LEVERAGING TRENDS 2022
What independent agents need to know—and do—
to ensure an outstanding year
By Joel Zwicker
Those in the industry need to keep their finger on the pulse of the trends in order to prepare for what is coming, create strategic plans, and execute in a way that will add to their firm’s success.
As we move more fully into 2022, we are seeing clear insurance industry trends that are likely to dominate and become more prevalent throughout the year. Built on our analysis of the landscape in 2021, we are seeing an increased adoption of technology, a move toward specialization, and drastic changes carriers are making to their operations that are impacting the industry as a whole.
Preparing for the following five trends and utilizing them to your benefit will help your business grow and thrive.
Independent agents will increasingly choose specialization over being generalists. Competition has increasingly made it difficult for agents to grow and retain business, and over the next year we are going to see more individuals choose to specialize. As the market becomes more competitive, specialization could be a financially lucrative decision.
While the change from a generalist to a specialist doesn’t happen over-night, most who choose this route find that they need to do so in an area they are passionate about. An agent needs to become knowledgeable about all aspects of a potential niche sector to become an expert. With deep insight, they are able to truly understand the risks and provide relevant recommendations to clients.
By having this thorough under-standing, agents are well prepared to identify coverage gaps and provide the best service to their customers, while also upselling. Unlike generalists, specialists enjoy limited competition and are able to create a niche for themselves that transcends geographic lines. This has been a successful model for many, who have been able to increase their revenue as a result as competition grows, we will see more agents take advantage of this opportunity.
More carriers will follow Nationwide, releasing captives. The historic move by Nationwide to release all its captive agents caused a shake-up in the industry. For carriers, the appeal is clear: a reduction in operational outlay. By releasing agents, carriers are able to cut down costs on buildings, benefits, and payroll. For independent agents, there is the opportunity to capture more of the market by working with multiple carriers. While this may have been an unexpected change, many agents are seeing higher revenue post-transition.
This change follows customer behavior. More clients are seeking independent agents to do business with because they value market choice. Customers are showing reservations toward working with captive agents because of the perception they are obligated to toe the company line instead of providing the best products/coverage available to consumers.
Independent agents can work with a range of carriers and create a custom bundle of services from different ones to provide the best coverage and the best price. Over the coming months we believe we are going to see at least two to three major carriers follow suit and make the move to the independent agent model.
Focus on customer experience will become a key growth strategy. Business growth is part of the overall strategy for all agents and creating a clear plan to increase revenue traditionally is built around new customer acquisition. When looking at strategies to grow revenue, more agents are going to look toward the retention of existing customers, instead of putting their foot on the gas for new business.
More focus will go to the customer experience and how to provide excel-lent service and communication. While this might feel daunting with the number of existing clients an agency might have, especially if the book of business is already robust, agencies that adopt automated marketing technology can seamlessly create a customer journey with consistent contact and high return on investment.
Automating processes like onboarding, renewals, and cross-selling all depend on timely, tailored and reliable communication that can be programmed for agents. While this might seem like a handcrafted message to the customer, the likelihood that agents are creating individualized messages to their entire book of business is unlikely. Through technology, agents can appear to reach out with personalized messages at exactly the right moment for their customers.
Agencies that improve retention rates by only a small amount could see dramatic gains. For example, in an agency reporting $4 million in revenue, even a three percent retention increase would translate into an additional $120,000 by 2023. Holding on to that three percent increase over the next five years (say the agency goes from 87% to 90%, then stays at 90%) would result in a $642,000 revenue boost in year five. A larger retention rate would extrapolate to even higher gains.
Beyond retaining clients, it’s just smart business to keep existing customers happy. They are more likely to refer their friends, families, and colleagues with their current service. This retention-based strategy will also result in increased referral rates, which will help agents grow their business as well.
Lack of cyber disclosures could get agents in errors and omissions court. More and more companies are becoming victims of cyberattacks, with a record number of breaches over the past year. Every indicator shows that this number will increase by the end of 2022.
Agents must provide adequate education to their clients about their coverage gaps regarding cyber insurance. Those who aren’t adequately communicating to their existing customers could find themselves in hot water, even in errors and omissions court. Clients who could become victims of these attacks need to under-stand risks and should be covered. Those who don’t have coverage could feel misled and look to blame their agents for losses.
Fortunately, agents don’t have to create a whole system to assure their own protection. They can begin to incorporate language about coverage gaps and additional offerings directly into their client renewal process. For new prospects, this language can easily be incorporated into onboarding communications that clearly define the vulnerabilities and risks of not retaining cyber insurance.
Agents need to protect themselves by telling their clients about risks; being proactive will ultimately keep them out of any E&O suits.
Insurtech will receive record investments by large carriers. Confidence in technology for the insurance industry continues to rise and has been supported by large carriers making major bets on startups. While many individual agencies have been slow to adopt technology, events of the past few years have led to an accelerated adoption of technology by consumers.
In 2021, investors put more than $6 billion into insurance and insurtech startups. American Family Insurance’s venture arm, American Family Ventures, was quoted recently discussing how they are placing big bets on technology that seeks to improve insurance workflow through digitization.
The next 12 months will prove that the insurance industry is primed for innovation, as money continues to flow into new solutions. A new generation of agents is, on the whole, eagerly adopting technology that allows them to run their business in the digital manner, while also communicating with their clients through online channels they prefer.
We see massive changes to the industry taking shape right now. Those in the business need to keep their finger on the pulse of the trends in order to prepare for what is coming, create strategic plans, and execute in a way that will add to their firm’s success.
Joel Zwicker is the “insurance evangelist” at Agency Revolution and formerly an agent at one of Canada’s largest independent insurance agencies. He now works to provide independent insurance agents with the best marketing tools for their unique needs. Contact him at firstname.lastname@example.org.