Industry News

Although direct-channel growth in personal auto has come at the expense of the independent-agency channel, 12 of 18 personal-lines insurers that have outperformed their peers in both growth and profitability over the past decade use the independent-agency distribution channel either in whole or in part, according to a recent Conning report.

“The flexibility of the independent-agency channel is well suited to the rapid growth of these companies,” Conning says in its report, “Growth and Profit Leaders in Personal Lines Insurance.”

The Conning report contradicts a study by McKinsey and Co., which argued that the value provided by independent agents is diminishing. Leading PIA agents strongly disputed the McKinsey study (“A Flawed Premise Wrapped in a Faulty Analysis”) in a series of press statements and an article in the National Underwriter.

Conning notes that the most common channel for companies in its “growth and profit leader group” was the independent-agency channel, adding that the channel allows small- and mid-sized insurers “to accommodate growth without requiring the large fixed-cost base of a direct-response organization.”

Most Personal Lines Growth Leaders Use Independent Channel (PC360 12/4/13)

WASHINGTON — The National Association of Professional Insurance Agents (PIA) has announced a call for nominations for three prestigious awards in its 2014 Spring Awards Program. Nominations are being accepted now through January 24, 2014 for the association’s Professional Agent of the Year, Customer Service Representative (CSR) of the Year and Young Insurance Professional of the Year awards.

The PIA National Professional Agent of the Year Award, the association’s highest national award of distinction, is presented annually to one outstanding professional insurance agent who is a member of PIA. Nominations for this award are made by PIA state and regional affiliate associations.

“Every Professional Insurance Agent is outstanding, but once a year we bestow our highest honor on just one PIA member who exemplifies the best of our best,” said PIA Nation President John G. Lee.

The PIA National Customer Service Representative of the Year Award is given annually to an outstanding agency customer service representative who works for a PIA member insurance agency. Nominations for this award are made by PIA members. The CSR of the Year Award is sponsored for the seventh year in a row by The Hartford, a member carrier of The PIA Partnership as well as a Pinnacle Partner.

The PIA National Young Insurance Professional of the Year Award is given to an outstanding employee, owner or principal of a PIA member agency who is under the age of 40 or a member of a PIA-affiliated Young Insurance Professionals association. PIA members as well as PIA state and regional affiliates may make nominations for this award, which is sponsored for the ninth year in a row by Rough Notes magazine.

All three awards will be presented during a luncheon ceremony on Friday, March 28, 2014, in Arlington, Virginia, held in conjunction with the 2014 PIA Federal Legislative Summit and 2014 PIA National Spring Governance Meetings. Learn more and download nomination forms at www.pianet.com/awards.

PIA’s four other major national awards — the Company Award of Excellence, the Managing General Agency of the Year, the Company Representative of the Year and Excellence in Social Media — will be presented in San Antonio, Texas, on September 20, 2014, in conjunction with the association’s Fall Governance Meetings.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America^SM. PIA’s web address is www.pianet.com.

PIA National issued a press release on Nov. 15 in which we agreed with President Obama when he said, “Buying health insurance is never going to be like buying a song on iTunes. You know, it’s just a much more complicated transaction.” The president made the remark during an hour-long press conference at the White House on November 14, during which he attempted to explain all of the problems related to the launch of the Affordable Care Act (ACA).

“Although many independent insurance agents and brokers would disagree with the kind of healthcare reform efforts seen so far, the president finally did make a few valid points about the nature of insurance,” said PIA National President John G. Lee. “I was somewhat taken aback when the president admitted that his administration is ‘discovering … that insurance is complicated to buy.’ PIA has been saying this all along because it is true. This eleventh-hour realization is a particularly disappointing admission on the part of the president, given how many highly qualified and successful former insurance regulators he appointed within the Department of Health and Human Services (HHS) to head this effort.”

The president also said during his press conference, “Part of what we’re realizing is that there are going to be a certain portion of people who are just going to need more help and more hand-holding in the application process.” Lee said, “That is precisely what independent insurance agents and brokers do every day as part of the regular service we provide to our customers.”

PIA Agrees That Buying Insurance Is Not Like Buying a Song on iTunes (PIA 11/15/13)

WASHINGTON – Mike Becker has been named Executive Vice President & CEO of the National Association of Professional Insurance Agents (PIA National), effective December 10, 2013. The announcement was made by PIA National Executive Vice President & CEO Ron Von Haden.

“PIA is pleased that Mike Becker will assume his new responsibilities on behalf of our national association,” said Von Haden, who will continue as Executive Vice President of PIA of Wisconsin when he relinquishes the additional duties he had assumed at PIA National over the past year. “We are proud that PIA is moving forward in such a dynamic manner.”

