Last week I had the pleasure of attending an independent agent seminar presented by Hales & Co. and hosted by National Underwriter and AA&B on “creating and enhancing shareholder value.”

Don’t let the Hales tag fool you: although M&A was a large part of the discussion, it was by no means the only topic. In fact, the all-day event pretty much ran the gamut of all the challenges independent agents face, from complying with the new healthcare reform law and other legislation to building a stronger brand.

The main message I came away with was this: Being an independent insurance agent is not for wimps. Not only are you stuck competing in the worst economic mess since the Great Depression, but you also have to worry about complying with state and federal regulations, finding new business, tracking your insurers’ financial stability, and on top of everything else, staying on top of Facebook, LinkedIn and Twitter.

And now, to add insult to injury, you’re also a target for professional wrestlers.

In a story that sounds like something from the Onion, last week the St. Petersburg Times reported that Hulk Hogan (real name: Terry Bollea) has sued his insurance broker, Wells Fargo Insurance Services, claiming the broker should have offered him an umbrella policy, which would have protected him from lawsuits when his son crashed his car, catastrophically injuring a passenger in 2007. Although he had a third-party auto liability policy with a $250,000 limit, Hulk recently paid a confidential settlement in the accident, which the broker lawsuit seeks to recover.

The case goes to the heart of the broker-as-consultant issue, which holds the profession to a higher standard of ethics and expertise than a mere policy-pusher. According to the Times article:

Didn’t Bollea have a personal responsibility to investigate on his own what he needed to do to protect his multimillion-dollar net worth?

“Not if you put your trust in your broker,” Florin (Hulk’s lawyer) said.

“This isn’t a personal responsibility case,” Florin said. “This is a professional responsibility case.”

 Every agency consultant, including those at the Hales event, extols the virtues of independent agents and brokers differentiating themselves in a tough market by becoming more professional and consultative. Unfortunately, as the Hulk case demonstrates, that professionalism can be a double-edged sword. If you’ve cut corners to survive the soft market and the recession, that frugality could come back to haunt you if you’re not covering all the bases with your agency services.

 As the industry continues to evolve in sophistication, don’t be surprised if you start seeing more of these types of cases.

And it would be really cool if they could be settled with a cage match.

To paraphrase the late, great Rodney Dangerfield, independent insurance agents don’t get no respect.

It’s bad enough that a recent career survey ranked your profession below janitors, bookbinders and even editors (see my related blog, ”At least you’re not a roustaboust“). Now, the latest Forrester Research consumer survey reveals that your customers don’t even find you fun.

The survey, conducted over the Internet last October, gave independent agents an overall score of “okay” from 4,600 consumers who had interacted with a variety of companies. Forrester asked consumers to rate insurance companies on three areas: “meets needs,” “easy to work with” and “enjoyable.” Several insurers, including USAA, Liberty Mutual, Progressive and The Hartford, were ranked “good” by respondents. But when it came to being “enjoyable,” consumers rated independent agents “poor,” while giving them “good” ratings for “meets needs” and “easy to work with.”

What does this mean? Evidently it’s not an ease-of-use issue; respondents ranked agents “good” on meeting customer needs and being easy to work with. And it’s not just a carrier issue, either. Savvy carriers know, and slower carriers are discovering, that it’s not enough to simply provide ease of use through technology and real-time services — in fact, that’s just the starting point (see this related article on Deep Customer Connections’ recent survey on agents telling carriers they need more ease of use).  

From just looking at the numbers, the problem seems to be with the agency system itself, as several carriers got high marks from consumers as being enjoyable to work with. Granted, the results may be skewed because of the focus on personal lines insurance purchasers, but this dissing of insurance agents shouldn’t be the case. It all boils down to the perception of insurance agent as unnecessary middleman, useful perhaps, but more likely just another roadblock between the customer and the underwriter.

The irony is, agents are in a much better position to deliver real customer satisfaction — and yes, even “fun” – than any insurer ever could. In our monthly agency success stories, we speak with agency owners, especially those in small towns or rural areas, who don’t think twice about emergency customer visits, of knowing the names and ages of teenaged drivers about to be added to a family’s auto policy, of engaging customers in intimate conversations to discover their plans for the future and how insurance coverage can help protect those plans. These agencies and their employees are also connecting to their communities through charitable work, recruitment at area schools, and other ways to create engagement with customers and prospects. It’s a testament to the level of service that every independent agent should be providing to valued customers, especially at a time when every customer counts.

And inevitably in today’s world, part of that customer outreach is through intelligently developed and executed social media planning. Maybe that’s where the smart carriers have an edge on agencies — they have the financial wherewithal and staffing to plunge right in. (Luckily, you don’t need these resources to make good use of this new tool: check out ACT’s recommendations for creating a social media policy for your independent agency). 

