The insurance industry is a product-driven business where the products are provided through conventional agent-to-customer sales methods. Until now, the industry believed that was just what the customers wanted. However, a recent Accenture study reveals some surprising findings: 67 percent of insurance customers surveyed would consider buying insurance from an organization other than the traditional insurer/agent channel. Of those, 23 percent would consider buying coverage through online service providers such as Google and Amazon.
This unlikely scenario is already playing out in China, where customers are starting to buy insurance in ways that bypass agents. While the practice has not caught on in the U.S. to any measurable degree, the market upheaval is poised to be industry-altering: Accenture's figures suggest that 91 percent of respondents are getting no love from their agents or carriers.
Moreover, the survey revealed a "switching economy" pattern; consumers are changing providers. The research revealed that 51 percent of U.S. consumers switched service providers in the past year due to poor customer service experiences, up 5 percent from 2012. Consumers are expressing dissatisfaction and many are doing something about it.
What that means to U.S. insurers: there's a potential $1.3 trillion in revenue at stake thanks to unsatisfactory customer service results. However, it's unclear whether consumers are ready to let go of the traditional sales model. In an environment of consumer-driven demand for fast response and even faster delivery, is the traditional insurance agency model in danger?
Behind the numbers
Erik Sandquist, managing director of Accenture's distribution & marketing services, says Accenture has conducted the survey for several years and has also surveyed the personal lines market in the U.S. He says they've seen these trends develop. This year, however, was the first time the company had asked consumers if they would consider buying insurance from a source other than agents.
"One thing that stood out was 'consumers' willingness to consider alternative industries from which they may seek information and purchase insurance products," he says.
Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute, says replacing providers is an idea that could spread. "I don't know of anybody who hasn't seen the auto-switching ads. That idea has been planted for auto insurance, and there's really no reason why people won't carry that idea over to other insurances, as well." That, Weisbart says, requires a trigger. To him, that's where the notion of changing providers falls short. Consumers, he says, may not be happy, but there may not be enough to push them into action. "Even if you think you'll save money, you're probably not going to get around to it unless you have something with your current carrier that rubs you the wrong way," he adds.
That kind of consumer reticence seems in line with what John Nichols believes. Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA), says changing providers isn't new. He also says that technology isn't necessarily going to be the death knell for agents.
"There has been distribution via technology for at least 20 years. I know several firms that have an Internet methodology that's supplemented with a call center or some form of human interaction with a licensed, educated advisor. I think it's a reach to think the advisor's being circumvented," he says.
The customer-agent disconnect
That could be good news for the life insurance industry since the larger issue isn't keeping customers, but rather creating customer interest in a product that is often viewed as unnecessary. Weisbart says that people under the age of 60 are buying less life insurance than previous generations. His concern isn't whether they will switch providers, but whether they will buy at all.
"If they did, I think they would tend to in a simplistic way – buying one or two years' worth of salary in death benefits – without really doing any kind of analysis on what they need or what policy to buy, which is what an agent would help them think through," he says.
Agents, Weisbart adds, aren't making that connection with their customers, and it's driving them to online sources of both information and coverage. Sandquist sees that as a problem of focus. "Many insurance companies have, historically, been product-oriented or distribution-oriented. Moving to a customer-centric mentality is a bit of a change." Still, he says, it's a transformational shift that they need to undergo.
