The Online Playing Field - Stealing Our Youth??

First of all, individuals and businesses are inarguably operating in an environment that is different and, in some cases, more challenging that at any time in the last 50 years.  More specifically, the availability of information, products, and services is at levels nobody would have thought could be attained 15, even 10, years ago.  The internet, or should I say the power of the internet, has changed everything.

When I got my first car in 1988, my parents called their agent about auto insurance and that was the end of the story.  If they were good enough for my folks, they were good enough for me.  No questions asked.  I mean, where else would I go?  I wouldn’t know where to begin on my own.  Nowadays, 16- and 17-year-olds have the wherewithal and, more importantly, the desire to do virtually everything online.  Whether it’s talking to their friends, researching school projects, or purchasing music, actually speaking to someone, going to the library, or going to a retail music store is, well, so 1990’s!  The scary thing is — these aren’t even the consumers I’m worried about.

It’s the 22- to 28-year-olds who are finishing up school, paying their own bills for the first time, and finding out that life is a lot tougher on their own (even in good economic times) that I’m worried about.  At this point in their lives, they’re veterans of the online world and they watch a lot of TV because, well, we all do.  An online mindset coupled with constant television ads promoting lower prices for one of the first bills they take on when they leave home, auto insurance, concerns me.

Last Friday at an industry event, an agency owner client of ours told us that his two sons, after leaving college, began purchasing their auto insurance online.  And he owns an agency!  It was cheap and easy — case closed.  I’m not making this up; just ask my associate whom I’m rebutting.   Here’s the thing — a portion of those who go to direct writers will end up with an agency at some point in the future as they begin to accumulate assets and realize having someone knowledgeable to advise them is worth a few extra bucks.  The problem is that a good portion, because of human nature and the desire to save money, will not leave their direct writers, which means the pool of potential insureds, as a percentage of the population, is, and will continue to be, smaller for insurance agencies.  And the average age of agencies’ private-passenger auto books will slowly, but surely, rise as fewer young drivers come on the books.  How can this not happen? 

I’m not at all saying that the agency distribution system is in trouble.  Businesses and individuals with significant assets will always want and need an advisor.  But the pool of new potential private-passenger auto clients, which happen to make up the biggest portion of most independent agents’ personal-lines books of business, is smaller.

P.S.  Buying online does not have to mean from a carrier — but it usually does. - EW

Successful Agencies Measure Things

Now more than ever, you should be looking for ways to improve your agency’s performance.  A subtle, but powerful, first step is to begin to really get your hands around key metrics of your current operation.  Remember, having detailed knowledge of something is evidence that you care about it.

Whether it’s a valuation, merger or acquisition, or perpetuation planning, almost every one of our assignments begins with the gathering of data.  In this process, I’ve noticed some recurring themes:

    1.      Successful agencies have owners/executives/managers who set goals and measure things.

    2.      Almost every time we see neat financial statements and are able to get questions answered quickly, we see good performance.

    3.      Almost every time we see cluttered financial statements and are not able to get questions answered quickly, we see sub-par performance.

    4.      Successful agencies that measure things don’t let their management system dictate the data they can or can’t get their hands on.  Instead, they figure out what they want and then see if their system can give it to them.  If their system can’t, they figure out how to get it themselves.

By the way, we sort of don’t care what you’re measuring and I say “sort of” because we definitely have an opinion on the operating dials you should keep your eye on (for example, profit from your core operation, meaning before contingent commissions and other miscellaneous non-operating income).  As long as you’re getting good data, we’re confident you’ll make good decisions and, with that, begin to create the agency you envision. - EWS