A Couple Things I Learned About Independent Insurance Agents

A Couple Things I Learned About Independent Insurance Agents

September 13, 2012 10:38 am 0 comments

So, I am wrapping up a pretty extensive qualitative research project aimed at finding what drives/motivates independent insurance agents. In doing so, I think I learned a good bit about that world that I think might serve other people well to know. I can’t make my research public because it was done for a client, and it probably isn’t all that meaningful for consumers anyway. This post doesn’t contain research findings – this is just my opinion based on what I learned about the industry after dozens of interviews with agents around the country conducted by myself and my colleagues.

First, stay away from Allstate altogether. If you’re going to go with a big carrier, it’s State Farm, but that still isn’t best. Auto Owners and Travelers will be your best bets (but probably not the cheapest). Like most things, you get what you pay for.

Secondly, as far as using an agent goes, if you want to go that route, ask how many carriers they represent. You don’t want a captive agent – someone who works directly for a carrier – and you don’t want an independent agent who works with dozens. You want an independent agent that represents a handful of strong companies. The reason is that the agent who represents dozens, does so because s/he doesn’t have the relationship with carriers strong enough to negotiate with them, so instead just shops rates around and plays them against each other. When shit hits the fan, you don’t want that agent. The agent that only has a few carriers is more likely to have really good relationships with those few and can fight for you when stuff goes wrong – s/he can also persuade the good companies to be a little more flexible in forgiving minor blemishes on your record so that you get better coverage.

Third, the thing to get a feel for with an independent agent is their business philosophy. Some agents are all about the customer, which can be tempting. They’ll tell you that they are completely on your side and just want to help you get what you need at the lowest price. For them, it’s all about the relationship with their customers. Sounds good, right? Beware of these agents. It seems strange, but you want the agent who is committed to the carriers. Carriers will like that agent more and will be more willing to help her/him succeed. That is who you want when things go wrong because the carrier will do what’s right to keep that agent bringing in business for them.

As an aside (excuse this little rant), insurance has become a commodity, no different than gasoline. It is something that consumers hate paying for, but know they have no other choice. To win them over, insurance companies have started competing on price – consumers think all insurance is the same, so they just look for the company that will make them pay the least. That couldn’t be further from the truth, and unfortunately, many independent agents have also convinced themselves (sometimes unknowingly) of the same thing. The agents who are customer focused perpetuate the commoditization of insurance because they fight to get the lowest rates possible for their clients just to appease them. Good agents understand that going with the right carrier makes a huge difference. The good ones will go as far as refusing to take cheap customers because a $25 commission isn’t worth losing their reputation when a claim is filed that a carrier won’t cover. That coverage is bad for their business and ¬†you in the long run.

Lastly, should you buy online or go through an agent? There are advantages to both. Buying online will get you comparable coverage at a lower rate because they don’t have to pay agent commissions. However, when you file a claim, you could have a tougher time getting things taken care of in a timely manner. Buying through a reputable agent buys you a relationship with a human being who can get things done for you if something happens. You pay a little more, but you get greater assurance. If you do buy online, do your research and make sure you understand what you’re buying and what the claims history of the carrier is.

Don’t mistake this post as me advocating for independent agents. In a lot of ways, I see that industry dying as the Geicos and Progressives of the world invest in awesome technology that automates every step of the process from purchasing to claims payout. But there is something to be said for having an intermediary, a concierge sort of, that will be there when the insurance company is being difficult. Is that worth the extra money? That’s up to you. If you decide it is, hopefully this post will help you choose the right agent.

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