Is There a Future for Insurance Service People?

The insurance agency has people who sell policies, and those who service customers.  The latter, called CSRs or CSAs, are the backbone of the business. As we know them, CSRs or CSAs are dead men and women walking.  The traditional agency customer service person has no long-term future.

The traditional tasks of providing transaction oriented service to customers like policy changes, endorsements, certificates, claim reporting, and the like, can now be faster, more convenient, and far cheaper by insurance company service centers.  Consider that service centers can react to customer needs 24/7/365, are never sick or on vacation, never on break, tied up on the phone and speak whatever language the customer prefers, among other advantages.  They have no reluctance to ask for additional business, and have made a science of account rounding.  And they do it very cheaply.  Service centers cost agencies about 13% of revenue, compared to about 25% of revenue, for an agency service employee.

If that isn’t convincing enough, please click to see the CSA of the very near future.  Using computer generated graphics, artificial intelligence, and machine learning “digital humans” can now perform all the tasks of a CSA in an almost indistinguishable way for a human being.  Who needs to pay for office space or manage the issues of human service employees?  Who needs a call center full of telephone operators for that matter?  By 2020, you can have your service people loaded on your laptop.

This is truly amazing.  But, it isn’t the future, it’s now.  These robots can handle complexity far beyond what is required by agency service people.  You can read more about that in a recent “FastCompany” article.

Insurance agency owners may not be the most forward-thinking people, but they already get it.  According to most respondents, to this Safeco’s survey on the future agent, the role of CSR and Producer are merging (read about it here).  That’s because it’s obvious that service will continue to be automated, and the role of agents and agencies will be focused to an increasingly high degree on sales going forward.

This does not mean these valuable people will all be wasted, only that their role’s, and their daily work must change.  They must become proactive nurturers of relationships, instead of processors of transactions.  They must master cross selling to deepen relationships, and they must be competent creators of new business.   I believe those talented, skilled, and experienced people, who make the transition to new roles, have an even bigger future.

Those that do not, will need to begin to think about a career somewhere else.

What Can We Do About It?

Last time, I wrote about two facts that call into question the continuing value of insurance agents in the sale of insurance.  One impacts their utility for carriers and the other customer.

To read that blog please click here.

These two facts ought to disturb every agency owner.  But, do they mean the end of the business?

I don’t think so.  The fact that insurance companies can do a better job of predicting loss based on an algorithm rather than an agent’s knowledge isn’t news.  The idea that you can drive growth with advertising is also ancient history.  The fact that an insurance customer will shortly be able to get a quote in nano seconds, by typing their address in a Google search window, doesn’t mean agents are obsolete.

It just means agents must change what they do to continue to create value.

The task bar search and quote capability are exciting to me.  As a commercial insurance agent, it means that I can eliminate 5 to 10 hours of work for myself and a CSR to get a quote done for a prospect.  That will potentially free up hundreds of hours a year!  I can spend that time prospecting for even more customers, or I can spend that time really getting to know the customer.  Isn’t that what relationships that last are built on? Both things will help me make even more money, by helping more people in the future.

I remember 1982, when personal computers first started becoming widespread.  There were many predictions that massive unemployment would be the result.  The outcome was massive productivity gains, followed by rising incomes.  I believe these new technologies offer the promise.

Are agents worthless to insurance companies, in a future where algorithms give better underwriting results?  I think they are worth more.

The biggest value agents have always represented is putting the business on the books.  As agents have more time, due to automation, they can drive even more business, as I describe here, for their carriers.  To pay for the new technologies, carriers will require ever more revenue, and this plays to the agent’s advantage, if she uses the freed time to be an even better prospector and relationship builder.

However, agents who don’t adapt their business models very quickly will find that they have no place in the very near future.  Agents who are slow to change, won’t be just left behind, they’ll be left to die.  For entrepreneurial, risk taking, experiment making, agents we are preparing to enter a gold rush.  For everyone else, the golden days are now officially in the past.  Which kind of agent are you?

Where We Are Now

I’ve been writing about the future of insurance distribution here for some time. My goal has been to help agency owners think about the future and prepare for it. I’m not interested in doom and gloom, and in fact think the future has more possibility than the past. Putting my money where my mouth is we’ve created two new agencies this year, with different market focuses, and hired 20 new team members.

In the November 6, 2017 issue of the, “Insurance Journal” Chris Burand (who is an industry financial analyst and consultant) writes that insurance companies have now reached the point where they no longer need agents to do their front-end underwriting for them. He points out that carriers, who do not use agents, who spend more on advertising get better growth rates. Not surprising. But what is shocking is that apparently, they get better underwriting results as well.

That is huge.

