Is Hunkering Down an Effective Strategy?

7/25/2010 7:11:05 PM #

The property and casualty industry is experiencing interesting times.  I have spoken with hundreds of top executives of insurance agencies, MGAs, Program Administrators, Carriers, Reinsurance, Private Equity firms and even Vendors over the last six months and everyone of them is in a soul searching mode to write cost effective new business.  So is the industry growing, shrinking, contracting or ready to explode wide open?

I believ many successful  insurance agencies will recognize the Internet's potential as a powerful marketing tool, increasing employment growth of some occupations while slowing growth of others. Growing use of the Internet might reduce costs for insurance agencies and carriers, but it also could enable many clients to turn first to the Internet to get information on their policies, obtain price quotes on possible new policies, or submit claims. Some believe as insurance companies begin to offer more information and services on the Internet, employment in some occupations, such as insurance sales producers, could be adversely affected.  I have spoken with three firms last week and all of them were looking for sales producers.

Productivity gains caused by the greater use of computer software will continue to limit the growth of certain jobs within the insurance industry. For example, upgrades to underwriting software have helped increase underwriter productivity.   So in theory I can see how automated underwriting that quickly rates and analyzes insurance applications can reduce the need for underwriters.

Employees in property and casualty insurance, particularly in auto insurance, will be most affected by increasing reliance on the Internet.   Auto policies are relatively straightforward and can be issued more easily without the involvement of a live agent face-to-face or even over the telephone.   Also, auto premiums tend to cost more per year than do other types of policies, so people are more likely to shop around for the best price—and the Internet makes it easier to compare rates among companies.  My personal lines insurance totals over $5,800.00 per year between home's, auto, umbrella and I still have an agent that, but will research rates online before I renew or purchase.

Here's an interesting sales plan that I came across in the mid-west.  A brand new agency was created using Crum & Forster paper to insurance CPA's.  Now these premiums will run anywhere between $500, $1,900 and $6,000 per year depending on the employee size and revenue.  The selling is being performed over the telephone direct.  This speaking to what's going on out there with how much of the 15 to 20% can we keep in our pockets by going direct. The reality to the example above is that the premiums that are $500.00 to $1,900.00 per year are being underserved.  How will this agency compete with one carrier if other carriers continue to buy the business?  So it would be interesting to hear what agencies plans for new business growth are.

There's also a whole lot of private equity money floating around out there such as the $1.4 billion that was just given to Vertafore formerly AMS Services.  So maybe these guys know something we don't and our industry is about to explode for the better!

Jeff Neilson | Reply

10/16/2010 9:50:37 AM #

Great write-up. I simply stumbled upon your website and desired to state that I have certainly loved surfing your blog posts. Anyways I'll be subscribing to your feed and I hope you compose once again soon.

kosher | Reply