Becker heads PIA’s day-to-day lobbying efforts on Capitol Hill. He began his career at PIA in March of 2007, rising to Assistant Vice President of Federal Affairs, then being appointed to his current position of Vice President of Federal Affairs in February 2013. Prior to joining PIA, he worked on the congressional relations team for the Consumer Healthcare Products Association (CHPA), an organization representing pharmaceutical companies. He joined CHPA in 2004 after a stint as a legislative staffer on Capitol Hill.

“Mike Becker is a can-do person who is fully and firmly committed to the continuing success of PIA,” said PIA National President John G. Lee. “He is the right person at the right time for PIA. The leaders of PIA National are determined that our Association will continue to grow and prosper in the years to come.” Lee added that Mr. Becker’s strong background as a federal lobbyist does not mean that PIA’s emphasis will change. “PIA is firmly committed to maintaining and continuing to expand the full range of legislative and regulatory advocacy, carrier relations and services that we currently provide on behalf of our members.”

“My commitment to PIA is complete and unwavering,” said Becker. “We owe an immense debt of gratitude to our professional staff at PIA National’s Alexandria, Virginia, headquarters. Their talent, experience and dedication keeps PIA a major player on behalf of Professional Insurance Agents. We couldn’t do it without them and we will depend on all of them in the years ahead as we move forward.”

“Over the past few years, PIA successfully overcame many challenges and is now growing its membership and expanding its influence. My job is to enable that to continue,” said Becker. “I am dedicated to earning the respect of our PIA affiliates, leadership, members and staff in this team effort.”

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America^SM. PIA’s web address is www.pianet.com.

It happens every decade or so and now, in 2013, it is happening again.

There have been several consulting reports issued in recent months which, to varying degrees, predict the demise of the independent agent and the unraveling of the independent agent distribution system.

The National Association of Professional Insurance Agents (PIA) disagrees, vehemently.

The report that has garnered the most attention is one by McKinsey & Co.’s Financial Services Practice, a consulting firm. It contained the headline, “The End of an Era for the Local Insurance Agent.” McKinsey contends that “the economics of the traditional agent model are beginning to unravel.”

The McKinsey report, after it makes a case for agents being under increased pressure from competition by direct writers and commoditization, then goes on to observe – somewhat incongruously with the rest of its argument – that “Local agents are not in danger of extinction, but the role they play will continue to evolve.”

Having put forth its view of how it thinks the market is evolving, McKinsey then paints a picture of the role it sees local agents playing in the future: highly specialized, greatly diminished and paid much less. Indeed, McKinsey laments the fact that the flawed argument it puts forth “Surprisingly [emphasis added] [this] has not yet led to a change in the local insurance agent landscape. There are signs now, however, that the economics of the traditional agent model are beginning to unravel.”

It’s Just Not True

“The McKinsey report is just somebody’s opinion. In reality, I just don’t think it’s true,” said PIA National President John G. Lee of Fredericksburg, Virginia. “Direct writers are tough competition but we can compete. Wacte have just as competitive rates as they do. There is a percentage of the market that’s going to go direct and overall, across all lines, it’s been stuck under 30% for many years, despite billions in advertising. I don’t see that market share increasing.”

“Far from being the ‘End of an Era,’ this is the dawning of a bright, new age for the independent insurance agent,” Lee said.

PIA National Senior Vice President Patricia A. Borowski has seen this all before. Every decade or so, consulting firms will predict the demise of the independent agency distribution system, for their own competitive priorities. Often, she says, this leads to massive losses by those who buy into the narrative.

“The report by McKinsey is not a research report, as no true unbiased research seems to have been conducted for it,” said Borowski, during a break at a conference held by the Society of Insurance Research (SIR) in San Antonio, where she was representing PIA. “There are charts and graph references, but they are used to support a predetermined outcome. It is nothing more than an opinion article by a couple of analysts that – at best – relies on the authors’ opinions, along with selective statements from like-minded others.”

Borowski said the McKinsey report was on the agenda of the Commercial Lines Insurance Agents Panel at the SIR conference. The consensus among the panelists and a number of the conference participants was that the report is little more than a dressed-up op-ed article.

“These ‘reports’ are efforts to convince everyone that they – these consultants – have a plan by which carriers and/or banks (for whom the consultants would no doubt like to consult) can eliminate independent agents and pocket that savings,” Borowski said. “What is never discussed are the conversion requirements, ongoing costs and potential consequences carriers may face by following such a strategy.”

WASHINGTON — The National Association of Professional Insurance Agents (PIA) has named Frankenmuth Insurance as the recipient of its prestigious 2013 Company Award of Excellence. The presentation was made on September 20, 2013, at a ceremony held in conjunction with PIA’s Fall Governance Meetings in Las Vegas, Nevada.

