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2015 state of the insurance industry
- 1. © 2015 Agency Revolution, All Rights Reserved
State of the Industry 2015
Mending The Broken Promise:
How to close the breach, regain the trust and
recover the heart of the insurance customer
- 6. © 2015 Agency Revolution, All Rights Reserved
7 points of vulnerability.
Proof: Empirical evidence.
‣ Changes in consumer behavior.
‣ Changes in carrier behavior.
‣ Changes in the nature of risk.
5 point action plan.
‣ For retail agents and the industry that
serves them.
- 7. © 2015 Agency Revolution, All Rights Reserved
“This is a relationship
business.”
- 10. © 2015 Agency Revolution, All Rights Reserved
VULNERABLE
7
1 2
3
4
5
6
- 11. © 2015 Agency Revolution, All Rights Reserved
It’s been easy.
Points of vulnerability.
1
- 12. © 2015 Agency Revolution, All Rights Reserved
Growth of the US economy
It’s been easy.1
- 13. © 2015 Agency Revolution, All Rights Reserved
Growth of the US economy
It’s been easy.1
- 14. © 2015 Agency Revolution, All Rights Reserved
Marketing meant.
It’s been easy.1
- 15. © 2015 Agency Revolution, All Rights Reserved
VULNERABLE
What got you here, won’t get you there.
It’s been easy.1
- 16. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable.
Points of vulnerability.
2
- 17. © 2015 Agency Revolution, All Rights Reserved
Chinese & Babylonian traders.
3000bc
Greek & Roman health & life insurance.
600bc
Genoa first known insurance contract.
1347ad
London (after the Great Fire).
1667
1st US insurance company.
1735
Ben Franklin.
1752
St. Paul sells
1st policy.
1853 1864
History:
Travelers sells
1st policy.
- 18. © 2015 Agency Revolution, All Rights Reserved
The habits, processes and bureaucratic interests
resist CHANGE.
Mature Industries
are vulnerable2
- 19. © 2015 Agency Revolution, All Rights Reserved
Not because the industry isn't good.
Mature Industries
are vulnerable2
Carrier
Agent
Consumer
- 20. © 2015 Agency Revolution, All Rights Reserved
Disruption generally happens when the
industry is at its highest PEAK of Excellence.
Mature Industries
are vulnerable2
VULNERABLE
- 21. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 22. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 23. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
ç
- 24. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 25. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 26. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 27. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
- 28. © 2015 Agency Revolution, All Rights Reserved
Smaller, more nimble entities, often
outsiders, disrupt.
‣ Usually with technology.
Mature Industries
are vulnerable2
- 29. © 2015 Agency Revolution, All Rights Reserved
Blacksmith, Henry Ford
Mature Industries
are vulnerable2
- 30. © 2015 Agency Revolution, All Rights Reserved
Kodak
Mature Industries
are vulnerable2
“...it was film-less
photography, so
management’s
reaction was,
‘that’s cute - but don’t
tell anyone about it.’ ”Steve Sasson,1975
- 31. © 2015 Agency Revolution, All Rights Reserved
Netflix
Mature Industries
are vulnerable2
“Neither RedBox nor
Netflix are even on the
radar screen in terms
of competition...”
Blockbuster CEO
Jim Keyes: 2008
- 33. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
A NEW INDUSTRY GROUP
RUN UNDER THE GUIDANCE OF
THE ASSOCIATION OF OPTOMETRISTS (AOP)
HAS BEEN CREATED TO ADDRESS PRACTICE DECLINE
- 34. © 2015 Agency Revolution, All Rights Reserved
Warby Parker
‣ Founder Neil Blumenthal’s 1st rule of success
“Cut Out the Middle Men.”
Mature Industries
are vulnerable2
Started 2010
Sold 500,000
pairs of glasses
by 2013.
- 35. © 2015 Agency Revolution, All Rights Reserved
Travel agencies
Number of traditional
travel agencies.
