Digital Disruption Saps Confidence Among Insurance Agencies

To negate market threats, the majority of large agencies reported an increase in technology budgets, according to the Vertafore survey.

digital distruption and insurance

Insurance agencies of all sizes are less optimistic about future growth based on year-over-year results, with the biggest drop in sentiment coming from large agencies where only 33 percent claim to be very optimistic, compared to 70 percent in 2014.

This was one of the findings of Vertafore’s second annual survey of 200 principals or producers from independent U.S. insurance agencies, which also revealed the primary culprits driving industry uncertainty.

Those include carrier adoption of predictive analytics (59 percent), Google’s entry into the insurance market (54 percent) and self-directed preferences of Millennials (48 percent).

"Customer expectations are driving the evolution of digital disruption. They’re demanding access to their insurance companies on their terms, on their timeline," Guy Weismantel, vice president of marketing at Vertafore, told eWEEK. "Digital insurers need a multi-channel approach to meet these demands through social media, client portals, and an IT strategy that understands the handshake of business is as likely to happen online as it is in an office."

To negate market threats, the majority of large agencies reported an increase in technology budgets, specifically for self-service, cloud and mobile technologies.

Meanwhile, small agency technology budgets remained stagnant near 60 percent, and the group of very optimistic agents dropped from 25 percent to 11 percent.

Of the dominant threats identified in the survey, agents of all sizes singled out predictive analytics as the biggest threat to the future of their business, with 59 percent indicating carriers integrating risk analytics solutions as a moderate to serious Another major threat expressed by respondents is the influx of new market entrants providing access to insurance products and information to consumers online.

Examples include companies outside of the P&C industry, such as Walmart and car dealerships, as well as new premium aggregator websites like Google Compare and Zenefits.

More than half (54 percent) of agents surveyed now feel moderately to seriously threatened by these competitive newcomers.

"Today's insurance marketplace isn't just highly competitive --it's highly digital," Weismantel said. "Successful agencies need to become digital insurers to stay relevant, to drive better customer service and satisfaction, increase profitability, and build a strong future."

This year’s survey identified advanced customer self-service capabilities (47 percent) including websites and interactive voice response (IVR), as well as investments in cloud services and solutions (43 percent) as primary drivers for spending within the next 12 months.

Investments in mobile (40 percent) in the form of mobile-friendly websites and apps also made the list of technology budget priorities.

"Mobile is an integral part of everyday life for consumers, and agents are just beginning to realize the ROI of creating a more personalized, mobile experience for their customers," Weismantel said. "By enabling agents to communicate with customers via mobile and text, independent insurance agents can ensure the highest quality of service possible by connecting with customers at all times in the method they prefer."