With more insurers, including traditional direct writers, using multiple distribution methods, the stakes are higher than ever for agents to prove themselves invaluable to their customers — not just by meeting their insurance needs in a smart and timely way, but by engaging with them on multiple levels.

What’s your agency doing to build your brand perception with your customers?

In our December look at agency Internet marketing, the first question in our reader survey was, “Does your agency/brokerage have a Web site?” The response was 81%. Why not 100%, you might ask.

Another person asking was Duke Williams, a blogger and consultant on agency Internet use. Last month, Duke decided to conduct an informal survey of “feet on the street results for actual agency Web presence.” His methodology was simple: he used the “find an agent” feature on many insurance carrier Web sites, and Googled the term “car insurance city name state name.” He used the SuperPages, YellowPages and about a half dozen other lists online.

In individually searching several locations in South Carolina, North Carolina, Georgia, Alabama and Florida, he found:

• 248 independent agencies
• 49 Nationwide agencies
• 19 online-only agencies
• 51 State Farm agencies
• 26 Allstate agencies
• 7 Farmers agencies
• 7 Alpha agencies
• 2 Farm Bureau agencies
• 1 GEICO local agency
• 1 Direct General agency (rregional non-standard auto insurance carrier with owned agency locations)

While these results seem to indicate a strong presence for independent agencies, a closer look tells another story. Of the 248 independent agencies that came up in the search, only 64 — a paltry 25.8% — had a Web site, and only a fraction turned up in the Google “local results” search.

Delving deeper, Duke discovered that the agencies with Web sites weren’t consistent in functionality, even in non-real-time. For instance, 51.6% had quote request forms, but only 12.5% had “request a policy change” forms, and only 20.3% had “report a claim” forms. Not surprisingly, Duke reported that all the national direct writers had very high functionality.

While you could argue that Duke’s results are atypical — focused on a limited geographic area and a single line of business — you’d be missing the point. In every way, direct writers are making it easy for consumers to find and use their products and services — and it isn’t all about price.

Woody Allen once said that “80% of success is showing up.” When it comes to Web pages, the odds are even better if you show up with a functional product that makes it as easy as possible for people to use what you have to offer.

Last month we posted an interview on our Web page with Progressive’s  Karen Barone, national distribution leader for agency business, which proved to be 0ne of our most popular features.

Not surprisingly, part of the article’s interest — or more accurately, controversy — involves Progressive’s promotion of direct purchase along with sales through its agency force. 

Many of our readers pointed to Progressive’s heavy TV advertising — currently featuring the wacky saleswoman character, “Flo” — as testimony to its commitmemt to direct sales and cutting out the middleman. Surprisingly, in spite of the prevalence of Progressive advertising promoting direct sales,  Barone noted that about 65 percent of Progressive’s sales actually come through its more than 30,000 independent agencies.

Now, in recognition of that fact, Progressive is unveiling on Oct. 19 a new Flo commercial, featuring — you got it — an independent agent. (Well, actually, he’s an actor playing an independent agent, kind of like actress Angelina Jolie will play me in “The Laura Toops Story,” but you get the idea.) And, taking a tip from other industry branding programs (remember the Big I and Raymond Burr?), Progressive agents can even access a version of the commercial they can customize with their agency’s branding to run locally.

The thinking behind this move seems pretty sound — an attempt to promote the insurer’s already prevalent independent agency sales. But the end of the commercial — a voiceover that states, “Prices vary based on how you buy” — sums up the controversy. Because, of course, consumers who buy directly through Progressive will pay less than those who go through an agent.

Do you think Progressive’s new campaign will increase agency sales?

A surprising item on yesterday’s newswires was an Accenture study revealing that two-thirds of the world’s biggest insurers were planning to expand operations outside of their home markets over the next 12 months, with 75 percent of respondents viewing the current economy as as opportunity for growth.

On second thought, maybe it isn’t that surprising. The study included both property-casualty and life insurers, both of which have been aware for awhile that emerging markets are where large number of people with disposable incomes have people and property to protect, some of them for the first time.

On a related note, I noticed an item about how a Bolivian unit of Zurich Financial Services is teaming up with BancoSol, a microfinance bank, to offer a form of life insurance to Bolivian emigrants in Spain. The coverages come in four forms, all based on a $10,000 coverage to return a decedent’s body to Bolivia in case of death, with annual premiums ranging from $57 to $129.

This is a pretty creative way to address a socio-economic trend: Bolivian emigration to Spain has increased dramatically throughout this decade.

There are opportunities like this right in our backyard. A recent study by the Minneapolis Foundation shows that African immigrants in the U.S. represent a growing but “largely untapped” market segment. Most of these immigrants have their own checking and savings accounts, and most have cell phones and e-mail. The results were collected from focus groups in Minneapolis, New York and Los Angeles, and surveys of African immigrants in Minnesota, California, New York and Washington, D.C.