Source: Phocuswright; Airline reporting corp. (ARC); ASTA.org
1995
47,000
2011
14,000
2000
38,800
- 36. © 2015 Agency Revolution, All Rights Reserved
Mature Industries
are vulnerable2
80,000 agencies.
1980
40,000 agencies.
2015
- 37. © 2015 Agency Revolution, All Rights Reserved
Points of vulnerability.
We're getting old.3
- 38. © 2015 Agency Revolution, All Rights Reserved
Average age of agency principal: 59.
We are getting old
3
- 39. © 2015 Agency Revolution, All Rights Reserved
25% will be gone by 2018
We are getting old
3 McKinsey & Co
2015 2018
- 40. © 2015 Agency Revolution, All Rights Reserved
‣ Number of employees 55 and older in P&C is
30% higher than any other industry.
‣ Carriers will have to replace 400,000
employees by 2020.
‣ 72% of principals with over 20% ownership
is over 60.
We are getting old
3
Accenture, AM Best, IIABA
- 41. © 2015 Agency Revolution, All Rights Reserved
The pernicious
term“agent".
Points of vulnerability.
4
- 42. © 2015 Agency Revolution, All Rights Reserved
The pernicious term“agent”.
‣ “acting on the authority of another”.
The pernicious
term“agent”4
Carrier
Agent
Consumer
- 43. © 2015 Agency Revolution, All Rights Reserved
The pace
of change.
Points of vulnerability.
5
- 44. © 2015 Agency Revolution, All Rights Reserved
The pace of change.
"Worried the world is changing faster
than my agency.”
The pace
of change5
4%
96%
- 45. © 2015 Agency Revolution, All Rights Reserved
“If the rate of change
on the outside
exceeds the rate of
change on the inside,
the end is near.”
JackWelch
Chairman and CEO,
General Electric,
1981- 2001
The pace
of change5
- 46. © 2015 Agency Revolution, All Rights Reserved
OUR AVERAGE
AIN'TTHAT GREAT
Points of vulnerability.
6
- 47. © 2015 Agency Revolution, All Rights Reserved
And“on average”thats how the
marketplace judges us.
Average ain’t that
great6
- 48. © 2015 Agency Revolution, All Rights Reserved
This is a built in systemic weakness.
The“independence”of 40,000 delivery entities
inherently lacks business discipline.
Average ain’t that
great6
- 49. © 2015 Agency Revolution, All Rights Reserved
Cannot enforce:
‣ Best Practices.
‣ Brand discipline.
Average ain’t that
great6
- 50. © 2015 Agency Revolution, All Rights Reserved
Compare to:
‣ 17,000 Starbucks cafes
‣ 63,000 Nordstrom employees
‣ 437 Apple Stores
Statista 2015
Average ain’t that
great6
- 51. © 2015 Agency Revolution, All Rights Reserved
Timken Professor of
Business Administration,
Harvard Business School
Cynthia A.
Montgomery
“Does your company
matter?That’s the most
important question
every business leader
must answer.”
Average ain’t that
great6
- 52. © 2015 Agency Revolution, All Rights Reserved
We cost more.
Points of vulnerability.
7
- 53. © 2013 Agency Revolution, All Rights Reserved
AM Best, research and data
70.8 74.2
Loss ratio %
Expense ratio %
97.3%95%Combined ratio:
Carrier
$
Independent
Direct
response
26.5 20.8
The pace
of change7
- 54. © 2015 Agency Revolution, All Rights Reserved
VULNERABLE
7
1 2
3
4
5
6
It’s been easy.
Mature Industries
are vulnerable.
We’re getting oldWe cost
more
Our average
ain’t great
The pernicious
term“agent”
The pace
of change
- 55. © 2015 Agency Revolution, All Rights Reserved
Prove It.
‣ What Consumers are saying and doing.
- 56. © 2015 Agency Revolution, All Rights Reserved
13%
6%
10%
71%
Online
800 Number
Yellow Pages
Not Sure
71% use the internet to research insurance.
