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 Big “I” National News

Legislative Conference & Convention
Cantor, Tester Address Big “I” Members
Legislators share thoughts on economy and regulatory environment.

Health care, the economy and insurance regulatory reform: those were the topics that were front and center during the 2009 Big “I” National Legislative Conference Breakfast. Attendees heard remarks from House Republican Whip Rep. Eric Cantor (R-Va.) and Sen. Jon Tester (D-Mont.) before heading to Capitol Hill to lobby lawmakers on issues important to independent agents and brokers.

Cantor, who was hailed by Big “I” President & CEO Bob Rusbuldt as a “rising star” in Congress and the new face of the Republican Party, thanked attendees for their presence and their role as advocates for customers’ needs. 

“Your being here is very important,” Cantor told attendees. “We’re at a cross roads. I urge you to demonstrate that when you’re talking about being an independent agent, connecting your clients’ needs with products out there is very important. A free market and a competitive situation is how you deliver and get the economy back again.”

Cantor also spoke about health care reform, noting that the doctor-patient relationship must drive health care reform and urged Big “I” members to deliver that message while on the Hill.

“Health care affects everyone…and we have a marathon race between two very different visions,” said Cantor.  “One is 100% coverage. But when we approach health care reform, think of the single mom...She wants the ability to choose her doctor, the ability to make sure her children can see pediatricians and the ability to choose a specialist for an elderly parent.”

Rusbuldt introduced Tester as a lawmaker who understands the needs of the small business community, including independent agents, farmers and entrepreneurs. Tester was recognized for his longstanding commitment to insurance regulation that works for both consumers and businesses.

Specifically, Tester stated his belief that regulation of insurance should remain at the state level, “just as it has for the last 140 years.” Tester, a farmer and former music teacher from a small town, said he is working on the Senate Banking, Housing and Urban Affairs Committee to put “common sense regulation” back into the financial sector.

“Expanding federal reach is not always the answer,” he said. “We need to focus on targeted reforms and pass smart regulation that helps consumers. We need to regulate exotic securities, limit fees charged by credit card companies and ban sub-prime mortgages.”

Tester compared the ideal role of financial regulators to referees on a basketball court, stating that the best referee is the one who does his job unnoticed and sets ground rules to ensure a fair game for all players. 

“For the financial markets, we need to put the referees back on the court,” Tester said. "We need to put middle class families and small business ahead of Wall Street CEOs, and I want to work with you as we re-work Wall Street.”

Veronica DeVore (veronica.devore@iiaba.net) is Big "I" writer/editor.

P&C Trends 
Online Insurance Market Continues to Grow
Agents capitalize by understanding significant trends and customer needs.

Online insurance sales have seen unprecedented growth in the past year, with online auto policy sales up 7%, and a 71% increase in shoppers looking for insurance over the Internet, according to recent reports from research companies ComScore.com and All Web Leads. Insurance agents can position themselves to benefit from this trend by understanding the unique needs and qualities of customers seeking insurance online.

The 7% rise in auto sales reported by ComScore.com represents policies sold by five aggregator Web sites and 12 insurance company Web sites that include both direct writers and agent-based models. The data from All Web Leads is based on about 2.9 million consumers who searched for insurance online and requested contact from an insurance agent. While some online insurance searches exclude agents, many rely on an agency’s ability to provide online quotes quickly and easily to a variety of demographics.

Younger adults (ages 18-34) have a significant online presence, representing 48% of online insurance customers. However, customers older than 35 actually represent the majority of online customers at 52%. According to All Web Leads, each category of online customers requires a different form of attention from insurance agents. Whereas younger customers are often best reached by e-mail and social networking tools, those older than 35 have already done business in more conventional ways and are looking for both a personal business relationship and fast results.

All Web Leads reports that 63% of customers seeking insurance online searched for health insurance, while 32% sought auto coverage and 5% looked for life insurance. Life insurance had the largest uptick in online customers, increasing by 109%, followed by auto insurance at 89% and health insurance at 62%.

Although the most online requests for insurance occur in the largest states, the number of requests adjusted for relative penetration is actually higher in smaller, more rural areas. PPeople in smaller states are proportionally more likely to look for auto and health insurance online, which suggests the Web is penetrating some markets traditionally held by agencies.

Grier Bomar, secretary-treasurer of George Johnson Insurance in Spartanburg, S.C., says his agency differentiates itself from the online marketplace by focusing on selling multiple policy accounts, which many Internet sites do not offer.

“We want to write more than one line of business, and we want that account to stay with us longer,” he says. “While it may be that we’ve seen some erosion from online policy sales, it’s negligible.”

Bomar admits, however, that competing with the online insurance marketplace presents some challenges. Customers who expect rapid service and quotes on the Internet expect the same from agencies, and Bomar’s agency makes prompt responses to customer inquiries a top priority.

“If we get a request, our employees are under instruction to go to that person as quickly as possible,” he says. “It’s a different buying mentality. One customer recently moved her auto insurance to GEICO and when I asked her why, she said she can get them on Saturday afternoon. One way we can combat that is to be as quick on the uptake as possible. You can’t call a customer back three days later and expect them to buy from you.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.


 

P&C Trends 
The Softest Market Ever
Agents feel the historic pressure on pricing.

P-C net written premiums are down for the second year in a row—something the insurance industry hasn’t seen since the Great Depression.

In April, A.M. Best and the Insurance Information Institute (III) released their initial summaries of 2008 year-end, property-casualty industry results. Both industry watchers cited the decline in p-c net written premiums of about 0.5% for 2007-2008 and a decline of 1.5% for 2009.

