GROWTH STRATEGY REVIEW

SERVICE CONVERGENCE

Insurance agents must become trusted advisors of choice
to remain competitive in the changing service landscape

By G. Edward Kalbaugh

Service convergence results when a consumer need or action triggers other service needs or actions controlled by a trusted advisor.

In today's fast-paced times, consumers can access myriad service providers to meet the complex requirements of daily living. But it is a daunting task for anyone to find the best service provider from literally thousands of choices. Often the process is random and based on incomplete information. At best, a few selections are made through indirect referrals.

To help navigate the complex service landscape, consumers are turning more and more to one or a few trusted advisors. But before we examine the role of trusted advisors and the importance of this function as it relates to insurance agents, let's first review the service marketplace.

Service marketplace

The table below provides an overview of the scope of this service marketplace as derived from the Yellow Pages national database. As indicated, there are more than two million service providers within those categories potentially related in some ways to the role of insurance agents.

Services such as insurance, real estate, financial and travel share the common label of "agents" that act on behalf of the consumer. Some services discussed here have in common the protection of assets. These services include insurance, financial, legal, and the category that roughly defines those services involved with maintenance and repair of property, including homes, vehicles, and such. All services share a significant requirement for specialized knowledge, skills, and technology for enabling delivery of the service.

In the not-too-distant past, service delivery depended less on technology and more on human interaction. Providers interacted directly with their customers. Today, technology in every form is important to success in achieving effective service delivery. But technology is turning out to be mostly a facilitator of the process.

Human interaction is still critical, especially in helping consumers make decisions. That means helping them find the right service provider, understand their options, and reach conclusions that meet their needs.

Service convergence

As service processes become more transparent to consumers--mostly through behind-the-scenes technology--the value proposition shifts from the processing role to the advisor role, which involves a higher level of knowledge about the consumer and his or her needs.

For example, we don't need advisors to tell us what our account balance is. Computers do that. Computers are also capable of processing our taxes. But most of us still need advisors to help us understand and make the right decisions regarding those taxes. The value proposition has shifted from processing tax returns to advising on tax matters.

The advisor on tax matters is often a financial planner, who helps us with our investment decisions, including when to refinance our home. That act, of course, leads us to a lending institution, an inspector, an appraiser, a title search company, possibly an engineering or repair service, and our insurance agent.

In the above example, the financial planner's knowledge of the customer and his or her needs enables the financial planner to manage the service process. In other words, all of the services mentioned--tax preparation and advice, home refinancing, inspection, appraisal, title search, repair, and insurance--have "converged" under the financial planner.

In this sense, service convergence results when a consumer need or action triggers other service needs or actions controlled by a trusted advisor.

Insurance agent as trusted advisor

Trusted advisors are, in fact, defined by service convergence. In other words, the role of the trusted advisor and service convergence go together. And it is this synergy that works in favor of the insurance agent.

As a function of their service, insurance agents probably know more about their clients than most other service providers and, thus, are in an optimum position to bring in other service providers to meet the needs of their clients.

In doing so, one of the nagging issues for insurance agents has traditionally been the inability to generate revenue from these supporting services. Another problem has been finding "Best of Breed" service providers that will not impair the client relationship built by the insurance agent. In this regard, insurance agents have found limited help from professional organizations that provide information about other service providers and alliances that provide access to services.

The service aggregator

Recently, however, a new breed of company has emerged to facilitate service convergence and enhance the role of insurance agent as trusted advisor.

One such company, Totalpro of Hempstead, New York, has created a network of selected service providers under a unique fee- and equity-sharing arrangement that enables insurance agents to increase their income significantly. For a flat monthly fee, Totalpro provides insurance agents with access to a variety of services and capabilities that generate additional revenue and enhance agency value, such as:

* Access to additional insurance markets and programs

* Increased commission levels

* Premium finance

* Legal services for personal and commercial clients

* Financial and estate planning

* Tax preparation and advice

* Mortgages and related services

* Commercial and personal loans

* Debt reduction and management

* Back office servicing

* Management consulting

Totalpro offers services to insurance agents at discounted rates that enable the agents to be highly competitive, remain in control of the client relationship, and make more money. In certain arrangements, there is even an equity participation opportunity for selected agents that meet performance criteria.

The opposite end of the spectrum of service aggregators is represented by companies such as AARP that directly target specific audiences with as many services and products as possible.

Summary

Service convergence is a natural result of the trusted advisor relationship with consumers. Service aggregators anticipate convergence and provide service capabilities that enhance revenue and value. It is incumbent upon insurance agents to seek out those service aggregators that support the independent agency system and drive increased revenue and value to the agency. *

The author

G. Edward Kalbaugh is a partner with Allegent Growth Strategies, a full-service consulting firm specializing in services to the insurance industry. Allegent is located at 100 Crossways Park Drive West - Suite 104, Woodbury, NY 11797. Telephone (516) 364-7034, fax (516) 364-7036, e-mail: info@allegentgsi.com, Web site: www.allegentgsi.com