In a special annual report to Berkshire shareholders, Warren Buffett says GEICO is poised to grow well into the future. An insurance company that just 18 years ago held only a 2% share of the auto insurance market is now at 9.3% and is going after the remaining 90%. According to Buffett; "Don't bet against (GEICO) acquiring chunks of it year after year in the future."
GEICO's current 9.3% auto market share generates $15 billion in premium. Buffett is proud that GEICO's operations have maintained an underwriting profit for nine consecutive years while State Farm has had an underwriting loss in 8 of the last 11 years.
With over $900 billion in annual advertising costs (about 6% of premium) I guess we will continue to see the gecko, the caveman and who knows what other creepy icon they come up with for many, many years.
Monday, February 27, 2012
Friday, February 24, 2012
Can a computer sell auto and home insurance?
Of course; it happens every day! Can a computer provide insight into how much insurance a person should carry? If not already, I am sure it will be able to very soon. So where does the professional insurance agent fit into the picture?
I spoke with an agent recently and he said his agency will never be replaced because insurance is a relationship business and as long as he takes care of his customer he will have nothing to worry about. I asked him to expand on the "relationship" aspect of his agency. He said that all phone calls were answered live within a few rings; he said that his staff is well versed in servicing policies and all questions are answered quickly and correctly; he then added something that surprised me a bit. He said that a big part of his and his staff's time is spent in answering the "what ifs" from his customers. Things like; "what if my daughter gets her drivers license, how much will it cost to add insurance on her?" or "what if I get in an accident, will my insurance go up?" or even this one "I had a minor accident, should I pay for it myself?" These are things that are mind-numbing to an agency but are an important feature in the relationship that the agent has with the customer.
We all know that the direct insurance writers can easily duplicate the services of insurance agents in most areas; they can answer the phone within a few rings, the staff people can be well versed in the coverage of an insurance policy, but are they willing to take on the tasks of advice and counsel? If they are an employee of the direct writer, can they be expected to take on the role of customer advocate? Are these employees willing to go out on a limb and advise a customer that it may be in the best interest of the customer to pay this claim out of their own pocket? I don't think so. Why should they take the chance with a customer that they do not know or will probably never talk to again?
So, there is the secret sauce of the professional insurance agent. Taking care of the customer "what ifs." There are, of course, many other aspects of running an agency. Things like; completing annual policy reviews, visibility in the community and becoming an expert in specific areas of insurance.
Another interesting aspect of this is that advice and counsel is provided without cost to the customer. Of course the customers pay their insurance premiums but they would have to pay some company anyway, so why not pay a local agent and get someone that can help them?
Someone may come up with a business model that incorporates all aspects of an insurance agency that can be available to the masses. If and when that happens agents may be at risk, but in the meantime the future is pretty bright for agents.
I spoke with an agent recently and he said his agency will never be replaced because insurance is a relationship business and as long as he takes care of his customer he will have nothing to worry about. I asked him to expand on the "relationship" aspect of his agency. He said that all phone calls were answered live within a few rings; he said that his staff is well versed in servicing policies and all questions are answered quickly and correctly; he then added something that surprised me a bit. He said that a big part of his and his staff's time is spent in answering the "what ifs" from his customers. Things like; "what if my daughter gets her drivers license, how much will it cost to add insurance on her?" or "what if I get in an accident, will my insurance go up?" or even this one "I had a minor accident, should I pay for it myself?" These are things that are mind-numbing to an agency but are an important feature in the relationship that the agent has with the customer.
We all know that the direct insurance writers can easily duplicate the services of insurance agents in most areas; they can answer the phone within a few rings, the staff people can be well versed in the coverage of an insurance policy, but are they willing to take on the tasks of advice and counsel? If they are an employee of the direct writer, can they be expected to take on the role of customer advocate? Are these employees willing to go out on a limb and advise a customer that it may be in the best interest of the customer to pay this claim out of their own pocket? I don't think so. Why should they take the chance with a customer that they do not know or will probably never talk to again?
