As part of our continuing look at the Future of Insurance (kicked off in the third-quarter edition), Carrier Management asked State Auto CEO Michael LaRocco his view on the question of how insurance products and services will be distributed in the years ahead.
“Directionally, the main word for me in distribution will be consolidation. I believe there will be a lot of consolidation across the distribution area. Small independent agents will continue to become part of larger groups because those larger groups will add value and financial strength and protection.
“But the independent agents will not fade away,” he said. “Customers value the advice that an agent can provide. Even in a very automated world, coverages are still going to be more confusing than they should be,” and when people realize “they are protecting their business, their life, their automobile, their home—those are assets that are super important to them. They value that advice. And they get nervous about that.
“Even in a digital world, and even in a more automated world, that advice is very very powerful. What does the coverage mean? What happens at the moment of truth when there’s a loss? How do you save money? What if you spend a little bit more money? What does all of that mean? That value-added advice is important,” LaRocco said.
While customers want a more efficient way to get insurance—the digital piece—that doesn’t mean they don’t still value the advice, LaRocco asserted, advising that “agents who can insert themselves into a digital world effectively, provide the advice and embrace the way the customer wants to communicate with them will still bring a lot of power.”
“Agents will do things like blogging and connecting their customers through a Facebook page… They will bring all of those customers together in a very effective way, and make them feel more comfortable and confident around the business.”
In other words, agents’ jobs “may change a little bit, and the way they build relationships will change a lot. But their role should still be equally important.”
State Auto’s IT Leader Greg Tacchetti reinforced CEO LaRocco’s views about the future of agents, responding to a question about whether State Auto might pursue a direct-to-customer approach with its new digital platform. No, Tacchetti replied, explaining:
- We believe customers are better served by having a professional independent agent, who understands their client’s unique needs and makes recommendations for companies and products to meet these needs.
- The amount of money required to acquire enough brand recognition to make a direct operation profitable is more than we can justify spending.
LaRocco said that State Auto’s digital transformation is part of the road to the future for agents. It “is empowering them to spend more time doing that [advisory] type of work instead of the process crap that they’ve had to do over the many many years they’ve been in the business.” (See related article, “Standing Up a New Insurance Carrier: Super Regional State Auto Goes Digital for Real.”)
The world will change for sure over the next decade, he said, declining to give a particular forecast for the 10-year time horizon on which Carrier Management has been asking executives to opine. “We are using bots very heavily inside this company. We are using drones very heavily inside this little company in Columbus, Ohio. We have obviously embraced technology. We have got a Labs organization that’s working with startups, and doing some really creative things. All that’s going to change the world, but I think protecting assets is still going to be very powerful. And I think agents can add a lot of value in that space.”