Bothell, Wash. – October 21, 2015 – Vertafore®, the leading provider of software that transforms the business of insurance, today announced the results of its second annual survey, How Independent P&C Insurance Agencies Thrive in 2015’s Competitive Marketplace, conducted in partnership with the analyst firm Aite Group. The key takeaway this year reveals agencies of all sizes are less optimistic about future growth based on year-over-year results, with the biggest drop in sentiment coming from large agencies where only 33% claim to be “very optimistic” compared to 70% in 2014. The primary culprits driving industry uncertainty are carrier adoption of predictive analytics (59%), Google’s entry into the insurance market (54%) and self-directed preferences of Millennials (48%). To negate market threats, the majority of large agencies reported an increase in technology budgets, specifically for self-service, cloud and mobile technologies. Meanwhile, small agency technology budgets remained stagnant near 60%, and the group of “very optimistic” agents dropped from 25% to 11%.
Aite Group conducted the survey among 200 US-based P&C independent insurance agencies during September 2015. The following survey findings uncover key factors impacting agency optimism year-over-year, in addition to strategies used to combat new market threats or disruptions.
Large Agency Optimism Nose Dives, While Small Agencies Maintain Status Quo
The dramatic drop in overall optimism suggests that the ripple effect of the industry’s ongoing digital disruption has finally permeated the entire independent agent channel. The most notable shift in optimism and growth projections year-over-year was among large agency respondents, revealing a 53% decrease in the percentage of “very optimistic” respondents (from 70% last year to 33% this year). In contrast, findings show only slight differences in sentiment among the total number of smaller agencies year-over-year (25% to 11% “very optimistic”), implying they’ve already been dealing with the disruption. Similarly, only 29% of all agencies, regardless of size, are now focusing on aggressive growth, compared to 42% in 2014. The focus of maintaining current sales levels jumped up to 12%, up from 5% last year.
Predictive Analytics, Google and Millennials Pose the Biggest Threats
Of the dominant threats identified in the survey, agents of all sizes singled out predictive analytics as the biggest threat to the future of their business, with 59% moderately to seriously threatened by carriers integrating risk analytics solutions. The worry stems from carriers becoming more self-sufficient, further displacing the independent agent.
Another major threat expressed by respondents is the influx of new market entrants providing access to insurance products and information to consumers online. Examples include companies outside of the P&C industry providing competitive insurance products like Walmart and car dealerships, as well as new premium aggregator websites like Google Compare and Zenefits. More than half (54%) of agents surveyed now feel moderately to seriously threatened by these competitive newcomers.
The uptick in online insurance resources is driven by new digital demands from the next generation consumer. In fact, Vertafore’s survey found 48% of agents feel threatened by the self-directed preferences of Gen X and Millennials as it relates to the agency’s ability to keep up with digital demands in the future.
Investment in Technology Helping to Reverse The Doom-and-Gloom
To address key threats, four out of five agencies reported increasing their IT budgets over the last 12 months. Midsize and large agencies are planning to invest in technology budgets to drive productivity and enhance customer engagement. This year’s survey identified advanced customer self-service capabilities (47%) including websites and IVR, as well as investments in cloud services and solutions (43%) as primary drivers for budget spend within the next 12 months. Investments in mobile (40%) in the form of mobile-friendly websites and apps also made the list of technology budget priorities.
Surprisingly, agents are welcoming the emergence of usage-based insurance policies such as Progressive’s SnapShot, through which consumers receive discounts for good driving behavior. Half of all agencies feel the introduction of usage-based insurance policies will have a positive impact on their business, with only 11% predicting it will have a negative impact. Agents likely view usage-based insurance policies as a value-add opportunity to more effectively meet customer demands and attract prospects. In fact, Vertafore’s survey found more than half (56%) of agents have already seen increases in customer inquiries for such policies, and 62% expect demand to increase.
“The insurance industry is on the verge of disruption in the way we work and do business,” said Guy Weismantel, vice president of marketing at Vertafore. “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.”
About Vertafore
Vertafore’s comprehensive insurance management software solutions lead brokers and carriers to adapt to an evolving insurance industry to efficiently scale their businesses through deeper access to information and insights. The Vertafore product line is built on a platform, empowering customers and other solution providers to adapt and thrive as the market changes. Vertafore’s platform features fast innovation, partnerships with the best technology companies, and customizable solutions to help companies remain independent during a time of industry disruption. As the leader in modern insurance technology with the largest customer base in the industry, Vertafore connects every point of the distribution channel, from agencies and carriers to MGAs, MGUs, and state governments. For more information about Vertafore, visit www.vertafore.com, read the company’s blog, and follow the company on Twitter, Linkedin, and Facebook.
About RiskMatch
RiskMatch is a business intelligence and analytics company that delivers a suite of web-based solutions for insurance brokers and underwriters throughout the U.S. Its patented platform delivers an array of portfolio management, analytic and data management services designed to enable brokers and underwriters to enhance performance, reduce costs, facilitate growth, and improve their client service capabilities. For more information, visit the RiskMatch site.