54% have received a quote online.
- 57. © 2015 Agency Revolution, All Rights Reserved
New auto insurance
placed by local broker:
2003 2008
80%
68%
Changes in Consumer Behavior.
- 58. © 2015 Agency Revolution, All Rights Reserved
New auto insurance
placed by local broker:
2003 2008 2010
80%
63%
68%
Changes in Consumer Behavior.
- 59. © 2015 Agency Revolution, All Rights Reserved
How did you originally purchase your current
auto insurance Policy?
Local Broker51%75%
Online26%
7%
Less than 1 year5+ years
- 60. © 2015 Agency Revolution, All Rights Reserved
Now it's #4. 24%
14%
2007 2012
In 2007, the service experience delivered by
local brokers was the #1 driver of insurance
customers’overall satisfaction.
- 61. © 2015 Agency Revolution, All Rights Reserved
Small business would be open to buying
insurance online if the price is right.
So Far, So Close, James Colaço, Senior Manager, Monitor
Deloitte, and Leader in Deloitte's P&C Insurance Practice
84%
Cheaper Price
Easier to buy insurance
More suitable coverage
44%
41%
Reasons for openness to buying insurance online
84%
- 62. © 2015 Agency Revolution, All Rights Reserved
Prove It.
‣ What Carriers are doing.
- 63. © 2015 Agency Revolution, All Rights Reserved
2002 2011
1.7
5.9
Marketing spend for P&C carriers $ billions.
347% increase.
- 64. © 2015 Agency Revolution, All Rights Reserved
Marketing spend 2011:
Millions of advertising dollars spent.
Farmers 718
State Farm 813
Geico 1,000
Progressive 536
Allstate 745
Liberty Mutual
American Family
Travelers
Nationwide
AIG
332
167
166
277
125
92USAA
$1 BILLION
- 65. © 2015 Agency Revolution, All Rights Reserved
Government Employee Insurance Company,
“GEICO”
201220092008 2010 2011
$11 billion
$6
$3.5 billion
$7
$9
- 66. © 2015 Agency Revolution, All Rights Reserved
Progressive:
Average growth 17% per year.
201220091996 2010 2011
$16 billion
$3.4 billion
- 67. © 2015 Agency Revolution, All Rights Reserved
U.S. top 10 Private Passenger Auto Insurers.
State Farm1 117.919.3
Farmers3 56.07.2
Progressive4 48.45.8
Allstate2 210.110.7
Market share %Market share % Rank Rank
2002 2012
- 68. © 2015 Agency Revolution, All Rights Reserved
U.S. top 10 Private Passenger Auto Insurers.
State Farm1 117.919.3
Farmers3 56.07.2
Progressive4 48.45.8
American Family
Travelers
Nationwide
Liberty Mutual
USAA
Berkshire Hathaway, Geico
9
10
5
7
8
6
10
9
8
7
6
3
1.9
2.0
4.1
4.8
4.9
9.7
2.3
1.9
4.9
4.5
3.6
4.8
Allstate2 210.110.7
Market share %Market share % Rank Rank
2002 2012
- 69. © 2015 Agency Revolution, All Rights Reserved
U.S. top 10 Private Passenger Auto Insurers.
State Farm1 117.919.3
Farmers3 56.07.2
Progressive4 48.45.8
American Family
Travelers
Nationwide
Liberty Mutual
USAA
Berkshire Hathaway, Geico
9
10
5
7
8
6
10
9
8
7
6
3
1.9
2.0
4.1
4.8
4.9
9.7
2.3
1.9
4.9
4.5
3.6
4.8
Allstate2 210.110.7
Market share %Market share % Rank Rank
2002 2012
- 70. © 2015 Agency Revolution, All Rights Reserved
Available Now At The GEICO Store
- 72. © 2015 Agency Revolution, All Rights Reserved
Rise in direct response premium by channel.
