This is an excerpt from the 2018 State of the Insurance Industry Report by Michael Jans: The Death of the Old School Agency: The rise of the new marketing masters. To download the full report, click here.
The rumble of change is afoot.
But, change isn’t new to the retail insurance insurance agent.
After all, agents of all generations – Boomer, Gen X, Millennial – could easily say:
‘It’s not my dad’s insurance agency anymore.’
The average agency of today doesn’t look like its counterpart from a generation or two ago.
Over the years, we’ve seen agencies transform successfully – from ‘mere’ pass-through sales organizations to professional businesses. They’ve adopted agency management systems, various communication technologies, and many have done their best to chase the professional standards of industry best practices.
Yet, agencies of all sizes and levels of maturity have declared bewilderment at the sheer pace and nature of change demanded of them today. Such that they just as easily may declare:
‘But, it’s not my dad’s industry either.’
What’s familiar is disappearing. What used to work, doesn’t.
Incoming generations rightfully feel some pride as they assume leadership. It’s good to finally be in control.
But, all too often, they reveal a nagging sense that, given the topsy-turvy pace of change in their world, they just may not be in control at all.
Is the gap between agency performance and consumer expectation too big for the industry to jump?
Whatever generation they represent, alert agents declare their own vexing anxiety that the gap between agency behavior and what the world expects and demands is big and getting bigger.
Further, there’s a sense that the dark mysteries that lie around the corner – more changes in technology, consumer behavior and competition – might hold nasty surprises the independent agency channel is simply not prepared for.
It’s possible that both the nature of the trends affecting the industry and the very speed of those trends represents a new form of threat for which many agencies are unprepared.
Are the challenges of today fundamentally different than the challenges of earlier eras? Surely, that’s been true for many other industries.
It’s worth remembering this isn’t the first possible phase change the industry has suffered. In the early 1980’s industry observers estimated the number of independent agencies at roughly 80,000 – a number that quickly shriveled to about 40,000.
Why? Many were simply unprepared or unwilling to negotiate industry pressures to adopt the new technology of the day – agency management systems – or they were unable to endure the long soft market of the 1980’s.
While turbulence often causes harm – industrial ‘winter kill,’ so to speak – it also clears the field for the strongest, fastest and smartest.
How to prepare for change (and why ‘tricks are for kids’)
Inspired by a $40 late fee for an overdue video, Reed Hasting started Netflix in 1997.
Blockbuster chose not to react. After all, it was the 800-pound gorilla in its field. In 2003, their revenues topped $5 billion.
In 2008, Jim Keyes, Blockbuster CEO famously declared that Netflix ‘is not even on our radar’ as a competitor.
By the time the company chose to react, it was too late. In 2010, Blockbuster declared bankruptcy.
How could they have saved themselves?
Not with tactics – more stores, more movies, more discounts…more of the same.
Netflix beat Blockbuster with strategy. And, Blockbuster could only have beat Netflix with their own strategy: by knowing what trends to pay attention to, and intelligently reacting to them on time.
Strategy guides tactics
Strategy aligns every behavior, action and task – so they all go in the same direction. Minimal waste. Maximum output.
As Richard Rumelt stated in Good Strategy, Bad Strategy, ‘Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favorable outcomes[i].’
In other words, good strategy creates leverage: the ability to gain such measurable advantage that you generate higher input with less or equal output.
Crudely put, more money in less time.
In turbulent times, it’s easy to get seduced by the ‘shiny new thing.’ Or, to follow a ‘guru with a gimmick.’
They may be good tactics. But, tactics without strategy are tricks – and ‘tricks are for kids.’
The challenges facing the independent agency channel are ‘grown up’ challenges – and place the response directly in the lap of agency leadership.
Nobody said it was easy.
The critical issue is this:
What is that right direction?
If you have everything going in the same direction – which strategy demands – you’re gambling the pot on one thing.
A wrong turn could be as disastrous as no turn at all. How do you know it’s the right direction? What process do you employ to arrive at your hypothesis?
