2015 state of the insurance industry

© 2015 Agency Revolution, All Rights Reserved
State of the Industry 2015
Mending The Broken Promise:
How to close the breach, regain the trust and
recover the heart of the insurance customer

7 points of vulnerability.
Proof: Empirical evidence.
‣ Changes in consumer behavior.
‣ Changes in carrier behavior.
‣ Changes in the nature of risk.
5 point action plan.
‣ For retail agents and the industry that 
serves them.

“This is a relationship
business.”

BROKEN PROMISE

VULNERABLE
7
1 2
3
4
5
6

It’s been easy.
Points of vulnerability.
1

Growth of the US economy
It’s been easy.1

Marketing meant.
It’s been easy.1

VULNERABLE
What got you here, won’t get you there.
It’s been easy.1

Mature Industries
are vulnerable.
2

Chinese & Babylonian traders.
3000bc
Greek & Roman health & life insurance.
600bc
Genoa first known insurance contract.
1347ad
London (after the Great Fire).
1667
1st US insurance company.
1735
Ben Franklin.
1752
St. Paul sells 
1st policy.
1853 1864
History:
Travelers sells 
1st policy.

The habits, processes and bureaucratic interests
resist CHANGE.
Mature Industries
are vulnerable2

Not because the industry isn't good.
Mature Industries
are vulnerable2
Carrier
Agent
Consumer

Disruption generally happens when the
industry is at its highest PEAK of Excellence.
Mature Industries
are vulnerable2
VULNERABLE

Mature Industries
are vulnerable2

Mature Industries
are vulnerable2
ç

Smaller, more nimble entities, often 
outsiders, disrupt.
‣ Usually with technology.
Mature Industries
are vulnerable2

Blacksmith, Henry Ford
Mature Industries
are vulnerable2

Kodak
Mature Industries
are vulnerable2
“...it was film-less
photography, so
management’s
reaction was,
‘that’s cute - but don’t
tell anyone about it.’ ”Steve Sasson,1975

Netflix
Mature Industries
are vulnerable2
“Neither RedBox nor
Netflix are even on the
radar screen in terms
of competition...”
Blockbuster CEO
Jim Keyes: 2008

Mature Industries
are vulnerable2
A NEW INDUSTRY GROUP 
RUN UNDER THE GUIDANCE OF 
THE ASSOCIATION OF OPTOMETRISTS (AOP) 
HAS BEEN CREATED TO ADDRESS PRACTICE DECLINE

Warby Parker
‣ Founder Neil Blumenthal’s 1st rule of success 
“Cut Out the Middle Men.”
Mature Industries
are vulnerable2
Started 2010
Sold 500,000
pairs of glasses
by 2013.

Travel agencies
Number of traditional
travel agencies.
Source: Phocuswright; Airline reporting corp. (ARC); ASTA.org
1995
47,000
2011
14,000
2000
38,800

Mature Industries
are vulnerable2
80,000 agencies.
1980
40,000 agencies.
2015

We're getting old.3

Average age of agency principal: 59.
We are getting old
3

25% will be gone by 2018
We are getting old
3 McKinsey & Co
2015 2018

‣ Number of employees 55 and older in P&C is
30% higher than any other industry.
‣ Carriers will have to replace 400,000 
employees by 2020.
‣ 72% of principals with over 20% ownership 
is over 60.
We are getting old
3
Accenture, AM Best, IIABA

The pernicious
term“agent".
4

The pernicious term“agent”.
‣ “acting on the authority of another”.
The pernicious
term“agent”4
Carrier
Agent
Consumer

The pace 
of change.
5

The pace of change.
"Worried the world is changing faster 
than my agency.”
The pace 
of change5
4%
96%

“If the rate of change
on the outside
exceeds the rate of
change on the inside,
the end is near.”
JackWelch
Chairman and CEO,
General Electric, 
1981- 2001
The pace 
of change5

OUR AVERAGE
AIN'TTHAT GREAT
6

And“on average”thats how the 
marketplace judges us.
Average ain’t that
great6

This is a built in systemic weakness.
The“independence”of 40,000 delivery entities
inherently lacks business discipline.
great6

Cannot enforce:
‣ Best Practices.
‣ Brand discipline.
great6

Compare to:
‣ 17,000 Starbucks cafes
‣ 63,000 Nordstrom employees
‣ 437 Apple Stores
Statista 2015
great6

Timken Professor of
Business Administration,
Harvard Business School
Cynthia A.
Montgomery
“Does your company
matter?That’s the most
important question
every business leader
must answer.”
great6

We cost more.
7

AM Best, research and data
70.8 74.2
Loss ratio %
Expense ratio %
97.3%95%Combined ratio:
Carrier
$
Independent
Direct
response
26.5 20.8
The pace 
of change7

VULNERABLE
7
1 2
3
4
5
6
It’s been easy.
Mature Industries
are vulnerable.
We’re getting oldWe cost
more
Our average 
ain’t great
The pernicious 
term“agent”
The pace 
of change

Prove It.
‣ What Consumers are saying and doing.