If agents can’t deliver better underwriting numbers than a computer, and if it’s cheaper and more effective to boost advertising instead of paying agents to sell, why do insurance companies need insurance agents?

I recently saw a demonstration by one of the country’s largest carriers where typing a business address into a search bar, resulted in an instantaneous quote for most of the business’s coverage needs. This is done by applying the same smart underwriting algorithms Burand refers to in his article with software that pulls in the aggregated data collected by third party data providers (in case you don’t know virtually everything about everyone is known, tracked and for sale). This technology is estimated to be mainstream within 24 months.

If customers can get a quote for their complex business insurance needs, why do they need an insurance agent?

Some agents still believe these developments are far in the future. They aren’t. They will be impacting agency operations in the next couple of years.

Is there a future for agents? I’ll look at that next time.

Ten Thousand Experiments

In my blog on September 8, 2017, I talked about the commitment of time required to become an “expert”.  As you may recall I quoted Malcom Gladwell, author of, “Outliers” who says that extensive research shows it requires 10,000 hours of practice to achieve expert status.

Michael Simmons, serial entrepreneur and author of the blog, “The Mission,” has an entirely different take on this.  In fact, he believes that, “deliberate practice may help you in fields that change slowly or not at all, such as music and sports.  It will help you succeed when the future looks like the past, but it’s next to useless in areas that change rapidly, such as technology and business.”

The insurance agency industry is in the midst of rapid change.  No one can deny that.  In fact, according to many observers, more change will occur in the next five years than has in the last fifty.  So, should we be focused on 10,000 hours of practice, or as Simmons says, “10,000 experiments?”

Simmons argues that all successful entrepreneurs, and he cites examples from Edison to Zuckerberg, owe their success to constant tinkering, experimentation and innovation.  He points out that instead of maximizing time, we should be maximizing experiments.

Of course, in mature industries like insurance, and insurance agencies, there is a strong bias against change.  In, “CounterPoint,” an industry magazine, published industry mergers, acquisitions and management consultant MarshBerry pointed out that there has been no investment whatsoever in “insuretech,” by anyone in the insurance distribution (agency) industry.  Up until very recently this was also true with respect to insurance carriers, but they are now rapidly making investments in technology, startups, and other experimenters, because they now believe that experimentation and innovation are increasingly important to their future success.

As our industry rapidly changes, due to technological disruption and fast moving consumer changes, I think that Simmons has an important point for all of us.  In my own company we have adopted an attitude that failing forward (the process of rapid experimentation and declaration of victory when we are either successful, or have learned something valuable even in defeat), is the key to our future success.  I see in our agent partners an increasing willingness to step out of business norms and try new approaches.  I find this encouraging.

If you’re interested in reading more about Mr. Simmons viewpoint you can find it here:

“Plant Acorns Before You Need Oak Trees”

Tyler Asher, the new President of Safeco Insurance Company, made the headline statement in his speech to SIAA’s semiannual meeting in Boston.  His comment was made in the context of a listing of things his company is working on to sustain their growth and prepare for a future insurance market, much different from today’s.

If you just take the statement at face value it makes a lot of sense doesn’t it?  Of course we must all prepare for a bigger future if we want one, and an oak is a great symbol of strength and stability.  I was immediately captivated by the idea.

But, where the analogy breaks down for me is that it takes a long time to grow oak trees, and the future is coming upon us with breathtaking speed.  Do we really have time to grow oak trees?

Then I thought again about Jeff Bezos’s quote I wrote about recently where he says, he is more concerned about what stays the same the next 10 years, than what changes.  I’ve decided that it’s the intersection of Asher and Bezos where we as independent agency owners need to focus.

For example, it’s estimated that 60% of the employees in our industry will retire in the next 7 years, and if you believe “Outliers” author, Malcom Gladwell, it takes at least five years (10,000 hours) to train an expert in anything.  I believe, channeling Bezos, that customer service and person to person selling will be as important to agency success in the future as it is now.  So, how are we going to replace the oak trees (people) in our industry fast enough to secure our future?

I don’t have an answer.  But, it’s an incredibly important question for anyone who plans to continue to make this industry their career in the decade ahead.  In our organization we are creating a streamlined training curriculum coupled with third party courses and old fashioned apprenticeship to meet our needs for new blood.  Frankly, it’s expensive to do this.  But the only other options are to hire other’s problems (which is getting harder and more expensive to do) or go out of business.

The need to invest in new people comes while commission compression and new competition, in the form of online sellers, are beginning to stress some agency income statements.  As Tyler Asher points out, you must prepare for the future if you want one.  Viewed in this way, the spending on new employees is an investment, not a cost, and the promise of the future is a profitable business built for the long term.