So, there is the secret sauce of the professional insurance agent. Taking care of the customer "what ifs." There are, of course, many other aspects of running an agency. Things like; completing annual policy reviews, visibility in the community and becoming an expert in specific areas of insurance.
Another interesting aspect of this is that advice and counsel is provided without cost to the customer. Of course the customers pay their insurance premiums but they would have to pay some company anyway, so why not pay a local agent and get someone that can help them?
Someone may come up with a business model that incorporates all aspects of an insurance agency that can be available to the masses. If and when that happens agents may be at risk, but in the meantime the future is pretty bright for agents.
Monday, February 20, 2012
50,000 Insurance Agents in North Dakota!
There is one insurance agent for every 15 people in North Dakota! I bet you thought the competition was tough in your area.
The number of insurance agents in North Dakota has doubled in just 10 years from 25,856 to 49,893 according to the North Dakota State Insurance Department.
Actually there are only 6,000 Resident agents in North Dakota, a much better ratio of residents to insurance agents. Why does the records show almost 50,000? It seems that with the surge of 800 number and internet insurance sales, a large influx of non-resident agents have entered North Dakota. People who answer the phone and deal with customers online must have an insurance license in the State.
The number of insurance agents in North Dakota has doubled in just 10 years from 25,856 to 49,893 according to the North Dakota State Insurance Department.
Actually there are only 6,000 Resident agents in North Dakota, a much better ratio of residents to insurance agents. Why does the records show almost 50,000? It seems that with the surge of 800 number and internet insurance sales, a large influx of non-resident agents have entered North Dakota. People who answer the phone and deal with customers online must have an insurance license in the State.
Friday, February 17, 2012
Where are the worst drivers in America?
I was pretty sure that the worst drivers in America were right here in my state. Actually, I thought the worst drivers were not only in my state but right here in my city and in my community. It turns out I may be wrong.
An online company named Car Insurance Comparison compiled some information from three sources; the National Highway Safety Administration (comparing fatalities), the American Motorists Association (comparing the number of citations issued), and Mothers Against Drunk Driving, MADD (comparing drunk driving statistics) to come up with the states that have the worst (and best) drivers.
The absolute worst drivers in America come from (skip the drum roll), believe it or not, LOUISIANA. It was not even close, Louisiana was worse by 12 additional points over Missouri.
Does that mean that car insurance in Louisiana costs more? If so, it may be a great opportunity to get your insurance license and get started on a new career since insurance agent income is based on commissions.
Here are the results from the survey:
The Worst Drivers in America:
#1 Louisiana, #2 Missouri, #3 Texas, #4 Florida, #5 Oklahoma, #6 Arizona, #7 Kentucky, #8 Alabama, #9 Montana, #10 Nevada, #11 South Carolina, #12 North Carolina, #13 North Dakota, #14 Delaware, #15 Tennessee, #16 Kansas, #17 Arkansas, #18 Idaho, #19 Georgia, #20 Alaska, #21 Iowa, #22 South Dakota, #23 Mississippi, #24 New Mexico, #25 Colorado, #26 Pennsylvania, #27 Hawaii, #28 Wisconsin, #29 New York, #30 Vermont, #31 Indiana, #32 Michigan, #33 West Virginia, #34 Maryland, #35 Minnesota, #36 California (what!), #37 Wyoming, #38 Washington, #39 New Jersey, #40 Utah, #41 Ohio, #42 Nebraska, #43 Illinois, #44 Maine, #45 Oregon (my state!), #46 New Hampshire, #47 Virginia, #48 Massachusetts, #49 Connecticut, and the very BEST drivers in America, at #50 Rhode Island.
If you would like to see all of the statistics that went into this non-scientific survey, go to:
http://www.carinsurancecomparison.com/which-states-have-the-worst-drivers/
I can rest easy now knowing that the crazy drivers in my city are not the worst in the US.
An online company named Car Insurance Comparison compiled some information from three sources; the National Highway Safety Administration (comparing fatalities), the American Motorists Association (comparing the number of citations issued), and Mothers Against Drunk Driving, MADD (comparing drunk driving statistics) to come up with the states that have the worst (and best) drivers.
