PolicyGenius. The Zebra. Insurify. Cover. Trov. Embroker.
It seems every few weeks, a new would-be disruptor of the insurance industry is introduced, attracts funding, and announces itself as the future of policy distribution. Other non-insurance firms are entering the fray, too: Overstock.com began selling auto, home and small business insurance in May 2014 and Wal-Mart made a splash last year by announcing it would offer auto and health insurance through its online platform.
On its face, this seems like a natural fit – after all, 50% of consumers begin their insurance research online and about two-thirds say they would consider purchasing coverage from organizations like Amazon or Google.
What’s more, even small business owners say they would be at least somewhat likely to consider buying insurance policies without the use of an agent, according to a recent survey from Deloitte.
So why haven’t insurance brokers yet gone the way of the travel agent?
A new opinion piece in TechCrunch
, authored by Peter G. Colis – CEO of life insurance exchange Ovid – suggests it has to do with “channel conflict.”
“Incumbent carriers cannot turn their backs on the agent and go direct-to-consumer without the risk of offending their agent networks,” Colis wrote. “So much existing and referral-based business is at stake that most carriers do not allow consumers to purchase insurance online – they make consumers purchase through an agent.”
Colis considers the insurance agent profession to be “largely replaceable with software,” and looks forward to a time when insurance startups out of Silicon Valley disrupt the industry to the point that “new carriers will be born and incumbent carriers will hopefully wise up.”
Those working in the traditional insurance industry, however, say the real situation is not so simple. While acknowledging that there is demand for change in the current distribution system – and even interest from carriers in what these new channels might be – many say that change will come from how agents engage with consumers, not in excising the agent altogether.
“If you look at the number of policies [insurance startups] are actually issuing, it’s miniscule,” said Brian S. Cohen, operating partner at Altamont Capital Partners in California. “What’s happening is that individuals are visiting these sites to get a sense of a reasonable price, but they still want to go to a professional to figure out what’s best for them.”
Current insurance shopping statistics reflect that reality. There are more than 1 million insurance agents working in the US today – more than at any other time in history – and they sell 100% of commercial policies, 95% of home policies and 70% even of auto policies, the most commoditized insurance product on the market.
Even millennials, the most tech-reliant generation yet, still say they want some human interaction when purchasing insurance. In a 2015 survey from software provider Applied Systems, just 35% of millennials had completed their auto insurance purchase online. Another 37% reported buying auto insurance in person.
“The myth says that [millennials] want to do everything online always—that’s just not true,” said Michael Howe, senior vice preside of product management with Applied Systems. “They definitely want to talk to a human, it’s just that they also have a strong preference for different platforms at different points in the shopping and purchasing cycle.”
And as for small business consumers? While the Deloitte report suggests some interest in direct purchasing, the firm believes agents can maintain their hold on the market, provided they meet consumers on their turf and offer more tech-enhanced and value-added services.
After all, nearly half of small business owners say they appreciate the personal service and contact provided by agents. Another 34% value agent knowledge and 15% credited their agents with cost saving.
“It is unlikely that agents and brokers will be significantly disintermediated in the small-business market any time soon,” Deloitte said.
Howe agrees, on an even broader basis.
“A multi-channel presence is obviously important,” he said. “It’s not an ‘or’ question, it’s an ‘and’ question.”