Pain and Opportunity in Auto

As virtually everyone in the insurance industry knows, insurance carriers have been taking a bath in both commercial and personal auto, during the last year.  In several recent meetings I’ve attended, the message that rate increases are going to continue into the foreseeable future, has been loud and clear.

While losses are still developing (and growing worse) for 2016, the early results for 2017 do not look better.  Depending on which set of statistics you review, combined ratios for the industry are running somewhere between 107% to 111%.  Given that carriers need them to be 92-95% or lower, to make a profit, you can easily see the premium increases must continue.  In fact, one analyst opined that we need 25% to get out of the hole, and even with double-digit increases that we should expect to see, combined ratios continue to run 103% or greater for at least the next three years.

The drivers of these results are: increased frequency due to low gas prices, distracted driving (texting), and a dramatically increasing cost of repair (those back up cameras and computerized cars are expensive to fix).  It doesn’t look like there is much in those cost drivers that are likely to change.

As agents we experience and share in our customer’s pain. We certainly have a difficult task ahead to continue to explain these realities to frustrated or angry customers. Profit sharing is taking a hit for many agencies, too.  That’s the pain part.

We also have a lot of opportunity because of the auto market’s condition.  In the first place, agents are all getting a pay increase in the form of higher commissions, and smart agents are locking in customer loyalty by getting ahead of the PR battle and helping customers understand and cope with what’s happening.  Now is a great time to show how you’re different, with great, personalized, advice for each customer.  For independent agents, it’s time to increase market share against captives with greater choices to offer (and the stats bear out that this is happening).

So, auto market conditions are a mixed blessing, but on balance, good for good agents!  The one caveat I offer is, with increased commission income on existing business, comes the risk that prospecting for new business will get ignored and poor retention practices will get camouflaged.  I’ve seen this a lot over the years. It bears remembering, in our industry what goes up, doesn’t forever, it comes back down too.  Also, if you’re not growing PIF, you’re not really growing.

An Agent for the Future

In my last blog, I quoted Jeff Bezos, CEO of Amazon, regarding the future. Taking a cue from him, I expressed great optimism in the future of the insurance agency business! And I’m putting my resources behind that belief by investing in brand new insurance agencies: 25 so far this year.

As optimistic as I am, I also strongly believe that agents, and agencies, will need to be much different over the next decade than they are today to survive and thrive. I’ve written here a lot about what I think that looks like (please feel free to use the search feature for blogs on this or other topics). Safeco Insurance Company has recently released a white paper based on their research about what it will take to be successful as an agent in the future. It’s available for download here:

Read Safeco Insurance’s report: What it Takes to be an Agent for the Future, by clicking on this link.

Here are some interesting, and salient, points raised in the report:

– The responsibilities of producers and CSR’s are merging. CSR’s will be less involved in routine servicing and more involved in selling (which implies a different set of skills will be needed).
-CSR’s will need to be able to sell multiple lines of business and answer questions without passing a customer to someone else.
-Agents will need to embrace online account management and self-service (two of the top demands of millennial customers).
-Owners need to learn how to effectively hire and manage millennial employees (58% of all new agency hires are millennials).
-A growth focus will be required. Agencies that define themselves as “service” organizations as compared to “sales” organizations will have more difficulty.
-Agents are embracing technology: 60% use e-sign, 61% provide online quotes and 60% text with clients.
-Technology is critical to hiring millennials (81% say the kind of technology offered by an employer affects their decision making according to a Dell study).
-Agents need to rethink their position on after hours and weekend availability as only 56% of agents plan to offer what customers are demanding.
-17% of the U.S. population are Hispanic and this segment is growing yet only 14% IA’s surveyed by Safeco believed that this growth could have an impact on their business.

There is a lot more and I encourage you to read the full report. More importantly, though, I encourage you to think about how the business and consumer are changing and the strategies you want to employ, in order to continue your success into the future. No agent has to do everything, and none of us has to do it all at once. The key is to pick one area to improve, make it a focus, add it to your business and then pick the next one. What is your first step into the future going to be?

Listening to Jeff Bezos

(AP Photo/Ted S. Warren)

I’d like to quote the founder and CEO of one of the world’s largest and most valuable companies:

“I very frequently get the question: ‘What’s going to change in the next 10 years?’ I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two – because you can build a business strategy around things that are stable in time.”

There is a great deal of angst in the insurance business over what the future will be like.  Many even worry about the survival of the local independent agent as a species!  Perhaps this is why people who work in our industry are headed for the exits in unprecedented numbers (60% will “retire” in the next 7 years according to one estimate).  I’m not one of those.

