Why insurance agencies must adopt social media
August 6, 2014 by Terry Golesworthy
Many insurance carriers report frustration in their efforts to make agents enthusiastic about the power of social media.
The reluctance of agents, however, to engage in social media is totally understandable:
- Agency principals grew up in a different time; by and large they do not tweet, poke, pin or follow. Their use of Facebook, if any, is to view pictures of grandkids, and tweets are for the birds.
- Agencies are busy places; who has the time?
- To do social media well, most agencies need a marketing person – or, as they call it, a non-producer. It is harsh to label marketers as “unproductive”, but that’s what they are called.
- The personal lines agency business is flat. Direct channels are biting into all other channels, and agencies have taken their fair share of the hit. While most agencies are not hurting too much yet, this seems a bad time to throw cash at “toys.”
- In the minds of agency principals, social media has not been proven, with the classic characterization of posting pictures of one’s lunch and updating the world on the minutia of life. It is hard to connect the dots between pictures of cats and umbrella policies.
The threat to agencies
The reasons to stand on the sidelines are compelling, but jumping into the social media water may turn out to be fundamental to an agency’s future, as the insurance industry looks to be embarking on momentous change.
- The bite taken by direct channels will grow. Frankly, it would be irresponsible for insurers not to explore and gain experience in channels in which consumers have expressed considerable interest. Many insurers are at the very least dabbling in direct channels, from adding nonstrategic products (cancer insurance, bike insurance and child life insurance) to acquiring or starting new companies.
- While carriers flirting with direct sales are an ongoing source of irritation for agencies, the real threat might come from outside the industry. Walmart has a toe in the water with auto and life insurance, and Overstock.com has put a complete foot in by opening an agency to offer auto and home and will soon add life insurance. Ameriprise is reporting strong growth through its insurance partnership with Costco, and in the UK, the top four supermarket chains and the leading department store now offer a comprehensive range of insurance products.
- While the retail channels pose threats, bigger disruption is on the horizon. Google operates as a leading aggregator for auto insurance in the UK and France; is this a precursor of a global initiative? Amazon is rumored to be exploring the life insurance market, and if you want to be paranoid, consider the marketing power it would have with Amazon Moms (a service for new mothers along the lines of Amazon Prime) and the self-maintained database of some of the best prospects for life insurance.
The agency impact
The impact will most be felt with younger consumers, who will be drawn away by new channels and new options. They never developed agency loyalty, are comfortable with comparison buying and probably are more trusting of Amazon than is an “older” gentleman sitting in a leather chair peering through bifocals.
Total agency revenue is likely to drop and some agencies will fail, but across the board, the customer base will be aging. Many principals feel they can “tough it out,” milk the existing book of business and retire. Most will actually succeed with this plan, but then comes the real impact.
An agency with a shrinking business and aging customer base is just not worth as much as principals anticipate. This indicates an agency that has not invested in the future. This is a major issue because many principals have simply not invested adequately for their own retirement. The retirement plan is the agency.
Protecting agency assets
Agency principals need to invest in business succession to protect their major asset. New customers will not be acquired in enough volume by cold calls, Yellow Pages ads, Rotary breakfasts or flower boxes outside the office. Younger consumers are not born with a built-in knowledge of insurance products and seek advice as much, if not more, than their parents ever did. But they seek much of this advice online. They are connected – on mobiles, tablets and wearable tech – and they communicate via social media with friends, family and even strangers to gain insight and advice. They absorb the musings of bloggers and eat up short videos, but they do not walk into an insurance agency.
Social media will not bring instant success; it takes a lot of hard work and time. It will be frustrating and more expensive than you have been led to believe, and it is hard to measure the return on investment. But long term, it may help protect the value of the agency. For people who have spent a lifetime advising clients about risk management, it would be sad and ironic if these same people see the business value diminish due to poor planning.
Terry Golesworthy is president of The Customer Respect Group, a web-strategy and social media firm with expertise in the insurance industy. Golesworthy is also editor of SocialEyes newsletter.
