The Independent Insurance Agency SWOT Analysis


The Independent Insurance Agency SWOT Analysis. Agency Revolution

It’s common to hear agents asking for shortcuts to top-line revenue acceleration. Years ago, they asked, “Does a letter or a postcard work better?” Today, the questions might be “Should we focus on Instagram or Twitter? Email auto-responders versus broadcast messages? How often should we blog? Which campaigns get the best results?”

While these are important questions to ask, many insurance agents ask them prematurely. They’re tactical questions without the context of a broader strategy. 

Before you select the delivery system for your marketing, you must first answer:

  1. Who is your market? As you define who you’re trying to attract and connect with, it will raise secondary questions about their motivations, goals, and fears.
  2. What is your message? Once you know your market, you can begin to test what messaging they’ll respond to.
  3. Once you answer the questions above, you can finally ask which media should we use to reach them?

How you answer these questions will have major business consequences for years to come. 

If you can direct your marketing and customer communications to the appropriate demographic, you’ll find a strategic match that generates the highest customer lifetime value, profitability, and equity. 

To hone-in on the best strategy for your agency—and the market you wish to attract—a SWOT analysis can serve a clear-eyed view of your position and how to respond. 

SWOT challenges you to ask four questions about your agency:

  1. What are our inherent strengths? These are the qualities that positively separates you and your agency from your competitors.
  2. What are our inherent weaknesses? These are important to note, either to work to improve or to acknowledge where you can’t compete.
  3. What are the emerging opportunities? These represent external forces your agency can leverage to advance your goals. 
  4. What are the emerging threats? These represent the external forces you must protect your agency against. 

The inherent strengths of the agent-broker channel

The most distinguishing feature when matched against the direct channel or the digital channel, is that you have real people

Everyone knows they call a far-away cubicle at GEICO. They don’t expect a relationship. They expect the efficient delivery of a commodity. 

You have real people in your agency. More real people in your marketplace with whom you can build real community and develop and cultivate real relationships, and offer genuine advice. 

Your expertise helps your customers make more informed decisions. You represent more than one carrier, and more than one policy option, and you can help people navigate the complicated world of insurance. 

One of the most overlooked strengths of the agent-broker channel—and also one of the greatest untapped opportunities, as we’ll examine further—is your existing book of business.

What are our weaknesses?

If you’re being honest with yourself, you’ll identify a few weaknesses we face as agents in this industry. 

According to A.M. Best, the independent insurance channel is a bit more expensive than the direct channel. 

While our underwriting costs less, we have the least efficient delivery system, our sales and distribution models have overlapping infrastructure costs, and we lack the enforced and streamlined discipline of direct channel models.

Being more expensive isn’t inherently bad however. Many successful companies across industries are more expensive than their competitors. Being more expensive is only an inherent weakness if you’re competing on price—something that is, unfortunately, common practice among insurance agencies and brokerages. We could all stand to figure out how to add value to the insurance experience as it passes through our human hands. 

A greater weakness is a fundamental problem with our industry: our customers don’t like us very much. According to a recent survey by Edelman, 48% of the consuming population “does not trust the insurance industry to do the right thing.” You read that right: half the population doesn’t trust us.

Trust is at the core of all relationships, and is especially important in the insurance industry, where we’re selling an intangible. Trust needs to be woven into the fabric of your relationship with your customers; more so because they can’t see what you’re selling them. 

Our greatest opportunity

I was speaking with a friend who complained about never hearing from his agent. Our conversation went like this: 

Me: “Do you feel like you have the right coverage?”

Him: “I don’t know.”

Me: “Do you feel like your agent is doing the right thing for you?”

Him: “I don’t know.”

Me: “Do you think that you have gaps in your insurance?”

Him: “I don’t know.”

No agency should let their customers feel this way especially when the money we make is in the relationships we build. The biggest opportunity to grow your business is to build deeper customer relationships. Improve your relationships with customers by providing information and insights they find helpful, even about their own coverage situation. By sharing information, you’ll be rewarded with higher retention, more policies sold per customer, and you’ll gain more referrals from happy, informed customers.

Further leverage this opportunity by deepening relationships with individual customers as well as the community you serve by attending community events, supporting local causes, or openly celebrating your team. You’ll earn the trust of the community, while earning new business and giving you community reasons to refer you.

Our most prominent threats

We are in a rapidly changing business environment. Emerging digital competitors aren’t backing down, and larger agency and direct sales threats are amassing resources. 

Even the nature of risk is changing. New technologies—driverless cars, IoT, AI—will disrupt many of the common insurance coverages we take for granted. Customer behavior is changing alongside technological transformation. 

The days where we can expect this year to be similar to previous years in business are over. In this fast-evolving landscape, the only constant is change, and our inability to adapt to it presents the largest threat to our industry. Remember my friend who said he never heard from his agent? There was a time when he would put up with poor customer service because the thought of switching his policies to a new agent was unbearable. His resistance to change cannot be your customer retention strategy. In today’s digital age, finding a new agency to provide the same or better coverage is no longer a hassle. Most consumers can do it within a few minutes without ever leaving the comfort of their own homes. If you previously relied on your customers’ resistance to change to keep them, it’s time to rethink your retention strategy, to keep your customers from switching today and to keep your business growing into the future.