13%
6%
10%
71%
Online
800 Number
Yellow Pages
Not Sure
71% use the internet to research insurance.
54% have received a quote online.

New auto insurance
placed by local broker:
2003 2008
80%
68%
Changes in Consumer Behavior.

New auto insurance
placed by local broker:
2003 2008 2010
80%
63%
68%
Changes in Consumer Behavior.

How did you originally purchase your current
auto insurance Policy?
Local Broker51%75%
Online26%
7%
Less than 1 year5+ years

Now it's #4. 24%
14%
2007 2012
In 2007, the service experience delivered by
local brokers was the #1 driver of insurance
customers’overall satisfaction.

Small business would be open to buying
insurance online if the price is right.
So Far, So Close, James Colaço, Senior Manager, Monitor
Deloitte, and Leader in Deloitte's P&C Insurance Practice
84%
Cheaper Price
Easier to buy insurance
More suitable coverage
44%
41%
Reasons for openness to buying insurance online
84%

Prove It.
‣ What Carriers are doing.

2002 2011
1.7
5.9
Marketing spend for P&C carriers $ billions.
347% increase.

Marketing spend 2011: 
Millions of advertising dollars spent. 
Farmers 718
State Farm 813
Geico 1,000
Progressive 536
Allstate 745
Liberty Mutual
American Family
Travelers
Nationwide
AIG
332
167
166
277
125
92USAA
$1 BILLION

Government Employee Insurance Company,
“GEICO” 
201220092008 2010 2011
$11 billion
$6
$3.5 billion
$7
$9

Progressive:
Average growth 17% per year.
201220091996 2010 2011
$16 billion
$3.4 billion

U.S. top 10 Private Passenger Auto Insurers. 
State Farm1 117.919.3
Farmers3 56.07.2
Progressive4 48.45.8
Allstate2 210.110.7
Market share %Market share % Rank Rank
2002 2012

U.S. top 10 Private Passenger Auto Insurers. 
State Farm1 117.919.3
Farmers3 56.07.2
Progressive4 48.45.8
American Family
Travelers
Nationwide
Liberty Mutual
USAA
Berkshire Hathaway, Geico
9
10
5
7
8
6
10
9
8
7
6
3
1.9
2.0
4.1
4.8
4.9
9.7
2.3
1.9
4.9
4.5
3.6
4.8
Allstate2 210.110.7
Market share %Market share % Rank Rank
2002 2012

Available Now At The GEICO Store

Rise in direct response premium by channel. 
AM Best, IIABA Market Share Report

48 46 44
32 31 29
2003 2007 2011
Personal auto
Independent
broker
Captive
agent
80
77
73

20 23 27
48 46 44
32 31 29
2003 2007 2011
Personal auto
Independent
broker
Captive
agent
Direct

39 38 38
57 57 56
4 5 6
77 81 77
23 19 2320 23 27
48 46 44
32 31 29
2003 2007 2011 2003 2007 2011 2003 2007 2011
Personal auto Homeowners Small commercial
Independent
broker
Captive
agent
Direct

Prove It.
‣ Further threats.

FurtherThreats.
(from technology) "Could the broad
adoption of currently
available technologies
result in a radical
reduction in the auto
insurance business?" 
A Scenario:
The End of Auto
Insurance.
What HappensWhen
There Are (Almost) 
No Accidents.

FurtherThreats.
The End of Auto Insurance.
Timings for the adoption of key technologies.

FurtherThreats.
Mandatory
Preferred
Voluntary
Available
2012 2023-20272018-20222013-2017

FurtherThreats.
Mandatory
Preferred
Voluntary
Available
2012
Telematics
Automated
Enforcement
2023-20272018-2022
Automated
Enforcement
2013-2017
Telematics
Automated
Enforcement

FurtherThreats.
Mandatory
Preferred
Voluntary
Available
2012
Telematics
Automated
Enforcement
Collision Avoidance
2023-2027
Robot Cars
2018-2022
Automated
Enforcement
Collision Avoidance
Robot Cars
2013-2017
Telematics
Automated
Enforcement
Collision Avoidance
Robot Cars

FurtherThreats. 
How Much?Will UBI impact the auto 
insurance industry. 
Low
Medium
Large
insurance telematics usa 2013
95%

3 Predictions.
1 2 3

Fewer, bigger agencies.
Predictions
1

1
““There are 40,000
agencies in the U.S., and
you could absolutely
imagine them shrinking
by a quarter…”
Ellen Carney