AM Best, IIABA Market Share Report
- 73. © 2015 Agency Revolution, All Rights Reserved
Rise in direct response premium by channel.
AM Best, IIABA Market Share Report
48 46 44
32 31 29
2003 2007 2011
Personal auto
Independent
broker
Captive
agent
80
77
73
- 74. © 2015 Agency Revolution, All Rights Reserved
Rise in direct response premium by channel.
AM Best, IIABA Market Share Report
20 23 27
48 46 44
32 31 29
2003 2007 2011
Personal auto
Independent
broker
Captive
agent
Direct
- 75. © 2015 Agency Revolution, All Rights Reserved
Rise in direct response premium by channel.
AM Best, IIABA Market Share Report
39 38 38
57 57 56
4 5 6
77 81 77
23 19 2320 23 27
48 46 44
32 31 29
2003 2007 2011 2003 2007 2011 2003 2007 2011
Personal auto Homeowners Small commercial
Independent
broker
Captive
agent
Direct
- 76. © 2015 Agency Revolution, All Rights Reserved
Prove It.
‣ Further threats.
- 77. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
(from technology) "Could the broad
adoption of currently
available technologies
result in a radical
reduction in the auto
insurance business?"
A Scenario:
The End of Auto
Insurance.
What HappensWhen
There Are (Almost)
No Accidents.
- 78. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
The End of Auto Insurance.
Timings for the adoption of key technologies.
- 79. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
The End of Auto Insurance.
Mandatory
Preferred
Voluntary
Available
2012 2023-20272018-20222013-2017
Timings for the adoption of key technologies.
- 80. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
The End of Auto Insurance.
Mandatory
Preferred
Voluntary
Available
2012
Telematics
Automated
Enforcement
2023-20272018-2022
Automated
Enforcement
2013-2017
Telematics
Automated
Enforcement
Timings for the adoption of key technologies.
- 81. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
The End of Auto Insurance.
Mandatory
Preferred
Voluntary
Available
2012
Telematics
Automated
Enforcement
Collision Avoidance
2023-2027
Robot Cars
2018-2022
Automated
Enforcement
Collision Avoidance
Robot Cars
2013-2017
Telematics
Automated
Enforcement
Collision Avoidance
Robot Cars
Timings for the adoption of key technologies.
- 82. © 2015 Agency Revolution, All Rights Reserved
FurtherThreats.
How Much?Will UBI impact the auto
insurance industry.
Low
Medium
Large
insurance telematics usa 2013
95%
- 83. © 2015 Agency Revolution, All Rights Reserved
3 Predictions.
1 2 3
- 84. © 2015 Agency Revolution, All Rights Reserved
Fewer, bigger agencies.
Predictions
1
- 85. © 2015 Agency Revolution, All Rights Reserved
1
““There are 40,000
agencies in the U.S., and
you could absolutely
imagine them shrinking
by a quarter…”
Ellen Carney
- 86. © 2015 Agency Revolution, All Rights Reserved
Top 10 P&C agencies:
$3.186 billion in P&C revenue, 2011.
2013: $2.862 billion
1
Insurance Journal, Top 100 Agencies Special Report
Revenue
2.7 B
3.186 B
2.862 B
2011 2013
- 87. © 2015 Agency Revolution, All Rights Reserved
1
Fewer. Bigger.
Source: Phocuswright; Airline reporting corp. (ARC); ASTA.org
- 88. © 2015 Agency Revolution, All Rights Reserved
1
Fewer. Bigger.
Number of traditional
travel agencies.
Air sales per location $ million.
1995
1.6
2011
5.8
2000
2.2
Source: Phocuswright; Airline reporting corp. (ARC); ASTA.org
47,000
1995
38,800
2000
14,000
2011
- 89. © 2015 Agency Revolution, All Rights Reserved
1
“Driven by performance
pressures but lacking
strategic vision,
company after company
has had no better idea
than to buy up its rivals.