I think Bezos’ second question ought to make all of us stop and think.  Here is what I believe will not change in our industry over the next ten years:

  • People will still need insurance because fires, tornadoes, hail and accidents aren’t going away.
  • Insurance companies will still need to sell it (and they aren’t going to be replaced by tech startups).
  • People will still need advice and want to get it from someone they trust (and not an algorithm).
  • People will still want to pay as little as possible for what they need.
  • People will want increasingly to deal with insurance, as everything else, when convenient to them.

I’m as bullish on insurance as Bezos is on groceries!  I believe that agents are still going to be needed and that customers will still want great service, low prices, choices and someone to put them back together again after a disaster.

How all of that gets delivered is going to change, and we need to continually evolve our businesses as new technology and changing customer demands require it.  But we’ll still be here.

Practice Creates Proficiency


In my last two blogs, I have written about how long it takes to become an expert at something.  According to Wharton Professor Adam Grant it takes 10,000 hours.  Years in fact.  I have also noted that this meshes with my experience as a commercial insurance specialist.  But, as I have also pointed out, proficiency until mastery comes is what allows us to make a living, be successful and serve our clients well.

Proficiency, though, requires practice.

Actually so does mastery.  It’s interesting I think that lawyers work in a “law practice” and doctors, no matter their experience, “practice medicine”.  They also continue to train in their profession.  As I write this I am awaiting my instructor for a day of “recurrent” training in my airplane.  Pilots too must train and practice to maintain and increase proficiency.

While I wait, I’m a bit nervous.  Am I as proficient as I hope I am?  While not a test, I know the day will reveal any weaknesses I have.  On the other hand I am looking forward to the experience because I know I will learn some new skill, hone my ability in other areas, and be better when I leave than when I started.  This is what I think a professional in anything does. Practice to proficiency.  Work on making continual progress on developing skills and hope to eventually to demonstrate the mastery of the expert.  At my training, I know we’ll also review accidents.  All of the accidents we review will be pilot failures where practice and proficiency were ignored.  Even by experts.

Those who want to become successful insurance agents and agency owners don’t need to wait to become experts.  But they must practice to gain and maintain their proficiency just as other professionals due. Unfortunately, I frequently see agents who just “wing it” and hope for the best.  Effective practice requires a plan, a briefing of what is to be done and a post practice review and evaluation.  This is what pilots do before every flight and what other professionals due each time before “practicing” their craft.  When they become “expert” they may forgo the checkList in favor of a flow but never the planning, practice Itself or the review.

How about you and your agency?  Are you already an expert or working your way to proficiency? Regardless of your development I encourage you to continue your practice!




One of the things that always provides amusement, for older people, is to hear children plan to do something difficult and complicated.  Their plans are always simple and underestimate the difficulty and time required.  This is because children are natural optimists!

I find that insurance agency entrepreneurs are also optimists, and occasionally share the lack of understanding of the difficulty of doing things that our younger selves did.  This is a tremendous advantage for them because it allows them to try things, and become successful, when others are fearful.

For example, the successful personal lines producer, who sees greater opportunity and income in commercial lines, often underestimates the complexity of the business, and thus, the time required to master it.  The good news is that mastery isn’t required for success!  As I noted last time, mastery seems to take about 10,000 hours of practice, which can take many years.

Proficiency is required to achieve success.  While less costly in time and money to obtain, it isn’t cheap or inconsequential.  Proficiency can be defined as, “a high degree of competence or skill.”  To acquire proficiency in anything requires effort.

I spoke to a highly intelligent and driven young man, several years ago, who wanted to immediately begin his career in insurance as an agency owner specializing in commercial insurance.  I pointed out that all professionals require a great deal of training and usually a lengthy form of apprenticeship before being able to competently work in their field.  As examples, I pointed out doctors, lawyers, and engineers, all of whom study for years, and then work under close supervision for many more years before working independently.  Only when they achieve proficiency are they free to go their own way.

In my experience, commercial insurance is similar.  A talented person can make a living in commercial insurance from the beginning, even though they aren’t skilled or proficient, just as a young doctor can earn a living doing simple tasks while learning the complex.  The difference is that the doctor is supervised in his lengthy training by other doctors whereas the young insurance agency owner may only be supervised by his unsuspecting customer!

Our business is a profession, and requires that we exercise due care to calibrate our business to our knowledge and ability, not to do harm to our customers through unnecessary mistakes.  As we gain proficiency we can work on increasingly complex risks, but we do our own development, and our customer’s finances harm, when we work outside our own proficiency.

Expertise in the field of commercial insurance takes at least 10,000 hours to develop.  Proficiency in a limited area of the field may only take a few dozen hours.  Luckily, we can build an income, and a business, by being proficient in limited ways until we are able to become expert in many!