Independent agents who feel the soft market every day because of its effect on commission income may feel as though the decline has lasted much longer than two years. Examining year-to-year percentage changes in premiums can be misleading, particularly in a long-term historical context. For example, $15 in 2009 is the equivalent of about $1 in 1933, a 1,300% difference. Assessing changes in premiums year-by-year and ignoring the impact of price changes minimizes a more dramatic effect. The current soft market actually feels a lot softer than two years of overall decreases in net written premiums indicate.

 
Source: A.M. Best Aggregates and Averages, U.S. Census and U.S. Dept of Labor 

Examining the chart above, the same written premiums cited by A.M. Best and III are adjusted for inflation to equivalent dollars based on the year 2000, which is a year economists typically use to “normalize.” Then, to provide a more accurate sense of what prices feel like on an account-by-account basis, the adjusted NWP is divided by population estimates for the United States in each year. The graph clearly indicates that the current soft market is not only the steepest in history, on a per capita basis, but is also just as long as any soft market thus far.

Paul Buse (paul.buse@iiaba.net) is president of Big I Advantage^SM and a licensed p-c agent.


L&H Trends 
Business as Usual
Agencies need to keep up with the rapid pace of innovation, customer demands.
 
The pace of innovation continues to evolve and grow, and while many businesses may pass off some of the emerging social networking trends such as YouTube, Facebook and Twitter as fads, the reality is that independent agents need to understand these capabilities in order to ensure the future viability of their businesses. Many agency principals’ first reaction to these new tools is that their agency has been on Main Street in their community for 100 years and that face-to-face relationships can never be replaced. While personal relationships will always be important, there is a wave of people both young and old who are utilizing these tools in their daily lives.
 
Consider the plight of many travel agencies in the late 1990s that had been in business for many years with a lot of goodwill. While some still survive today by focusing on travel packages, there is little doubt that Web sites like Expedia, Priceline, Travelocity and Orbitz have changed how people book their airlines and hotels for basic travel. In fact, Priceline currently has a market capitalization of $3.7 billion. As a result, many travel agencies have gone out of business.

The explosion in online travel booking was made possible by technology and consumers embracing online business transactions. Of course, purchasing insurance is much more complicated than booking a trip. However, as direct writers like GEICO partner with major homeowners carriers to provide one-stop auto and homeowners insurance, direct writers’ personal lines market niche can be expected to grow.
 
Travel agencies are not an isolated example. The Wall Street Journal reports that e-books are gaining market share. Imagine the potential impact on independent book stores that already have to compete with the big box stores and are greatly dependent on their regular readers. Now, Amazon's e-book, the Kindle, enables  readers to not just to read an entire book online, but also allows the customer to easily browse thousands of book offerings. As more books are offered, and people become comfortable with the technology, digital reading will become a burgeoning market niche.
 
So, what are the implications of rapidly evolving technology for independent agencies?  Technology is not the enemy and that online competitors don't have to result in lost personal lines market share. However, agencies need to embrace technology and social networking to allow them to convey important information to current and potential customers. Agencies already use agency management systems to run their agencies more efficiently. Companies now offer agencies the opportunity to provide 24/7 service to their customers, provide real-time certificates of insurance, allow customers to update information and provide comparative rate quotes and search engine optimization (SEO) services. The Big “I” Agents Council for Technology (www.independentagent.com/act) has published a plethora of helpful information that agents can use to utilize technology to advance their business objectives.

Over time, consumers will continue to evolve in their purchasing habits, so agencies will need to use ever-evolving technology tools to win. Embrace technology to meet and exceed your customers’ needs.

For more information on how Web 2.0 technologies can benefit your agency, read “Find Us on Facebook” in the May issue of IA magazine.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and IA l-h contributing editor.


Agency Management
One Agency’s Tips for Selling on the Internet
Superior service is the key to online sales success.

Gary Savelli is an agent who really "gets it" when it comes to Internet sales. He understands why the Internet can be a valuable sales tool, and he also knows how to use it to its full potential.

Recently, Savelli’s conservative estimate of commission income just from his Web site was in excess of $100,000; most agencies probably aren't netting 10% of that amount in premium income from their Web sites. In just a few months, Savelli's four-person agency booked more than 100 policies and, since he likes being a small agency, he has cut back to about 50-75 policies a month by not updating his Web site on popular search engines.

Savelli launched his Web site by marketing non-standard auto coverage. Since that time, he has targeted homeowners, special event coverage and bonds, finding success in each market by learning how to build content that interests a particular market segment and becoming an expert in "manipulating" search engines to drive traffic to his Web site.

Despite his slogan “lowest prices on the Internet,” Savelli has discovered that it isn't the lowest price that closes the deal, but the promise and delivery of superior service that distinguishes him from his  online competition. 

"I would say 50% of people I quote have also checked elsewhere on the net,” says Savelli. “When I come back with superior personal service, quick response via e-mail, have a toll-free number for them and tell them I can place coverage instantly in most cases, I get the sale. One way not to be successful on the net is to deliver the 'ordinary.' My average client is shocked that I know their names when they call, and sometimes even where they live or what car they drive. I am firmly committed to this point: Insurance on the Internet will never be fully automated, certainly not for the average broker or agent. People need to talk to someone who cares, and when you merge a personal touch with a technical edge, you have a winner."

To visit one of Savelli’s's low-tech and low-cost, but highly effective Web sites, go to www.basicwest.com. To learn more about how Savelli sells on the Internet, visit his marketing site just for independent agents at www.insurance-web-sales.com. This site also provides details about a book Savelli recently published entitled, "Selling Insurance on the Internet."

To read the entire article, click here. 

Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University.