The absolute worst drivers in America come from (skip the drum roll), believe it or not, LOUISIANA. It was not even close, Louisiana was worse by 12 additional points over Missouri.
Does that mean that car insurance in Louisiana costs more? If so, it may be a great opportunity to get your insurance license and get started on a new career since insurance agent income is based on commissions.
Here are the results from the survey:
The Worst Drivers in America:
#1 Louisiana, #2 Missouri, #3 Texas, #4 Florida, #5 Oklahoma, #6 Arizona, #7 Kentucky, #8 Alabama, #9 Montana, #10 Nevada, #11 South Carolina, #12 North Carolina, #13 North Dakota, #14 Delaware, #15 Tennessee, #16 Kansas, #17 Arkansas, #18 Idaho, #19 Georgia, #20 Alaska, #21 Iowa, #22 South Dakota, #23 Mississippi, #24 New Mexico, #25 Colorado, #26 Pennsylvania, #27 Hawaii, #28 Wisconsin, #29 New York, #30 Vermont, #31 Indiana, #32 Michigan, #33 West Virginia, #34 Maryland, #35 Minnesota, #36 California (what!), #37 Wyoming, #38 Washington, #39 New Jersey, #40 Utah, #41 Ohio, #42 Nebraska, #43 Illinois, #44 Maine, #45 Oregon (my state!), #46 New Hampshire, #47 Virginia, #48 Massachusetts, #49 Connecticut, and the very BEST drivers in America, at #50 Rhode Island.
If you would like to see all of the statistics that went into this non-scientific survey, go to:
http://www.carinsurancecomparison.com/which-states-have-the-worst-drivers/
I can rest easy now knowing that the crazy drivers in my city are not the worst in the US.
Monday, February 13, 2012
You can now buy insurance from a smartphone!
A few months ago, several banks promoted an app that allows customers to deposit checks into their checking accounts by simply photographing the check front and back. Now the same technology is coming to the insurance industry to attract new customers.
Progressive announced an app that allows a person to use their mobile phones to upload photos of their drivers license, prior insurance card and/or vehicle identification number in order to get a quick quote. Progressive will even bind the coverage through this process.
Extensive use of mobile apps will certainly take off if this test program is successful. It will not be long before other insurance companies will be offering similar features.
Mobile phone apps carry with them a tremendous amount of potential for the insurance industry and companies are just beginning to get involved. Mobile apps will be able to assist in underwriting, sales, and claims. Think about the underwriter who has questions about the wood burning stove and wants to see a picture of it. Or the claims adjuster who wants to see a picture of the accident.
Progressive announced an app that allows a person to use their mobile phones to upload photos of their drivers license, prior insurance card and/or vehicle identification number in order to get a quick quote. Progressive will even bind the coverage through this process.
Extensive use of mobile apps will certainly take off if this test program is successful. It will not be long before other insurance companies will be offering similar features.
Mobile phone apps carry with them a tremendous amount of potential for the insurance industry and companies are just beginning to get involved. Mobile apps will be able to assist in underwriting, sales, and claims. Think about the underwriter who has questions about the wood burning stove and wants to see a picture of it. Or the claims adjuster who wants to see a picture of the accident.
Thursday, February 9, 2012
Allstate offices at car dealerships?
Allstate insurance announced that they will be opening agents offices at car dealerships. The idea is to attract the business leads generated by auto sales and offer customers a full menu of Allstate products.
Car dealer referrals were once considered poor business practices by most insurance companies. The companies did not want their agents working this market. Apparently that is not the case at Allstate.
I am not sure this is a good idea. The reasons that insurance companies prefer to stay away from auto dealer referrals are legitimate. A high majority of these referrals are people who have no prior insurance; they are primarily interested in getting the car off the lot and therefore may provide false driver information; and of course, the car salesman also wants to make a sale and may encourage the customer to provide misleading or even false information.
Dealership auto referrals have also caused many agents to lose their license or their insurance company contracts. New agents are hungry for business and will do most anything to write a policy. Dealership sales managers are aware of this and will work on a new agent to try and get them to bind coverage over the phone instead of coming into the dealership. Sales managers do not want the cost of auto insurance to screw up the pending sale, so they may encourage a low ball quote. Remember that the goal of the dealership is to get the car off the lot with few hassles and insurance is a hassle.
