careers paths Where are Your Clients A Look into <strong>the</strong> Consumer Choice Model By Julia Jordan Over <strong>the</strong> last couple <strong>of</strong> decades, <strong>the</strong> increasing prevalence <strong>of</strong> online shopping has given consumers faster, easier access to <strong>the</strong> goods and services <strong>the</strong>y desire. Fifth Gear Marketing Research found that in 2010, 71% <strong>of</strong> adults were shopping online. Th<strong>is</strong> technology has presented a new world <strong>of</strong> choices for consumers and heightened competition among companies in many industries. Consumers have come to expect quick and easy comparative shopping, so companies have been forced to adapt <strong>the</strong>ir strategies to meet <strong>the</strong> demand for consumer choice. The landscape <strong>is</strong> now changing for service industries, such as insurance, as it already has in retail, electronics, music, entertainment and many o<strong>the</strong>r industries. Take <strong>the</strong> travel industry for example. In <strong>the</strong> ‘90s, <strong>the</strong> online travel industry was growing rapidly. Consumers began taking advantage <strong>of</strong> <strong>the</strong> Internet to shop around and find <strong>the</strong> best travel deals. To answer th<strong>is</strong> demand, some <strong>of</strong> <strong>the</strong> leading U.S. airlines formed companies such as Orbitz and Travelocity. These sites <strong>of</strong>fered a “one-stop shop” for consumers and allowed <strong>the</strong> major airlines to make sure <strong>the</strong>y stood as a contender in <strong>the</strong> search. Millions <strong>of</strong> shoppers have switched to <strong>the</strong>se sites as <strong>the</strong>ir main source <strong>of</strong> booking travel. O<strong>the</strong>r industries have also caught on to th<strong>is</strong> strategy to better compete in <strong>the</strong>ir marketplace. Amazon.com lets consumers compare retail products side by side. Bankrate. com allows consumers to compare interest rates for mortgages, home equity loans, CDs and o<strong>the</strong>r financial products. According to NetQuote, over 25 million people have used websites that provide quotes from multiple insurance companies. The problem with th<strong>is</strong> <strong>is</strong> that <strong>the</strong> consumer frequently must talk to multiple agents before getting sufficiently comfortable enough to purchase <strong>the</strong> new policy. The consumers’ power <strong>of</strong> choice puts captive agents, with limited product <strong>of</strong>ferings, at a competitive d<strong>is</strong>advantage. Today, <strong>the</strong> independent agent has <strong>the</strong> ability to impartially shop with multiple carriers and has <strong>the</strong> technology to do it fast. The power <strong>of</strong> choice creates an uneven playing field for captive agents, and th<strong>is</strong> will only grow over time. “Whenever I am deciding on an insurance company, I want to ensure that I am getting <strong>the</strong> most out <strong>of</strong> every dollar I pay. The power to have choice with my insurance company gives me confidence to know that I am getting <strong>the</strong> best option for me and <strong>the</strong> freedom to invest my money exactly where I want it. Choice <strong>is</strong> something I have come to expect in all areas <strong>of</strong> my life now.” –Shirlene P., independent insurance agency client So where are your clients According to J.D. Power and Associates, 54% <strong>of</strong> new insurance buyers are finding quotes online. However, only a fraction <strong>of</strong> <strong>the</strong>m buy online; <strong>the</strong>y prefer to buy from an agent – a human being – <strong>who</strong> can answer questions and provide alternative options for <strong>the</strong>m. Insurance <strong>is</strong> a complex financial product and most people need <strong>the</strong> counsel <strong>of</strong> a pr<strong>of</strong>essional to make good choices. The rate that consumers are shopping <strong>the</strong>ir insurance has r<strong>is</strong>en from 27% in 2009 to 33% in 2011. Out <strong>of</strong> <strong>the</strong> 33% shopping, 40% switched to a new insurer – up from 33% in 2010. These trends are only expected to increase. Th<strong>is</strong> <strong>is</strong> bad news for captive agents with limited product options, but good news for independent agencies <strong>who</strong> have <strong>the</strong> consumer choice model available for <strong>the</strong>ir clients. Ano<strong>the</strong>r value add for independent agencies <strong>is</strong> <strong>the</strong> ability to re-shop <strong>the</strong>ir clients at renewal if <strong>the</strong>y face rate increases or are o<strong>the</strong>rw<strong>is</strong>e unsat<strong>is</strong>fied with <strong>the</strong>ir carrier, a practice which can significantly improve customer retention. The independent agency <strong>is</strong> enhancing <strong>the</strong> consumer choice model not only by providing multiple options, but with more efficient compar<strong>is</strong>on technology and real-time quoting that result in prompt follow-up and a better client experience. Stat<strong>is</strong>tics show that insurance clients are responding positively to th<strong>is</strong> model as independent agency close ratios range anywhere from 3 to 5 times higher than <strong>the</strong>ir captive agency peers. The consumer choice model <strong>is</strong> proving to be a necessity in many industries and <strong>is</strong> gaining steam in insurance. It has become evident that consumers across <strong>the</strong> board expect choices when it comes to spending <strong>the</strong>ir money on financial products such as insurance. Technology <strong>is</strong> changing buying patterns, and captive agents will see increasing competitive pressure from independents because choice <strong>is</strong> demanded by <strong>the</strong> 21st century consumer. Like consumers, captive agents have <strong>the</strong> power to choose <strong>the</strong>ir business platform. They owe it to <strong>the</strong>ir clients and <strong>the</strong>mselves to thoughtfully consider whe<strong>the</strong>r going independent <strong>is</strong> <strong>the</strong> right choice for <strong>the</strong>m. Ef Julia Jordan <strong>is</strong> a marketing associate at Goosehead Insurance, <strong>the</strong> franch<strong>is</strong>ing subsidiary <strong>of</strong> TWG Insurance, and has previous pr<strong>of</strong>essional experience as an independent agent. She can be reached at 214-838-5438 or julia.jordan@goosehead.com. 44 — Exclusivefocus Winter 2011/2012
Winter 2011/2012 Exclusivefocus — 45
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