A report by McKinsey & Co. on the future of property and casualty insurance managers, discussed in “McKinsey to Agents: Adapt or Find Another Line of Work” by Elizabeth D. Festa, reveals they face marginalization unless they can evolve and get creative. The agent’s role in some fields is becoming obsolete, and some are fast approaching commoditization, meaning agents can simply be bypassed. The report stated, “The hard truth is that most agents have neither the scale nor the operational efficiency to profitably sell a commodity.”

Auto insurance, accounting for 70% of personal lines premiums, is fast becoming commoditized, and the new numbers make a difficult picture for its future profitability. “Local agent channels are undergoing tremendous changes, and not all agents will survive the transition. Those that do will likely be well adapted to thrive in the new distribution environment,” the authors of Agents of the Future: The Evolution of Property and Casualty Distribution stated. Insurers must figure out how best to serve customers with an optimal agent mix, not just sit back and watch the traditional model fade.

Forces that agents now face include not only direct quote models, comparative-rater technology, and commoditization of a product, but also “the increasing sophistication and accuracy of predictive models, and the rise in straight-through underwriting.” This adds to the pressure on carriers to maintain the commission they pay agents; according to the report, commissions will be more tied to extras in the future. Carriers will need to consider giving agents commission for efforts that uniquely add value. The number of agents competing for a share of the “commission pools” has declined 10%, and if any of these pools shrink without an offset in growth in other business lines, the report claims the agent number decline will increase.

But according to McKinsey, the change and survival of travel agents is a possible sign of future success in an advanced form. The advent of the Internet caused a plummet in travel agents’ share of sales, but despite the numbers drop the agents did not disappear—those who are still active are largely more successful than before. They reinvented their business models by shifting towards more complex travel and specialization, focusing on operational efficiency and technology.

Other agent models of the future include traditional commercial agents at the top of small commercial or middle market, multiline agents that sell personal lines, commercial lines, and life insurance with a high degree of cross-sell—combined with a consolidation of agents possessing different skills and serving clients in an advisor practice manner.

If you’re in healthcare, insurance, technology or other professional services industries, and need help with a PR, marketing or social media campaign, contact Scott Public Relations.

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