With the AIG name continuing to be dragged through the mud (whether by the media, politicians or its own executives notwithstanding), the move to separate the financial giant’s successful property-casualty business from the bloodletting going on at the parent company seems like a smart move.

Our readers seem to agree. In a totally unscientific survey conducted on the AA&B Web site, 51 percent of respondents said the creation of AIU will help stabilize the business, while 26 percent said no and 23 percent voted maybe.

Our readers added the following comments:

Their P&C operations remain strong with good performance. This move should calm the market some with regard to their insurance operations.

The news media has made such a poor image of AIG that our customers will take a higher price for a product that is identical in terms, limits and coverages. I do hope that the public will soon see what the insurance industry is reading.

Most carriers think AIG’s business is either stuff nobody else wants or is priced too cheap. Right now, you can have any piece of AIG business if you can just match the price and coverages. Most insureds, if they had a choice, would move to another company.

Confidence in the “brand” has been dampened.

I certainly hope it will restore customer confidence.

If they can truly legally get out from under AIG as a separate free-standing entity and not have any obligation for AIG debts, it can work.

The AIG name has an unfavorable connotation.

It depends on if they sell it and move on. If they spin and keep some control, they will fail.

Yesterday J.D. Power and Associates came out with an interesting study of what independent insurance agents want in a carrier. The inaugural study was based on input from trade associations like PCI and IIABA, and more than 10 of the biggie insurers, including AIG, Allied, Chubb, Erie and others — in short, they wanted to know what drives agents to deal with a given insurer.

Although the study dealt strictly with personal lines, it paints a clear picture of what carriers can do to make it easier for agents to do business with them.

The results? In measuring agent satisfaction across six factors, the top three drivers were:

* Key carrier contacts (32 percent)
* Policy offerings (23 percent) and
* Claims (16 percent).

I spoke with Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates (and I’ll be posting an interview with him on our Web site shortly), who discussed some of the other findings.

At a time when we’re coming out of years of cutthroat competition, it’s interesting to see that compensation played a fairly minor role in agents’ decisions to deal with a carrier: Only 5 percent of the more than 1,500 respondents ranked it as a critical factor. However, technology and price were among the six leading factors, at 13 percent and 16 percent, respectively.

The low status of compensation wasn’t the only surprise, Bowler said. In spite of the fact that the survey was conducted in November 2008, with the AIG bailout still fresh in their minds, respondents ranked AIG about in the middle for overall agency satisfaction.

And while products and price were important factors, Bowler agreed that the survey results sent out a loud-and-clear message about the importance of the relationships between the carrier and the agency.

“Personal contact is important, for example, the person who is the key liaison on underwriting is the carrier representative that the agent is dealing with,” he said. “If those folks are not accessible, and supportive and helpful by giving the right answers quickly, the agents will struggle to compete.”

And while technology is important, technology alone is not the silver bullet for agency/carrier relationships. “Some carriers do well on technology, but fall down from the people standpoint,” Bowler said. “A typical agency is appointed to 7 or 8 companies. If all the companies are passing out information but have modest training, the last thing an agency needs is to have to go through an extra process to understand the tools of the trade.”

Interestingly, the J.D. Power study seemed to echo some of the findings of the Big I’s 2008 Agency Universe Study, in which 72 percent of respondents expressed overall satisfaction with their personal lines carriers. The Big I respondents ranked “making it easy for CSRs to write business,” “smooth quoting system” and “reputation with customer/prospects” as the three most improved areas for personal lines carriers — all areas that overlap with the J.D. Power driving factors.

Bowler indicated that J.D. Power was planning on conducting a similar agent survey for commercial lines. They’re a great barometer for insurers to use in fine-tuning their relationships with their distribution forces.

What are the most important satisfaction factors in your carrier relationships? Take a survey on our Web page at:

http://www.agentandbroker.com/ME2/dirsect.asp?sid=E2D3EF32475B4172A42FEE249B241FD4&nm=%3Cb%3E%3Cfont+color%3D%22%23c00000%22%3E+%3E%3C%2Ffont%3E+Take+the+%3Cfont+color%3D%22%23c00000%22%3ESurvey%3C%2Ffont%3E%3C%2Fb%3E

There really isn’t much I can add to the hue and cry following AIG’s announcement Saturday that it would be shelling out $100 billion in bonuses to some of the same clowns who got them into the derivatives mess in the first place. No less than the President himself has vowed to block the move with every legal means at his disposal.

Aside from the initial reaction of shock and disgust, however, the next thought that came to mind was that AIU Holdings Inc’s recent separation from the insurance industry’s answer to Marie Antoinette was a stroke of timing genius.