The competitors left
standing are often those
that outlasted others,
not companies with
real advantage.
Michael Porter
- 90. © 2015 Agency Revolution, All Rights Reserved
Continued market share
erosion in P/L, Small C/L.
Predictions
2
- 91. © 2015 Agency Revolution, All Rights Reserved
Predictions
Continued vulnerability to
disruption from outsiders,
smaller players or aggressive
innovators willing and able
to leverage technology.
3
- 92. © 2015 Agency Revolution, All Rights Reserved
1
“Other things being
equal, the larger army
has the advantage
whereas the winning
business tends to be the
one whose offerings are
most preferred by
customers, its size being
more the consequence
than the cause of its
success.”
Richard Rumelt,
- 93. © 2015 Agency Revolution, All Rights Reserved
5 Point action plan for success.
1
2
34
5
- 94. © 2015 Agency Revolution, All Rights Reserved
5 Point action plan for success.
1 2 3 4 5
- 95. © 2015 Agency Revolution, All Rights Reserved
The solution:
1
“Because the purpose
of business is to create
a customer, the
business enterprise
has two and only two
basic functions:
marketing and
innovation”.
marketing
innovation
Peter Drucker
1
- 96. © 2015 Agency Revolution, All Rights Reserved
The solution:
1
marketing and
innovation produce
results; all the rest
are costs."
marketing
innovation
Peter Drucker
1
- 97. © 2015 Agency Revolution, All Rights Reserved
5 Point action plan for success.
‣ Master Marketing.
‣ Be the“Relationship Business”you always
claimed to be.
1
- 98. © 2015 Agency Revolution, All Rights Reserved
1
“The most advanced
form of marketing is
that which creates
Meaningful
Relationships”.
Michael Jans
President /CEO
Agency Revolution
5 Point action plan
for success.
- 99. © 2015 Agency Revolution, All Rights Reserved
www.agencyrevolution.com/analyzer/
www.TheGrowthAnalyzer.com
1
- 100. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 101. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 102. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 103. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 104. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 105. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
$2,226,000
1
- 106. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
$2,226,000
$3,415,905
1
- 107. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
1
- 108. © 2015 Agency Revolution, All Rights Reserved
How DO you grow an agency?
$5,676,538
1
- 109. © 2015 Agency Revolution, All Rights Reserved
1
+Delight
At Every Stage in the Process
Attract Convert Optimize Retain
The ACOR+ Marketing Model
Prospects Buyers Clients PromotersLeads
C O RA
- 110. © 2015 Agency Revolution, All Rights Reserved
‣ Master Marketing & Get Bigger.
1
- 111. © 2015 Agency Revolution, All Rights Reserved
2
5 Point action plan for success.
‣ Master Innovation.
‣ Don’t Give IntoThe CommoditizationTrap.
‣ (and don’t wait for carriers to fix that for you.)
- 112. © 2015 Agency Revolution, All Rights Reserved
“Price competition,
Porter warns, is the
most damaging
form of rivalry.”
Joan Magretta
Joan Magretta
Harvard Business School
- 113. © 2015 Agency Revolution, All Rights Reserved
Joan Magretta
“Vying to be the best
is an intuitive but self-
destructive approach
to competition.”
Joan Magretta
Harvard Business School
- 114. © 2015 Agency Revolution, All Rights Reserved
Joan Magretta
“Competing to be the
best feeds on
imitation. Competing
to be unique thrives
on innovation.”
Joan Magretta
Harvard Business School
- 115. © 2015 Agency Revolution, All Rights Reserved
2
Innovation demands:
‣ Stop selling on price.
‣ Beware‘Best Practices’.
‣ Be unique.
- 116. © 2015 Agency Revolution, All Rights Reserved
second sub
Body 2
$65 billion...and growing
- 117. © 2015 Agency Revolution, All Rights Reserved
3
5 Point action plan for success.
‣ DestroyThe Old Model.
