Independent insurance agencies across the country are dramatically less optimistic about their future growth prospects than they were a year ago, a new report reveals.
According to software provider Vertafore’s 2015 Agency Sentiment Survey, optimism about future growth based on year-over-year results has fallen among agencies of all sizes, and particularly among large agencies (earning more than $10 million in revenue), where only 33% claim to be “very optimistic” about their prospects.
That’s nearly a 40% drop since 2014, when 70% of large agencies said they were feeling very positive about the future.
Among smaller agencies there was less of a shift, though levels of optimism remained low. Just 31% of midsized agencies (earning between $1 million and $10 million in revenue) said they were “very optimistic” about their future success, down from 60% last year. And among the smallest agencies (earning less than $1 million in revenue), optimism sank from 25% saying they were feeling positive in 2014 to 11% feeling the same in 2015.
Perhaps consequently, just 29% of all agencies told Vertafore they were focusing on aggressive growth, compared to 42% in 2014. The focus on maintaining current sales levels, meanwhile, jumped to 12% from 5% last year.
The reasons for this drop in confidence are myriad, though the report identifies three trends as among the biggest perceived “threats” to independent agencies: predictive analytics, the entrance of Google into the insurance space and shopping trends of the millennial generation.
Predictive analytics were viewed as the single biggest threat to the future of the agency channel, with 59% of respondents telling Vertafore they were moderately to seriously threatened by carriers who are integrating risk analytics solutions into their business models. In that line of thinking, carriers become more self-sufficient and have less need of the agency channel.
Another major threat expressed by agents is the influx of alternative distribution channels into the insurance space, including aggregator sites like Google Compare and Zenefits, and retailers like Walmart or various car dealerships distributing products. More than half (54%) of agents surveyed now feel moderately to seriously threatened by these new entrants.
Finally, the increase in online insurance resources and the shopping preferences of the millennial generation have agents feeling threatened. A full 48% of agents said they are concerned by this generation’s self-guided purchasing habits and the lack of agency resources to accommodate these preferences.
Guy Weismantel, vice president of marketing of Vertafore, points out that agencies are not standing still, however. Four out of five agencies reported increasing their IT budgets over the last 12 months in order to address these threats, with 47% planning to spend more to advance customer self-service capabilities, while 43% are looking to investments in cloud services and solutions.
Investments in mobile (40%) in the form of mobile-friendly websites and apps are also among technology budgets for agents in 2015.
“The insurance industry is on the verge of disruption in the way we work and do business,” Weismantel said. “New self-service technologies are popping up daily, contributing to the evolving role and future of the insurance agent. Rather than shying away from change, our survey shows that agents are embracing and integrating technologies into their operations to enhance the customer experience.
“The future of insurance is not about displacing the agent; it’s about strengthening and reinvigorating agent services with technology.”
The report, “How Independent P&C Insurance Agencies Thrive in 2015’s Competitive Marketplace,” was conducted in partnership with the analyst firm Aite Group.