Top 10 P&C agencies:
$3.186 billion in P&C revenue, 2011.
2013: $2.862 billion
1
Insurance Journal, Top 100 Agencies Special Report
Revenue
2.7 B
3.186 B
2.862 B
2011 2013

1
Fewer. Bigger.

1
Fewer. Bigger.
Number of traditional
travel agencies.
Air sales per location $ million.
1995
1.6
2011
5.8
2000
2.2
47,000
1995
38,800
2000
14,000
2011

1
“Driven by performance
pressures but lacking
strategic vision,
company after company
has had no better idea
than to buy up its rivals.
The competitors left
standing are often those
that outlasted others,
not companies with 
real advantage.
Michael Porter

Continued market share
erosion in P/L, Small C/L.
Predictions
2

Predictions
Continued vulnerability to
disruption from outsiders,
smaller players or aggressive
innovators willing and able
to leverage technology.
3

1
“Other things being
equal, the larger army
has the advantage
whereas the winning
business tends to be the
one whose offerings are
most preferred by
customers, its size being
more the consequence
than the cause of its
success.”
Richard Rumelt,

5 Point action plan for success.
1
2
34
5

1 2 3 4 5

The solution:
1
“Because the purpose
of business is to create
a customer, the
business enterprise
has two and only two
basic functions:
marketing and
innovation”.
marketing
innovation
Peter Drucker
1

The solution:
1
marketing and
innovation produce
results; all the rest 
are costs."
marketing
innovation
Peter Drucker
1

‣ Master Marketing.
‣ Be the“Relationship Business”you always
claimed to be.
1

1
“The most advanced
form of marketing is
that which creates
Meaningful
Relationships”.
Michael Jans
President /CEO
Agency Revolution
5 Point action plan 
for success.

www.agencyrevolution.com/analyzer/
www.TheGrowthAnalyzer.com
1

How DO you grow an agency?
1

$2,226,000
1

$2,226,000
$3,415,905
1

$5,676,538
1

1
+Delight
At Every Stage in the Process
Attract Convert Optimize Retain
The ACOR+ Marketing Model
Prospects Buyers Clients PromotersLeads
C O RA

‣ Master Marketing & Get Bigger.
1

2
‣ Master Innovation.
‣ Don’t Give IntoThe CommoditizationTrap.
‣ (and don’t wait for carriers to fix that for you.)

“Price competition,
Porter warns, is the
most damaging
form of rivalry.”
Joan Magretta
Joan Magretta 

Joan Magretta
“Vying to be the best
is an intuitive but self-
destructive approach
to competition.”
Joan Magretta 

Joan Magretta
“Competing to be the
best feeds on
imitation. Competing
to be unique thrives
on innovation.”
Joan Magretta 

2
Innovation demands:
‣ Stop selling on price.
‣ Beware‘Best Practices’.
‣ Be unique.

second sub
Body 2
$65 billion...and growing

3
‣ DestroyThe Old Model.
Carrier
Consumer

3

3
Carrier
Agency
Consumer

3 CarrierAgency
Consumer

4
‣ Launch A New Academy of 
Insurance Leadership.

4
‣ For insura-preneurs.
‣ That teaches non-insurance business leadership.
‣ With fully credentialed certification.

4
‣ Curriculum.
‣ Marketing
‣ Innovation
‣ Leadership
‣ Strategy
‣ Thought leadership
‣ Customer experience design

5
‣ Urgent: Leverage ModernTechnology.
‣ ModernTechnology AttractsYoungerWorkers.
‣ Because it's what consumers want us to do

What Makes Consumers Happy?
Channel usage, agent serviced customers.

What Makes Consumers Happy?
Channel usage, agent serviced customers.
Overallsatisfactionindex.
Agent +
emerging
852
822
Boomer
GenY
774
743
No
interaction
797
822
Agent only
830
814
Agent +
traditional
810
795
Non- 
agent only

4 Claims27 Birthdays 27 Renewing in 90 days 31 New prospects 10 New customers
Monday
4 Returning clients8 Lost clients 13 Cross sales 6 Lost policies
Trigger Point Marketing
11 Unclosed quotes
Agency Management System

4 Claims27 Birthdays 27 Renewing in 90 days 31 New prospects 10 New customers
@
@ @
@ @ @ @@ @ @
@ @ @ @ @ @ @
@ @
@ @@
Monday
4 Returning clients8 Lost clients 13 Cross sales 6 Lost policies
Trigger Point Marketing
11 Unclosed quotes
Tuesday Wednesday Thursday Friday Forever

The Cross Sell Generator

@ @
@ @ @ @@ @ @
@ @ @ @@ @@
The Cross Sell Generator
Client no life
X noY
Home no auto Commercial no personal
CL no comp
Personal no "toys"
CL no commercial autoAuto no home
@ @ @

"If all we’re doing is defending the status quo,
the game is over"

2015 state of the insurance industry

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