Pumping Up the Volume

Brokers must consistently deliver on the unique aspects of their distribution channel — independence from insurers, community involvement, representation of consumer values and offering choice to consumers — in order to differentiate themselves from direct writers and agents, Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO) told delegates of York Fire & Casualty Insurance Company’s Annual Executive Forum.

To halt any erosion of marketshare, the independent broker channel must market itself more aggressively, Carroll told the 250 people attending the forum, held at the Mississauga Convention Centre on Nov. 17.

As it stands, Carroll says, internal association polling shows a majority of the province’s consumers still prefer to buy their insurance products through the independent broker channel. The IBAO surveyed 15,000 Ontario consumers in 2007, with a response rate of 5% (or about 750 consumers). Fifty-one per cent of the consumers polled reported that they bought their insurance products through the independent broker channel, whereas 38% said they bought their insurance from agents or direct markets.

Survey respondents cited independence, consistent values and choice as reasons for using the broker channel, Carroll said.

“When you took a look at the agents, the consistent value of independence is not there,” he added. “And when you take a look at the direct and financial group writers, [the appeal to consumers is] basically Web online access that’s quick and easy.”

But if the broker distribution model can’t differentiate itself from direct writers effectively, brokers could find themselves losing market share, Carroll warned.

“Brokers still have a competitive advantage over agents, but the direct and financial group writers are starting to blur the line,” he said. “They are starting to come in and entrench in what was traditionally broker and agent territory. We have to do everything we can to make sure that that changes.”

Although consumers cited the above characteristics as motivating factors for working with the independent channel, brokers do not deliver on these factors consistently enough to differentiate the channel from direct writers, Carroll said.

“When we started to look at the Internet, and the new direct writers and the new distributors that were [using the Internet as a marketing tool], we kind of sat back and said: ‘I’m not too sure if that’s the type of client that I want to deal with. I’m not too sure if that’s the type of business that we want to write,'” he said.

“But I think now we are effectively making the change, and it’s safe to say that it’s business that we can’t ignore. We have to understand how to write that business and to do it well. We have to understand how to compete with those distributors that are fighting in that arena.”

There is an urgent need for brokers to make appropriate investments in order to deliver on the unique aspects of their value proposition, he said. That’s where marketing activities come into play.

Carroll said the amount brokers have invested in advertising is roughly half of that needed in order to compete with direct writers.

SPREADING THE WORD

Ontario brokers are spending, on average, less than 2.1% of their revenue on advertising. This amount should be 4% at a minimum, Carroll said. He added the amount of money that independent brokers are currently spending on advertising pales in comparison to the amount of money direct writers are spending for advertising. “We need to make sure collectively that we’re doing a better job of advertising and letting the consumer know that we are a very viable part of the distribution channel,” he said.

Carroll cited the results of a comScore study, a US-based Internet usage research firm, which found that 32.3 million consumers received a quote online in the U. S. in 2007 — an increase of 15% over the prior year.

In addition to analyzing consumers’ actual online behaviour, comScore also asked consumers what action they would take if they wanted more information after seeing an auto insurance advertisement. The survey found that second only to visiting the Web site specified in the advertisement (26%), respondents reported they would most likely do an online search (22%) to find more information about a company. The percentage of respondents that said they would do an online search to find a Web site or company jumped eight points versus last year, to 22%, underscoring consumers’ increasing reliance on their own research.

“This is something that we can’t just decide to not look at,” Carroll said. “We have to make it part of our business strategies on a go-forward basis.”

In response, the IBAO launched its homemade myinsuranceshopper.caWeb site in May 2008. The online tool provides information to the public about the independent broker channel and helps link online consumers to independent brokers. Carroll noted the site “started out fairly slow.” It had 3,600 unique visitors in its first month, most of them brokers. “But then reality hit,” Carroll said, noting the association ramped up its marketing of the site during the summer. “In October, we had more than 11,000 unique visitors to the site.”

INCREASED CONTACT

Of course spending advertising dollars and launching marketing campaigns is not enough to differentiate the channel, Carroll continued. The consumer actually desires more contact from his or her broker, and this plays to one of the strengths of the independent broker channel, which is a strong community presence, Carroll said.

“You need to reach out to those consumers and you have to get them to understand what your value proposition is, because they don’t get it and they need to get it,” Carroll said.

Certainly customer service and satisfaction levels have to be increased, “and it’s easy to get there,” he said.