I wish Allstate the best of luck in this venture, but I seriously doubt that it will be sustainable.
For the full story about Allstate's auto dealership plans, click here.
http://www.bodyshopbusiness.com/Article/96696/allstate_to_open_fullservice_agent_offices_at_auto_dealerships.aspx?categoryId=
Car dealer referrals were once considered poor business practices by most insurance companies. The companies did not want their agents working this market. Apparently that is not the case at Allstate.
I am not sure this is a good idea. The reasons that insurance companies prefer to stay away from auto dealer referrals are legitimate. A high majority of these referrals are people who have no prior insurance; they are primarily interested in getting the car off the lot and therefore may provide false driver information; and of course, the car salesman also wants to make a sale and may encourage the customer to provide misleading or even false information.
Dealership auto referrals have also caused many agents to lose their license or their insurance company contracts. New agents are hungry for business and will do most anything to write a policy. Dealership sales managers are aware of this and will work on a new agent to try and get them to bind coverage over the phone instead of coming into the dealership. Sales managers do not want the cost of auto insurance to screw up the pending sale, so they may encourage a low ball quote. Remember that the goal of the dealership is to get the car off the lot with few hassles and insurance is a hassle.
I wish Allstate the best of luck in this venture, but I seriously doubt that it will be sustainable.
For the full story about Allstate's auto dealership plans, click here.
http://www.bodyshopbusiness.com/Article/96696/allstate_to_open_fullservice_agent_offices_at_auto_dealerships.aspx?categoryId=
Monday, February 6, 2012
The Gecko in China?
Chinese officials announced recently that they would soon open up the auto insurance markets to foreign companies in China.
The auto insurance market in China is currently $31 billion a year but rapid growth is expected over the next few years.
Does that mean that the Chinese will soon be seeing the Gecko? Let's hope that they put all of their $900 million advertising budget into China and get rid of the Gecko here.
The largest distribution of auto insurance in China is through independent insurance agents. I wonder if we should move into China with an insurance pre-license training program.
The auto insurance market in China is currently $31 billion a year but rapid growth is expected over the next few years.
Does that mean that the Chinese will soon be seeing the Gecko? Let's hope that they put all of their $900 million advertising budget into China and get rid of the Gecko here.
The largest distribution of auto insurance in China is through independent insurance agents. I wonder if we should move into China with an insurance pre-license training program.
Wednesday, February 1, 2012
Somebody needs a talkin' to
How can the insurance company that I worked with for 37 years do so badly on a satisfaction survey?
JD Powers just today released their annual report called Auto Claims Satisfaction Study and Farmers came out really, really bad!
The only insurance company's in the survey that did worse were 21st Century and Esurance. There are 4 categories (Overall Satisfaction, First Notice of Loss, Service Interaction, and Appraisal) with each having a 1-5 score. A score of 5 means Among the Best, a score of 4 means Better than Most, a score of 3 means Above Average, and a score of 2 means The Rest. Farmers scored 2's in each category except they scored a 3 in Appraisal.
State Farm scored 4, 4, 5, 4 and Allstate scored 3, 3, 3, 4.
Here is the full report: http://www.jdpower.com/Insurance/ratings/auto-claims-ratings/
JD Powers just today released their annual report called Auto Claims Satisfaction Study and Farmers came out really, really bad!
The only insurance company's in the survey that did worse were 21st Century and Esurance. There are 4 categories (Overall Satisfaction, First Notice of Loss, Service Interaction, and Appraisal) with each having a 1-5 score. A score of 5 means Among the Best, a score of 4 means Better than Most, a score of 3 means Above Average, and a score of 2 means The Rest. Farmers scored 2's in each category except they scored a 3 in Appraisal.
State Farm scored 4, 4, 5, 4 and Allstate scored 3, 3, 3, 4.
Here is the full report: http://www.jdpower.com/Insurance/ratings/auto-claims-ratings/
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