Carrier
Consumer
- 118. © 2015 Agency Revolution, All Rights Reserved
3
5 Point action plan for success.
‣ DestroyThe Old Model.
Carrier
Consumer
- 119. © 2015 Agency Revolution, All Rights Reserved
3
5 Point action plan for success.
‣ DestroyThe Old Model.
Carrier
Consumer
- 120. © 2015 Agency Revolution, All Rights Reserved
3
5 Point action plan for success.
‣ DestroyThe Old Model.
Carrier
Consumer
- 121. © 2015 Agency Revolution, All Rights Reserved
3
5 Point action plan for success.
‣ DestroyThe Old Model.
- 122. © 2015 Agency Revolution, All Rights Reserved
3
Carrier
Agency
Consumer
5 Point action plan for success.
‣ DestroyThe Old Model.
- 123. © 2015 Agency Revolution, All Rights Reserved
3 CarrierAgency
Consumer
5 Point action plan for success.
‣ DestroyThe Old Model.
- 124. © 2015 Agency Revolution, All Rights Reserved
4
5 Point action plan for success.
‣ Launch A New Academy of
Insurance Leadership.
- 125. © 2015 Agency Revolution, All Rights Reserved
4
5 Point action plan for success.
‣ For insura-preneurs.
‣ That teaches non-insurance business leadership.
‣ With fully credentialed certification.
- 126. © 2015 Agency Revolution, All Rights Reserved
4
5 Point action plan for success.
‣ Curriculum.
‣ Marketing
‣ Innovation
‣ Leadership
‣ Strategy
‣ Thought leadership
‣ Customer experience design
- 127. © 2015 Agency Revolution, All Rights Reserved
5
5 Point action plan for success.
‣ Urgent: Leverage ModernTechnology.
‣ ModernTechnology AttractsYoungerWorkers.
‣ Because it's what consumers want us to do
- 128. © 2013 Agency Revolution, All Rights Reserved
What Makes Consumers Happy?
Channel usage, agent serviced customers.
- 129. © 2013 Agency Revolution, All Rights Reserved
What Makes Consumers Happy?
Channel usage, agent serviced customers.
Overallsatisfactionindex.
Agent +
emerging
852
822
Boomer
GenY
774
743
No
interaction
797
822
Agent only
830
814
Agent +
traditional
810
795
Non-
agent only
- 130. © 2015 Agency Revolution, All Rights Reserved
4 Claims27 Birthdays 27 Renewing in 90 days 31 New prospects 10 New customers
Monday
4 Returning clients8 Lost clients 13 Cross sales 6 Lost policies
Trigger Point Marketing
11 Unclosed quotes
© 2015 Agency Revolution, All Rights Reserved
Agency Management System
- 131. © 2015 Agency Revolution, All Rights Reserved
4 Claims27 Birthdays 27 Renewing in 90 days 31 New prospects 10 New customers
@
@ @
@ @ @ @@ @ @
@ @ @ @ @ @ @
@ @
@ @@
Monday
4 Returning clients8 Lost clients 13 Cross sales 6 Lost policies
Trigger Point Marketing
11 Unclosed quotes
Tuesday Wednesday Thursday Friday Forever
© 2015 Agency Revolution, All Rights Reserved
Agency Management System
- 132. © 2015 Agency Revolution, All Rights Reserved
The Cross Sell Generator
Agency Management System
© 2015 Agency Revolution, All Rights Reserved
- 133. © 2015 Agency Revolution, All Rights Reserved
@ @
@ @ @ @@ @ @
@ @ @ @@ @@
The Cross Sell Generator
Client no life
X noY
Home no auto Commercial no personal
CL no comp
Personal no "toys"
CL no commercial autoAuto no home
@ @ @
Agency Management System
© 2015 Agency Revolution, All Rights Reserved
- 134. © 2015 Agency Revolution, All Rights Reserved
"If all we’re doing is defending the status quo,
the game is over"