Within the independent insurance agency system, there is certainly some cause for concern when contemplating the future of personal lines insurance. Over the past several years, personal lines market share for independent agents has been declining at about 1% per year. Recent data shows this as a decline from 36.4% in 2004 to 32.3 in 2007. While this may not seem overly significant to some, it is important to realize that each 1% decline in market share equates to roughly $200,000,000 in lost REVENUE.
The majority of this lost market share seems to be moving toward internet based direct writers of insurance. Certainly GEICO has been a major player in that space. There seem to be two major factors at play. Clearly one of the major factors is the fact that GEICO is spending a staggering amount of money on marketing and advertising. In 2009, its spending in this area topped $750,000,000! Included in that amount is over $200,000 per day in "click-through" ads. The other factor, and perhaps the one that is cause for the most concern, is the fact that so many of us are getting more and more comfortable each day with what activities we perform on-line. From banking, to retail purchases, to travel, to music, to dating (for cry it out loud) we are quickly becoming a society that is "okay" with doing it on-line. And that is not a trend that anyone expects to reverse itself anytime soon. With the huge number of "Gen Y's" and "Millennials" getting ready to enter the market place and become an even more significant portion or our economy, the internet will probably play a much more important role in many business segments, including insurance.
The real sore point for losing market share however, is the fact that in most cases, independent agents still bring excellent value to the insurance transaction. When I speak to agencies in Georgia, most of them are very confident that they can compete AND beat GEICO in personal auto 7 or 8 out of every 10 opportunities. While that's pretty impressive, it really makes the loss in market share that much more of a bitter pill to swallow. It appears that independent agents are simply being out marketed. There is no doubt that independent agents can compete on price and provide far greater expertise, local service and the added ability to handle all of an insured's needs.
What's the solution? I will suggest that the independent agency system must increase its marketing efforts, and it must be more "web friendly". Social media sites, such as Facebook and YouTube have proven that they can be great tools to boost and agency's web presence. Most consumers now research nearly every purchase on-line before making a purchasing decision. There is recent data that shows the vast majority of people will research their insurance purchase on the internet, but when it comes time to buy, they want to talk with a real live person and get advice on how to more forward. Stay tuned to this blog for more insights and information on this important topic.
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I totally agree with this idea. In fact, in many ways the internet has become somewhat of a great equalizer on the playing field for business exposure...you dont have to spend tons of money to generate interest in a small business, just have a little internet savvy! I think it is one of the best opportunities for small business that has even been, and you are right...a web presence is not only gaining importance, but its almost a necessity for gaining the notice of the billions of customers who use the internet as their primary means of finding places to do business with.
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