Lessons From Insurance History

Ole Ben Sure Knew What He Was Doing!

by Ron Webber

The goal of every Independent Insurance Agency should be to offer the best coverage for the risk at the most affordable cost. Benjamin Franklin did just that when he devised a plan for fire protection for Philadelphia property owners through a subscription plan to fire companies. The insured received a tin shield that was placed on his building declaring the property to be a paid member of the fire company. The property would receive the services of the area fire company. The subscriptions or premiums paid by many utilized the law of large numbers and made the plan financially solvent.

Time passed and non-member homes burned as the fire companies stood by to protect adjacent properties that were members. This produced an outcry of the citizens, which forced politicians to become involved and convert the fire services to government owned and operated. The original fire insurers started offering protection covering the assets of the property instead of fighting the fire itself.

The point of this history lesson is the Insurance company had to evolve to stay in business and so has the job of the independent agent. The agency as an Independent contractor must solicit and market its services to the public as an expert in obtaining the best coverage at the best price for the insured. The agency must make a profit by lowering expenses and increasing sales to continue their services.

Since the agent cannot control the premiums they charge for coverages or the commissions they receive, the only expense factor left to control is the cost of doing business, also known as the acquisition cost. This brings us to the role of automation in the independent insurance agency. One part of the acquisition cost factor that can be controlled is the human cost of handing customer files. Automation doesn’t have to mean a paperless office. The paperless office idea has scared many experienced agents, who protect their paper files like a mother protecting her young. The major problem is always finding the file (or the information in the file) quickly and efficiently. Automation simply puts the customer data on the computer for quick and complete retrieval. This is the alternative to searching for a file folder and hoping that it contains up to date information.

The insurance companies’ answer is to provide the agent with the most current policy details available via the Internet and/or daily download of data. The problem with that solution is that the company remains in control of the information. Most independent agents represent several companies. They need control of their information for consolidated accounting of all of their policies and related information to help determine their financial condition and trends within their agency.

With more Insurance products being made available on a direct basis to the customer via the Internet and at the neighborhood bank, the question is what can the Independent do to survive? Many Insurance companies know and recognize the need for the local independent agent, but the competition is growing daily.  The agent must stay abreast of new products and methods of operating the agency to stay profitable. Automation is just one part of the answer but a much-needed one to survive in this new millennium. The insurance companies still need the agencies to stay profitable and stay in business for the companies to grow.

Automation is a big part of the answer to the question of how the independent insurance agent can survive amidst all of these challenges. I really believe the only way that you are going to survive in the 21st Century is to automate.
 
Remember, the bottom line is "Automation equals Productivity and Profitability."

Ron Webber

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