A day doesn't go by without someone predicting that the Internet will ultimately replace agents and brokers. As Mark Twain once said, "Rumors of my demise are greatly exaggerated." The fact is that at the moment, the Internet is still a minor factor in the sale of insurance products to the consumer. The introduction and acceptance of ATMs provides a good comparison to the public's use of the Internet. Although it didn't happen overnight, the consumer eventually became comfortable with the concept of not dealing with a bank teller.
The above comparison points out that consumers will take advantage of convenience. It seems that the transition to the use of the Internet will be much more rapid than the use of previous new technologies. Agents and brokers should anticipate the change.
A number of agencies have set up informational Web sites that describe the products that the agency sells, include a description of its markets and provide information regarding the principals. However, many agents still do not have an e-mail account. Some forward-thinking agencies have invested in a lead generation program from some of the key players in the Internet such as InsureQuote and InsWeb. Typically, Internet inquiry leads are e-mailed to the agents for follow-up. The cost effectiveness of this business model is still unproven because by the time the agent has responded, the lead has quickly gone stale.
Some agents are not sure how to position themselves when deciding an Internet strategy. Simply setting up a Web site may cost several thousand dollars. And once it is set up, the site has to be promoted in order to be valuable. Thus, many of the agents who put up a Web site have not promoted it. Fortunately, some business models have been developed to help agents do this.
One of the most interesting and elegant models that we have heard of recently is a program developed by The Consumers First Network (www.consumersfirst.com). Consumers First combines the best of all worlds. It provides agents with a private label Web site presence and an online comparative rating capability for personal lines. The Consumers First model also provides exclusive territories for larger hub agents who, in turn, are creating a network of WebPASS agents. These agents have access to the technology as well as to additional markets of the hub agency.
The Consumers First Network offers many Web sites for comparative rating. Such sites are autorate.com, homerate.com and condorate.com. After the network has been established on a regional basis and critical mass is in place, advertising will be initiated and directed to the consumer, which will drive consumers to the various sites where they can have their policy comparatively rated. The Consumers First model gives the agent direct access to the consumer instead of having to go through a referral service.
Though there are various networking models for agents and brokers, we don't know of any that combines an agency network with the Internet. The Consumers First model is a well-developed model for agents. Other programs may not have the sophistication of the Consumers First model.
Agents should consider how to incorporate the Internet into their business model. If an agency already has a book of personal lines business, that agency's customers will eventually look at various comparative rating models. The agent is likely to end up in a reactive mode rather than a proactive mode.
An integral part of Harbor Capital's consulting practice is working with its clients in evaluating Internet-based opportunities. We take a practical approach when reviewing the ever-changing Internet models that are available to agents and brokers. *
The authors
Paul J. Di Stefano, CPA, CPCU, is the managing director of Harbor Capital Advisors, Inc., a New York-based national financial and management consulting firm which offers services to the insurance industry. Services include agency appraisals, merger and acquisition representation, strategic and management consulting. William E. Ryan, CPA, is an associate director for Harbor Capital and was previously head of finance for an insurance agency consolidator. Bill has almost 20 years of experience in valuing agencies and managing agency acquisitions. Harbor Capital Advisors, Inc., can be reached at (800) 858-2732.
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