We recently interviewed John Q. Doyle, who now heads up AIU’s domestic division (read the article)

Doyle stressed that the formation of AIU is the first step toward separation from AIG, including a whole new branding process. Its property-casualty business is solid, and he proudly pointed out that none of the government TARP money went to this segment of AIG’s business.

We recently asked the survey question on our Web site of whether the AIU move will be enough to put an end to AIG’s problems. So far, the majority of readers seem to think it will. What do you think? Take the survey here.

As if it isn’t easy enough to read the signposts that have been cropping up in the news media, the latest announcement coming out of the NAIC makes things pretty clear: At an industry tele-press conference yesterday, incoming President Terry Vaughan announced that the association was moving its headquarters from Kansas City to Washington, D.C.

The move comes in direct response to demands from Congress during what Vaughan called “a historic time for regulation” of property-casualty insurance and financial services regulation.

The move will essentially create a Center for Insurance Information operating out of the NAIC’s 16-person D.C. office. The association will maintain its staff of 377 in K.C. and 48 in New York.

Although Vaughan declined to comment specifically on the recent findings of the GAO report — which implied that Congressional consideration of an optional federal charter could impact the current state regulatory system — she did say it was a “balanced report that made some good comments and identified issues.”

The NAIC’s strategy reflects the reality that Capitol Hill will continue to scrutinize our industry this year and beyond. Other signs of the times: PCI contracting with D.C. government relations firm Quinn Gillespie to advance its issues in Congress, and Zurich/Farmers beefing up its clout with the addition of former AIG government affairs director Rich Merski to its federal affairs team.
Not a moment too late, evidently. This from NUP:

An influential senator said today that federal lawmakers need to consider U.S. regulation of the insurance industry, which now has only state oversight.

Sen. Richard Shelby, R-Ala., made his comments during a Senate Banking Committee hearing citing the debacle at American International Group, which has required billions in government bailout money as a reason to consider federal regulation of the sector.

It’s happening, folks, whether we want it or not. The smart players are the ones positioning themselves to help craft an agreeable solution instead of those who close their eyes and let themselves be steamrolled by the results.

Want to take a poll about insurance regulation? Visit our Web site.

Just in time for Halloween, here’s a little something from the news wires to add another touch of lunacy to the AIG debacle. From the Duluth News-Tribune:

Duluth insurance agency fined for AIG ad

A Duluth insurance agency has agreed to pay thousands of dollars in fines for taking out an ad questioning the financial health of insurer AIG.

 The state Department of Commerce says Wednesday that insurance agent Gregory Brisky agreed to pay a $2,000 fine. His agency, the Dwight Swanstrom Co., agreed to pay a $3,000 fine.

 The department says the agency took out a newspaper ad soliciting AIG customers who might be “nervous” about their insurance company in an attempt to get them to switch insurers.

 American International Group was bailed out last month when the federal government offered it an $85 billion loan during the ongoing credit crisis.

 The Commerce Department says it has affirmed the financial solvency of AIG’s insurance companies, despite the troubles with the parent company.

 It’s against Minnesota law to make misleading statements on the financial condition of any insurer.

 Brisky says he has no comment

I tried to reach the agent to get his side of the story, but had no luck (not surprisingly). What’s really ironic is the same day this little item appeared, pressure from New York AG Cuomo forced AIG to freeze $600 million in deferred compensation for the brain trust of executives that got them into this mess in the first place.

Naturally, agents have to be careful with what they say, or run the risk of violating local law. The New York State Insurance Department, for example, has issued a number of warnings about licensed producers attempting to cash in on AIG’s troubles, reminding them there are laws against:

AA&B’s legal guru Barry Zalma calls the agent’s efforts “a violation of a local law and a stupid attempt to gain business…E&O does not cover, nor should it cover, criminal or other intentionally wrongful acts.” And our “Avoiding E&O” columnist Louie Castoria, an attorney with Wilson Elser, says, “This issue came up yesterday at the Credit Crisis presentation I gave in Portland to the Oregon Surplus Line Assn. The E&O problem with dissing AIG, apart from factual inaccuracy, is that if you play on people’s fears and they swith to a non-admitted insurer, they won’t have the state insurance guaranty fund as a fallback. There are also the usual problems with switching: advancing retro dates, changes in primary coverage that may effect excess layers, etc. In general, a broker should view switching carriers with suspicion, just as a mortgage lender today should be somewhat skeptical of a re-fi. Bottom line: Does it create a material benefit for the borrower?”

However, I can’t say that I blame the Duluth agent for trying to (literally) scare up a little business in the wake of the AIG mess, although obviously one has to stay within the limits of the law. And the story does raise the legitimate issue of how to assuage policyholder concerns during these unprecedented times.

I’d be interested to hear from any of our readers about whether their customers have expressed concerns about their coverage with AIG (or any other insurer, for that matter) and how you’re responding to them.