I’m often asked how we are handling competition from direct writers and our feelings on insurance company affinity programs, as well as hearing our broker colleague’s talk about how these are threatening their businesses. It’s a fair question and concern, but I’m not sure it’s a threat as much as an opportunity. It’s true the industry media talks a lot about how the insurance companies are focusing on building new direct to consumer channels and praising the growth that they are able to achieve in the beginning. We don’t really know who will come out on top, but I think it comes down to a few simple factors: how much it costs to build our customer base; the value we can provide to the customers; and, ultimately, how customers prefer to purchase their insurance.
Marketing costs any business a lot of money. Any time you are getting your name and what you can do presented to a customer it is very expensive, and there are many players all competing for the same customer. In insurance, direct writers have huge marketing budgets backed by billion dollar companies making “strategic investments”, and are able to saturate TV, the Internet, and print media with their branding. The issue they have, is they are only able to provide the right fit for a small segment of customers, meaning they are spending a lot of money to get connected to a customer that might not be able to purchase from them.
Each Insurance company is only likely to be able to offer the best insurance rate and product for 5-10% of the population. Those customers will have different insurance needs as they go through their different stages of life, with bigger or smaller houses; more or less cars; tickets; accidents; and general changes in assets and needs. Meaning the company that can help them today may not be the same company that can help them tomorrow.
Historically, brokers were in the same boat as the direct writers, having only 2 or 3 different insurance companies that they represented. Having only a few companies narrowed the underwriting profile of customers they could support, with the most competitive products, over the full life span of their insurance needs.
The modern broker is very different, with some of the leading brokerages representing over 30 different insurance companies. While we don’t have access to the marketing budgets required to saturate prime time TV slots, or take out full page ads in national newspapers, we are able to launch highly specialized and targeted online advertising. This allows a hyper efficient marketing spend, where we are able to provide virtually every customer we connect with an insurance solution. This targeted marketing approach means we don’t end up marketing to customers that we can’t provide a solution to, because we can provide a solution to everyone we market to. This includes high risk drivers; motorcyclists; experienced drivers with squeaky clean driving records; even the guy with the super cool hot rod, his house, trailer and 2 cars along with his business insurance, we can even provide him with the life insurance he needs. If you own it, we can insure it, but direct writers don’t have those same options. Brokers are perfectly suited to help almost all people match their insurance needs with their changing life situations and values. Just as your stockbroker or investment advisor can rebalance your portfolio as the market and your life change, we navigate the insurance market place for you—while your life and the insurance companies change—without you having to start the agonizing process over again every year.
Customers historically chose direct writers because they offered conveniences that brokers didn’t: extended office hours; online or phone enrollment; and being easy to find through all their advertising. These advantages are gone. Our office for example, is able to complete your enrollment process all online, so our customers can be anywhere, even on vacation in Florida, and we’ve extended our office hours to help our customers when they want to be helped.
Today’s customers are spending more time online researching other customer experiences with the companies they do or plan to do business with. Historically, you could only draw from the experiences of your close friends and family; you simply didn’t have access to a stranger’s experiences. With google reviews and Facebook reviews being available to everyone, this provides a tremendous opportunity for brokers to outshine the direct writers. Many brokers have exceptionally high customer ratings. Our team is maniacal in ensuring every customer interaction we have is one that our grandmothers would be proud of, and our reviews show this. Many of our customers come to us because of the positive experiences that our other customers have had. As a broker who loves their customers we are far better suited than the giant call centers of the direct writers, to form a positive relationship with our customers.
Brokers also provide tremendous value by helping customers navigate the complex insurance world without bias. Anyone who has had to call their cellphone or cable provider with a technical problem or a billing issue probably wishes that they could have someone else handle it for them. Someone that you just call up and say
My phone isn’t working, make it work or
change my payment date. As a broker, we do exactly that for our customers and their insurance. Everyday, our customers appreciate what we are able to do for them, beyond just finding a great price. We are the ones that call the insurance company when they have an error on the paperwork, find payment solutions that fit your budget, run your claims up the ladder and advocate for our customers to ensure they are treated fairly. It’s the broker who can work with insurance companies to come up with solutions for our niche customers. Having a broker follow up with an adjuster, inquire about a payment, or find coverage for that unique situation, saves our customers a huge amount of time.
Over the next few years, as customers continue to become more reliant on online research before making a purchase decision, the insurance market will likely see a shift with the modern broker channel becoming more dominant. Brokers are able to help every customer, forming strong customer relationships and provide consistent value to our customers.
Aside from working capital, I struggle to see any advantage a direct writer has over a broker. There are a lot of things a broker can offer as an advantage that a direct writer just can’t respond to.