Insurance agents are weary and wary of their current crisis/adventure. As if the recent upheavals in insurance products, technology and distribution channels weren't unbalancing enough, the Gramm-Leach-Bliley Act has shifted the ground from beneath their feet. For some agents, the one-two punch was fully felt when mega-agency call centers and Internet-based transactions sprang up.
The Crisis
Several factors contribute to the current painful state of many agents. The regulatory changes only reflect the larger challenges of the New Economy.
- Challenge 1: Regulatory Transition. The passage of the Gramm-Leach-Bliley Financial Services Modernization Act (GLB) realigned financial services delivery across the insurance, banking and securities industries. The Act preempts state laws that limited licensing of insurance product sales to agents and brokers. It also permits new alliances among the three industries for the delivery of complete financial service packages to clients. (See the Gibson Dunn Institute site for a summary of the Gramm-Leach-Bliley Act.)
At the state level, regulatory adjustments to the Internet economy are being made state-by-state. Specifically, individual states are reviewing and gradually accepting digital signatures and some forms of electronic contracts.
The disarray in regulatory adjustments reflects the continuous state of change in e-business technology and Internet security enhancements, as well as the impact of GLB.
Visit the Independent Insurance Agents of America site for "Future One" research and findings on the confluences affecting the insurance industry and their impact on regulatory change.
- Challenge 2: Technology Rules All. Because of Internet technology, consumers are deluged with options and conveniences. Shortcuts range from term-life call center sales, to banks' one-stop-shopping Internet sites for personal finance. Workplace online benefit renewal systems also influence user expectations of convenience. Clients expect current coverage information and selection criteria (if not their transactions) to be delivered instantly. Besides requiring lower-cost coverage (and therefore lower overhead), customers seek a holistic package approach to personal financial products.
Exclusively Web-based transactions won't suffice for all insurance needs, though. Not all decisions are as simple as choosing the best price. Middle- and upper-income clients still have advisory expectations. Because the available cross-industry financial choices are growing more complex, the advisory role of the agent won't disappear.
The virtual insurance company (VIC) has been evolving for some time. Virtual storefronts are displacing brick-and-mortar agencies. From products to pricing to promotion and distribution, the Internet has changed the face of every business and profession. The accelerating e-business culture will only increase the encroachments and alliances among industries.
It is becoming commonplace for insurers and large agencies to provide portals and Web presence for individual agents. Affiliation sites such as Channel Point provide agents with the electronic resources and connecting points to do business. Prudential also provides a Web presence for agent linking and evolving software by companies such as Lucent Technologies makes much of this type of networking possible.
- Challenge 3: Encroachment. The new sources of competition have come riding into the breach created by pre-Internet regulatory legislation and slow and costly product delivery in the insurance industry. Alternative distribution channels sprang up overnight from the finance world's strong technology infrastructures, including banks, mutual funds, stock brokerage firms and financial planners.
- Challenge 4: Disintermediation. A technology-influenced source of competition to agents comes from within the insurance industry itself, in the form of direct distribution of products to clients. To remain competitive with one another, insurers have embraced mass sales. Call-center operators, sometimes supported by simultaneous Web navigation, incur far less expense for both consumer and insurer than do commissioned agents.
"Disintermediation " sounds like a surgical procedure. It is having a like effect on agents. Big call-center brokerages are snuffing middle-market agencies for some products like auto and term-life insurance. National Underwriter, in its January 3, 2000, publication, decries the fact that the percentage of sales from agents is declining as those from other channels increases. Indeed, many agents have "reincarnated" to become registered representatives such as stockbrokers, mutual fund salespersons, financial planners and personal bankers. They still sell life insurance, but other financial products contribute more to their livelihood.
How could such an advisory, relationship-based profession become so seemingly compromised? And how might all these changes be viewed as challenges that agents can hope to tackle? The solution lies in adapting to change and accepting the tech environment.
Choose Your Own Adventure
A series of books entitled Choose Your Own Adventure allows preteens read a story to a certain point and then offers them the choice of how they want the story to continue: readers skip to "x" page if they choose the mountain escape or "y" page for a sea rescue.
Like the telecommunications and utilities industries, the insurance regulatory environment reveals a future of wide-open competition for agents. Like all other industries, there are plenty of products and markets from which to choose an adventure. Only those willing to retool, however, may embark.
In the present volatile climate, the operative words for insurance agents remain the same: research, advise, customize, repeat business. The agent's stock-in-trade always has been the ability to listen, to research and to custom-fit insurance solutions to individual client needs. The agent relationship will continue to be marked by continuous cultivation of clients and provision of value-added services such as the kind we see exemplified in the claims stories in television commercials. The differences will be the virtual supporting mechanism (Web site with e-mail) and the e-business partnerships with other financial service providers.
The user-friendliness of programs and Web sites is increasing. A few useful online resources, in addition to the site you're reading now, include:
It is certainly not too late to adjust to the new way of doing business.
What Next? The Whitewater Rapids Adventure
On the heels of the regulatory changes and the Internet revolution, there comes another wave of new technology: In time, wireless handheld browsers will surpass desktop computers for reference and transactions. Insurers increasingly will use the Internet to support agents with interactive capabilities and information that they can customize and deliver via e-mail to their clients. Soon, pricing and commission schedules, claims information and application status all will be available in real time and viewable by agent and customer alike from anywhere in the world.
Look for the handheld browsers -- known as personal digital assistants (PDAs) -- from Palm Pilot and Handspring to change the way both clients and agents do their transactions. Visit PDAStreet.com for details.
Agents will also need to master and use the Web tools and information available from sources like WebINS Market Strategies.
Crisis or Adventure?
The same Chinese symbol is used to announce both peril and opportunity. Agents have two weapons that can render peril into opportunity: their ability to cultivate existing relationships, and their experience at sifting through a zillion alternatives to help clients select the right one for them as their circumstances change. The critical success factor will be their willingness to travel the new territory (make alliances) in a new vehicle (e-business).
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