Answering those questions, and presenting a defensible and, ideally, high-leverage course of action is the job of strategy.
In this fast changing era, it’s all too easy to be seduced by the latest techniques and tricks. By gizmos and gadgets. By the ‘shiny new thing.’
That’s not strategy.
Similarly, strategy should not be confused with passion, courage, goal-setting, team-building, marketing – or any number of other critical entrepreneurial traits and behaviors.
The truth is, strategy is too-often avoided for one simple reason: it’s hard.
It requires a sober, no-nonsense assessment of the what’s happening – good and bad – both within and outside the organization.
To uncover ‘what’s happening’ requires withdrawal from the demands of the day – an almost overwhelming requirement when said demands are themselves overwhelming.
But – especially as industry forces become turbulent – strategy separates the winners from the losers.
Only when the powerful – and sometimes mysterious – forces of the world you live in are understood can you trust that you can ‘ride the waves’ of those forces and use them to your advantage.
Or, unprepared, you could watch them over-power you. These are the same forces that are:
- Influencing your customers and marketplace.
- Encouraging your competitors.
- Guiding the very strategic decisions your carriers are making in board rooms and executive sessions.
- Banked on by the investors and insurtech startups when they gamble on their innovation – and against yours.
So, what are those forces that are so powerful they can’t just not be ignored…they need to be obeyed or harnessed?
While the industry as a whole – agents, industry pundits, ‘gurus,’ and carriers – have been shouting ‘go digital or die’ from the rooftops for some years, digital marketing is not strategy.
After all, agencies across North America have gone willy-nilly with wasteful and unproductive digital marketing efforts.
Digital marketing isn’t strategy itself
Rather it must be nested within strategy.
To the point, digital marketing is nested in a broader marketing strategy. And, marketing strategy is nested in strategy itself, the over-arching direction of the entire enterprise.
So, just what are those powerful forces that today’s agent must attend to? What are those forces that will inform and guide your entire corporate strategy?
Of course, a list of forces, trends and pressures could be ad nauseam, but that would render it meaningless.
Perhaps the most arduous challenges facing the strategist are:
- First, assessing the many to determine the few. Forces of change can be diverse, numerous and occasionally hard to find. The strategist needs sufficient knowledge in both the narrow, insurance vertical and broader, global worlds. Out of the morass of possible ‘things you absolutely must pay attention to,’ the strategist must determine those that meet the very highest level of importance.
- Then, wisely interpreting appropriate course of action. Any responsible strategic analysis must, ultimately, deliver a ‘so what’ – a suggested course of action that is most likely to deliver that ‘cascade of favorable outcomes.’
The purpose of this report is to assess those forces that meet that criteria – ‘too important to ignore’ – and to suggest a strategic course of action for the independent agency channel. It is presented, even more so than in previous years, with a sense of urgency, as indicated by the very power and speed with which these forces are moving.
The purpose of this report is to:
- Examine the most powerful trends and forces affecting the independent agency of today, and,
- Arm those agencies with a strategic framework to meet and surmount the challenges presented by those trends and forces.
It is provided with the hope that:
- It will guide and align the team on a clear path to success
- Offer a sensible and effective outline for the allocation of marketing resources, and,
- Encourage agents to maintain an appropriate sense of urgency while removing the inherent distractions of anxiety.
Four forces that cannot be ignored
Just what are those forces that agents must understand and, ultimately, master?
Our research has identified four:
- The accelerated digitization of the connected economy, including its impact on consumer behavior, competition, and, existing industry players.
- The growing pressures of existing and emerging competition, including new entrants previously non-existent.
- The rise of the powerful – and different – millennial generation, becoming both the largest consumer class and supplier of agency employees.
- The accelerating rate of change in business and industry itself.
These forces do not exist in isolation. They overlap. They support each other. In some cases, they accelerate each other.
They are, as a whole, not a surprise. Most agents hear about them, read about them, and often, experience them.
This is an excerpt from the 2018 State of the Insurance Industry Report by Michael Jans: The Death of the Old School Agency: The rise of the new marketing masters. To download the full report, click here.
