and Progressive, and all of the recent success of insurtech carriers, insurance agents (independent and captive) still sell more insurance than all other channels combined (it’s about 90%), and this share is growing. Given these staggering statistics, insurtech carriers will have to make dramatic inroads on partnering with the agent channel in 2021 if they hope to truly transform the industry. Those that fail to do so will miss the majority of the market and valuations may struggle.
At Agentero, we believe that agents will continue to be a thriving distribution channel for the overall industry. Agents crave better technology. They want to include insurtech products in the bundles their clients use. They want to provide clients with better, fact-based advice. In short, agents must become more digital. The biggest shift in the agent channel is the steady transition of captive agents into independents. The independent channel is highly fragmented, there are over 36k independent insurance agencies in the country (even after many years of consolidation via M&A). Jumbo Agencies (those with $10m+ in premiums) represent less than 2% of the total market. Small agencies with 2-3 agents represent 35% of the total and over 20% of agencies are located in small-towns and rural areas. How will insurtech and traditional carriers reach and partner with agents in coming years?
This is why I love that we stand for insurance agents! We’re closing the tech gap for agents, unleashing the power of the latest technologies: Machine Learning/AI, APIs that are easy to use and integrate, and workflow automation. It’s all packaged with beautiful, intuitive design that helps agents grow their businesses faster and easier. Our technology strengthens their ability to use data and analysis to find new opportunities and to write new policies in an end-to-end digital experience. We’re providing the digital tools and the market access to tech-forward carriers. This way, agents can focus on better serving their clients and on growing their agencies. We use data to identify the insurance products agents’ clients want. Then we connect them to digital carriers who can write the policies and close the deal. The whole process is digital—fast, effective and client-focused.
We think this is a win-win-win. Consumers get the insurance they need in a fully digital way, independent agents sell more policies with less back-office work, and carriers grow through a tech-enabled channel which means a single, easy integration gets them going with hundreds of agencies at once!
Our approach offers value for agents and digital carriers in three key areas:
#1. Independent agents are hungry for new solutions. Silicon Valley has not focused on creating products for insurance agents. That’s changing and we are glad to be part of the solution. Agents of all sizes love working with us since better analysis of their existing book consistently brings them immediate growth opportunities. Using our solution, agencies regularly see an increase of between 20-30% in new opportunities with their existing customer bases alone.
#2 Digital natives expect more. Millennials and Gen-Z already represent more than 50% of the US workforce. We consume most of our key products and services online and on mobile phones. COVID has made the need for an end-to-end digital experience a must-have. Even Boomers now have clear expectations for how they want to get and pay for insurance, be engaged and communicated with (no phone calls!), and file claims. Agents, no matter how large or small, need to be prepared to provide insurance to the next generation. Our products help agents build strong relationships with these customers on their own terms, so that the advice and coverage they receive is personalized and relevant. While many digital carriers often provide a single insurance product, agents in our platform can bring their clients the full spectrum of insurance products their clients need across carriers, from auto to home to life and more.
#3 Insurtech’s next frontier is the agent channel. Many of the digitally native carriers started with direct-to-consumer strategies, acquiring customers largely through online marketing. Not surprisingly, these channels are quickly getting saturated, customer acquisition costs keep skyrocketing, and yet they are not reaching over half the market in most lines! These carriers are smart and expect their next wave of growth to come from the larger and more profitable agent distribution channel. We recently announced our initial panel of digital carriers and partners: Openly, Clearcover, Cover, Haven Life and Aon Edge. We are quickly building the largest technology platform for agents and carriers. More carriers are in the process of launching with us to bring their offerings to our fast growing network of hundreds of tech-enabled agencies. Our carrier partners appreciate saving a lot of time, cost and effort versus having to build all those distribution partners individually and our solution shifts the costs of acquiring customers from an expense to a variable cost (commissions).
At Agentero, we’re focused on building the best technology aggregator–the easiest place for a carrier to integrate into and tap the agent channel. Ease of integration is part of our secret sauce–our way to delight agents and the carriers and partners we work with. Innovative digital carriers that offer an end-to-end digital experience work with us because Agentero is the easiest place to integrate and distribute their products through the agent channel and have huge reach. We are also helping traditional carriers connect to our system and reach digital-native customers for the first time. By the end of 2021 we will have most of the tech-forward carriers in a single place, so that agents can join us and provide their clients with an unmatched product offering.
And the best part? We’re just getting started 🙂
(This is part two of a series. Check out part one, The Status Quo Doesn’t Work Any More here)