1. Provide agents a way to sell insurance 24/7. A customer of mine can call the "Directs" 24/7 and the company will process and bind immediately. Some agents do the phone binding now but I choose to not bind without signatures until company approves us to bind without signatures.
One of the ways our companies could help us sell 24/7 and present them and agent with less liability exposure would be to provide us links to their web sites. Example:
A. Person calls us.
B. We open company web site for rating.
C. When we have order, we ask underwriting questions (recorded conversations).
D. We provide company money and application on line.
E. Either company or us could send app for signatures. Fax or transmit to insureds on line when possible.

2. Fairness in rates. I saw an "Allstate Direct" ad in Paris that said "Savings Of 50%" (not sure if they have started this kind of advertising in U.S.). GEICO says up to 15%. A direct mailer I received said "Save $400". Another mailer, that comes in my bank statements every month, says "Save $300". Why should a company advertise savings that are more than they pay their agents? Are they telling us the business generated by them on a direct basis is "Better" business and, therefore they can write the direct business at an even lower cost than the commission they pay us? Could it be that it is the independent agent's better experience that has permitted companies to offer lower rates in their "direct programs". Are they increasing company direct market share on the backs of independent agents? I have heard reports that losses are higher from company direct business than from their independent agents' business but I have not been able to confirm.

3. Fairness in promoting direct vs. independent agent. The direct companies should stop their direct sales personnel from using negative comments about Independent Agents. In addition stop misleading advertising - savings of 30%? Who are they comparing? If their comparison involves a rate for a person over 30, married - no children, clear MVR, prior insurance and a good credit rating, then they should compare that rate with companies using the same underwriting.

Most of my insurance years I have had to compete with GEICO. NO company advertises as much as GEICO. A recent announcement to stockholders of Berkshire Hathaway, owner of GEICO, Warren Buffet reported that GEICO's aggressive advertising campaign had not paid off and that for the year 2000, GEICO's growth had "slowed to a Halt". When it became necessary for GEICO to take rate increases, they found their advertising 15% savings was not enough -- particularly when they could no longer save them 15%. Of course, Most agents no longer average 15% commission either. With one company I now average under 10%.

Give me 10% of GEICO's advertising dollars spent in our marketing area and I could take 25% of their market share in our marketing area! "Call Auten Insurance Service Or "800 Who Cares", it's your choice". Of course to penetrate GEICO's market, I will need the tools and note I did not include "A Lower Price" as one of the tools. My research indicates we can be 5% to 10% higher depending on size of premium. For $400, I would change companies! The $400 mailer was sent to me and not only could they not save me $400, they could not compete with the company now writing my auto.

Warren Buffett said insureds would switch for $200 but not $50. My approach is that people would prefer a local agent when possible. I buy books on Amazon.com, not because of price, but convenience. My wife, however, would prefer to visit a book store as part of her regular shopping. And my wife does not mind the time it takes to return merchandise she does not want to keep. I understand one of the big reasons for E-Toys.com's failure was that because customers had trouble with returns. Stories like E-Toys.com add to my belief that people will tire of "800 Who Cares".

People like the idea that when necessary they can be "face to face" with their agent. Locally I started to use personnel pictures in advertising.

We started November 2000 and since we started, we have seen business improve. State Farm does a great job advertising their local agent and I believe State Farm's advertising helps us too. Occasionally I have heard some independent agent companies advertise the reasons people need an independent agent but I haven't heard any ads recently. Are Independent agents companies still doing pro-agent advertising? Or, Are companies advertising themselves with only agent tie-ins (with agents paying part of cost) that will create better name recognition for the Company to get more callers to do business with them direct?

Before "Direct", our competition was State Farm. State Farm is so large their business is a target for all auto companies. State Farm, however, will be here in large numbers when most of the Internet marketing companies are gone. You can penetrate a market with very low prices but you can't stay in business with just low prices. GEICO's recent report indicates as much. A number of years ago (before Warren Buffett) GEICO came close to bankruptcy -- they were revived by their competitors who realized, with insolvency pools, they could not afford the bankruptcy of such a large carrier.

"Power To Agents" is a phrase I use to describe plans that help agents. I feel strongly that agents must start working together to help all agents with the new alternative marketing that our companies are developing to take our business. One plan is  www.AutoAgentsDirect@aol.com NAAA (National Auto Agents Alliance) brought AAD to GIAA (Georgia Insurance Agents Alliance) and GIAA wants to bring AAD to Georgia. Auto Agents Direct, Inc. can, I feel, give agents more control over their future as automobile insurance agents. The concept is to secure leads from national advertising that they then give them to their local agents' network. There are several lead generation companies doing business but this company I feel has a long term plan that will involve the local Independent Agent more and provide more help to Agents.

To start, AAD plans to:
1. Provide us Internet lead generation - primary source of leads will be the fast growing Internet yellow page advertising. One agent could not afford the expense but we can when we share with other agents.

2. "877" advertising. Internet and then other media. We will never spend the ad dollars of a GEICO but we can make our presence known. The more agents that participate, the more AAD will be able to spend on National Advertising.

3. In the near future I expect AAD to become large enough to assist their agent networks in securing companies help with their contracts and in keeping companies. If AAD can have an average of 100 agents per state, they would end up with 5,000 agents. 5,000 could make a difference for all agents.

NAAA/GIAA's involvement with AAD is still in the working stages. Plans are to start in July 2001. As we get more information, I will keep you informed in the FYI. If you are interested in contacting AAD, send e-mail to Michael Schrader at www.AutoAgentsDirect@aol.com

MIKE'S RESPONSE

RE: Re: Power to Agents
Hi Dean,
I really liked your article that you sent to Eddie. This issue of "direct vs. independent agents" is the most important issue of our day. The very future of the independent auto insurance agent is at stake. While our Auto Agents Direct program tries to address one solution, it is by no means the only solution. The insurance companies must become part of our solution and not part of our problem. We have to ask each insurance company which one they are, our problem or our solution.
Insurance companies can help us compete with "direct" insurance company competition by giving us the tools we need to do so. Your suggestion that companies allow us the opportunity to use their website to upload applications and money directly to them along with letting the insurance company obtain signatures and related documents is an excellent example of how insurance companies can give us the tools to compete with the "direct" writers. This type of program would work hand in hand with our AAD program.
Besides, we're not asking them to do anything different than what they already do themselves.

If a company is not interested in giving us the same tools they use to sell auto insurance, then they are only interested in putting us out of business. On the other hand, if an insurance company allows their agents the same tools that you referred to in your e-mail to Eddie, then we should support that company any way we can.
May I suggest that the NAAA discuss this issue at their convention in June.
The President may want to establish a committee of agents that will meet with various insurance companies to discuss ways of allowing us to compete with the "direct" marketing approach.