Who should I buy my auto insurance from … An independent agent? Online? Directly from an insurance company?
Historically independent insurance agents had control of the private passenger auto insurance market in the Commonwealth, with market share approaching 80%. This was due to a variety of factors, one being the state-controlled fix-and-establish rating system. But that is now be gone. Companies can compete. And companies unwilling to “compete” in the old, non-competitive system, would now rush to Massachusetts for a share of the $4 billion private passenger auto insurance market.
The companies most likely to arrive, it was speculated, were the direct writers and direct response companies. This development, we were told, would have a devastating impact on independent insurance agent market share, as consumers would gravitate toward these brands that were previously out of reach (remember when you could only get Coors beer west of the Rockies?).
And they came. First Progressive. Then GEICO and Allstate. The local directs, Liberty Mutual and AMICA, ramped-up their advertising. The worst was coming true, independent insurance agents market share was going to take a tremendous hit!
But something else was happening. The independent insurance agency companies stepped to the plate with creative and innovative products. Independent insurance agencies retooled and evolved from taking orders for auto insurance, to offering their clients options to best suit their insurance needs.
So it’s been almost three years since competitive rating began. What has happened to independent insurance agent market share? In April of 2008, independent insurance agents wrote 78.2% of the private passenger auto insurance market. At the end of the third quarter of 2010 (September), the market share stood at 74%.
(NOTE: These percentages are developed from Commonwealth Automobile Reinsurers (CAR) reports. The market share percentages are not exact, but are very close. The reasons they are not exact are that some new entrants, such as GEICO, Allstate, Preferred Mutual, among others, are not yet required to report to CAR. Also, Liberty Mutual and Peerless numbers are combined).
So why has this happened? Why have independent insurance agents in Massachusetts been able to withstand the onslaught of the directs?
As noted above, independent agents and their companies fought back. Miscues by Progressive (inaccurate quotes, limited coverage options). Allstate only using out of state agents for Massachusetts sales. GEICO’s rates have not met its “save 15%” promise. Who wants to buy a six-month policy? All of these factors, and others, have likely contributed to the very small reduction in independent agent market share.
We were interested in digging deeper to explore the resiliency of independent insurance agents in the Bay State. So in November 2010, we retained the Shen Research Organization (SRO) of Boston to conduct focus groups. SRO has worked with MAIA before, most recently in 2008 conducting focus groups to study consumer behavior as we entered the competitive rating environment.
Two focus groups were held, one among customers who had switched to a direct writer within the past three years, and one among current independent insurance agency customers. At the conclusion of the focus group sessions, we had the answer to the continued strong market share presence of independent insurance agents—“it’s the relationship that keeps the clientele loyal to the independent agent.”
Are you surprised? I’m not.
The SRO report of the focus groups goes much deeper than the “relationship” response. You can read the complete report by clicking here. I encourage you to take the time to review the report.
But the battle is not won. The directs will not give-up the fight. They will continue their advertising blitz. They will promise to save drivers so much money, they will have to give coverage away. They will tout how simple it is to do business with them on-line. And on and on.
But one thing they will never have with a customer is a “relationship.” That belongs to us, the independent insurance agent.
Want to know why Aronson insurance is growing its customer base in the face of Progressive and GEICO? Talk to any one of our great Account Managers. They are local insurance professionals who actually care about their clients – you!