What factors drive carrier selection?

Celent survey examines criteria agents use to place business

By Phil Zinkewicz

In Arthur Miller’s mid-century masterpiece Death of a Salesman, Willy Loman is a man who has lost contact with reality. He is a salesman who rides along on a “shoestring and a smile” and who believes that glad-handing and a dirty joke will get him attention from buyers. He has become an old man who has not kept up with changing times and that, in the end, destroys him.

In today’s difficult soft market, with the financial services industry debacle adding to the problem, insurance companies have to do more than glad-hand producers to attract their business. The question is: What do independent agents want from their carrier partners?

That question and others are answered in great detail in a survey recently released by Celent, an international strategy consultancy dedicated to helping financial firms create and sustain competitive advantage. The authors of the survey, Mike Fitzgerald and Craig Weber, note that soft markets were an issue throughout 2008.

Say the authors: “A broader market crisis is now gripping the country and may persist through 2009, putting downward pressure on expenses and creating consumer fear and uncertainty. Revenue growth is an imperative, despite the uncertain markets. In many property and casualty lines, if companies are to grow in 2009 and beyond, they will have to snatch business from other carriers, largely by differentiating themselves to a shared pool of independent producers.”

For this report, Fitzgerald and Craig surveyed thousands of independent producers to better understand current trends in differentiation. More than 900 people completed a 27-question survey designed to address key questions such as:

• What do agents want from carriers in services and technology?

• If given an equal (or almost equal) price, what factors matter the most to agents when they decide where to place business?

• How are carriers’ investments in agent technologies making a bottom-line difference in agencies?

According to the survey authors, four carriers typically represent 75% of an agent’s book of business. “There is no free lunch in the competition space,” they point out. The survey also found that agency management systems and carrier-proprietary Web sites are the most frequently used technologies. Document imaging is on the rise, but it still is underutilized. Handheld PDAs and tablet PCs showed relatively little use. “Celent believes independent agents have progressed in their use of newer technology tools, but carriers need to ‘prime the pump’ in specific areas such as mobile technology.”

The authors say the good news is that 39% of the agents are “very satisfied” with the technology delivered by their best carriers. However, 50% rated their comfort level as “somewhat satisfied,” which suggests that not all needs are being fully met. There is opportunity for differentiation.

Regarding carrier choice drivers, the survey found that the elements that were ranked as the top determinants of an agent’s selection of a carrier are: “providing outstanding service to my clients,” “having a good relationship with underwriter,” and “issuing underwriting decisions quickly.” All three were ranked as “very important” by the vast majority of respondents. “Technology and service delivery make a difference to agents,” the authors say.

Respondents were asked to name their favorite carriers and the reasons behind their choice. Travelers and Auto-Owners were a very close first and second, followed by a three-way tie for third place among Zenith Insurance, Hastings Mutual and The Hartford. It is interesting, the survey authors point out, that from more than 800 respondents to this question, only 14 carriers received double-digit votes as a favorite carrier. “This wide distribution suggests that carriers that make progress toward meeting producer needs have an opportunity to improve their competitive position dramatically,” the authors say.

The survey also showed that, despite the earlier responses that had ranked availability of Web-based tools and download for agency management systems nearly last for driving carrier choice, 22% of the favorite-carrier comments specifically mentioned technology as the reason behind the favorite-carrier choice. Celent believes this result reflects the power of technology to elevate a carrier above its competition, primarily by making the producer’s day-to-day work more efficient.

Say the authors: “Celent urges carriers to incorporate an understanding of carrier choice drivers into their distribution technology and strategies. We believe that, for most carriers, this means:

• Obtaining a clearer understanding of what their producers sell and how they sell it.

• Aggressively pursuing producer feedback to confirm that pricing, product, technology and service strategies are having the intended effect on sales.

• Continuing to focus on execution, which is where many carriers with similar intentions are differentiated.”

Celent’s 2008 Independent Producer Survey was made available to approximately 12,000 independent property and casualty producers, agency principals and customer service representatives through association with four companies: Farmers Alliance Mutual, Hastings Mutual Insurance, Zenith Insurance and Zurich North America.

For more information:
Celent
Web site: www.celent.com