Will digital insurance end the agent model?

In the Media

3 min read · Aug 30, 2021

Much has been written about the coming end of the traditional agent channel as the primary means of purchasing insurance. Consider these statistics and trends:

  • Online commerce is growing at 15.5% per year over the past five years, while brick and mortar business grew at only 3.5% (source: DigitalCommerce360)
  • Startup carriers such as Lemonade, Hippo, Next, Root and Neptune Flood have achieved significant market share in the renters, homeowners, small business and flood markets, respectively, due to their digital models, ease of use and disruption of the traditional channels.
  • Direct-to-consumer models, meaning no-agent-involved, are growing rapidly in all lines of the insurance business.

What does this mean for agents? Should they close up the office and call it a day, like saddle makers of the early 1900s?

Definitely not. Buying insurance is not like buying a saddle, but there are trends that should inspire evolution and change for the successful agents of the future.

Let’s consider the important roles of the agent in P&C insurance:

  • Agents are the trusted advisor to consumers and small businesses in making their purchase decisions. Home and flood insurance are particularly difficult to navigate given bank requirements and even mandates from the U.S. government.
  • After the sale, agents handle important touchpoints for policyholders, such as reviewing coverages, renewal decisions and helping with claims when there is a loss.
  • Agents help to translate and explain complex insurance products in ways that can be understood (best to avoid terms like “underwriting,” “reinsurance,” “subrogation,” “1:500 year flood”, etc.)
  • Agents present a full insurance picture to a homeowner or business. The complexity of this cannot be understated. Agents keep track of the hundreds of new carriers, MGAs, products, unique coverages, new risks and new lines of business every single year in a way that the normal consumer or business cannot.

Digital insurance makes it easier for everyone. True, it enables an educated consumer to buy online without an agent. But it’s also a great way for a consumer or small-business owner to become knowledgeable before contacting an agent. At Neptune, where 97% of our policies are generated through independent insurance agents, we find that a high percentage of the visitors to our direct-to-consumer site are real estate agents seeking to understand the cost of flood insurance as part of a real estate transaction. In addition, many of the consumer shoppers on our site then go to an agent to complete the transaction, often referred by Neptune to the agent.

A recent podcast of the Neptune Digital Insurance Leaders series featured Martha Notaras, managing partner at the venture capital firm Brewer Lane Ventures. Brewer Lane invests in companies across the insurance spectrum, and Martha is great at understanding business models and technology trends in insurance. Martha’s insights outline the key role of agents in the future and some of the adaptations that will likely be invaluable for agents to survive and thrive.

Martha sees the opportunity for agents to:

  • Educate consumers about risk and share information about “people like you also buy thus and such.”
  • Small and medium enterprise (SME) is an area of opportunity for agents, as many SME businesses don’t understand what they need and are at huge risk.
  • Agents will keep track of new products (e.g., cyber) or new types of coverage (e.g., parametric) and will explain how these fit into an overall financial picture.
  • Similar to how banks changed their delivery model over the past 20 years to a mostly online process, agents need to go digital and have multiple avenues for their customers to reach them: phone, text, chat, social media, as well as face-to-face.

Her belief is that agents will take on harder and harder types of insurance with larger and larger policies. They will move “upstream,” as the digital carriers’ processes automate the low-value touchpoints like changing mortgage processors on their policy or getting a copy of their insurance certificate.

In summary, we are at a massive transition point. Digital insurance makes it easier for everyone. Agents that embrace technology and the trusted advisor role will thrive in the future, to an even greater degree than they do now. Their roles will change, but they are still invaluable to anyone purchasing insurance.

Trevor Burgess is president & CEO of Neptune Flood. Contact him at [email protected].