“Frankenmuth Insurance is a true partner for Professional Insurance Agents,” said PIA National President Andrew C. Harris, in presenting the award. “In addition to their outstanding product line, Frankenmuth Insurance does business through 530 local independent agencies in a total of 15 states. It is with pride that PIA National bestows the 2013 Company Award of Excellence to a stalwart business partner and staunch supporter of agents.”

The PIA National Company Award of Excellence honors a company for its commitment to PIA, to the American Agency System and to furthering the interests of professional insurance agents by creating a better business environment.

“Receiving this national industry recognition is particularly gratifying since it comes directly from the independent insurance agents with whom we partner,” said Frankenmuth Insurance Chairman, President and CEO John Benson. “We strive to continually exceed their expectations, and receiving the 2013 PIA National Company Award of Excellence is confirmation we are achieving that goal.”

“We are truly honored to be selected to receive this award from the PIA National,” said Frankenmuth Senior Vice President Fred Edmond. “Our commitment to supporting our independent agency partners aligns both our interests and contributes to our mutual success. On behalf of our dedicated employees, leadership and Board of Directors, we wish to thank the PIA National as well as the Michigan PIA for nominating our organization.”

“With the advancement of technology, automation and product pricing sophistication, we cannot forget this is still a people business,” Edmond said. “It’s not always about just finding the lowest price, but it's about working with those you know, trust and like. Our mutual success is based upon strong agency partnerships and meaningful relationships.”

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America ^SM. PIA’s Web address is www.pianet.com.

A man who for the past decade has been one of the most outspoken supporters of federal insurance regulation in Congress, Rep. Ed Royce (R-Calif.), has fired the first salvo in what may be a renewed war on state regulation of insurance. Rep. Royce has launched a broadside against the National Association of Insurance Commissioners (NAIC). He said he intends to request a hearing to investigate the NAIC and its role in the insurance marketplace, which he said has gone far beyond what it has the legal authority to do.

A top Republican on the House Financial Services Committee, Royce said the NAIC has acted beyond its self-described role as a standard-setting organization and taken on a regulatory role, both in the United States and on the international stage. While the NAIC maintains it is a “trade association made up of regulators,” Royce contends the organization “imposes its will on companies and states through its accreditation standards while representing the U.S. on an international basis on rules it has no authority to enforce on a universal basis.” An NAIC spokesperson said the association had no comment at this time.

Royce was a prime proponent of creating the Federal Insurance Office (FIO) and tasking it with doing a study on the “benefits” — but not the disadvantages — of federal insurance regulation. Royce was also an author of the ill-fated so-called “optional” federal charter for insurers and producers. Prominent among Rep. Royce’s campaign contributors have been those at the forefront of the decades-long campaign to engineer a federal insurance takeover.

What It Means to Agents: The timing of this is not a coincidence. Very shortly, the much-delayed FIO study of insurance regulation, which PIA has maintained all along may be biased in favor of federal regulation, will be released. It may recommend some measure of federalization — unlike the recent Government Accountability Office (GAO) study, which praised our state-based insurance regulatory system for protecting markets, the insurance industry and policyholders during the financial crisis.

Attacking the NAIC and holding a congressional hearing could be part of a smear campaign timed to coincide with the release of a critical FIO report and recommendation. Royce said he sees the release of the FIO report “as a watershed moment for future regulation” of the insurance industry.

Make no mistake: This is very important to Main Street insurance agents. This is another attempt to shift to a federal model, to benefit a few big players. The “uniformity” that federal advocates tout could result in there being far fewer insurance companies, offering fewer choices to consumers, through fewer independent insurance agents. In addition, every state’s insurance premium tax could be at risk of being usurped by the federal government.

This battle has been fought many times before, and the state system has prevailed. It will prevail again. PIA remains steadfast in support of our state-based system of insurance regulation.

The PIA Partnership, the company relations council of the National Association of Professional Insurance Agents (PIA), has announced its annual project for 2014. Agency Touch Points – The Voice of the Customer: Commercial Lines will conduct a nationwide survey of commercial lines customers to determine their buying preferences.

Agency Touch Points – The Voice of the Customer: Commercial Lines will be the follow-up to the PIA Partnership’s groundbreaking 2012 study, Agency Touch Points – Voice of the Customer: Personal Lines.

“Recent studies backed by direct writers and captive carriers have contended that some buyers of coverages such as small and midsize business owners policies (BOP) have asserted that a majority want to purchase such coverages online,” said PIA National President Andrew C. Harris. “We believe that such studies lack credibility and that a more objective picture of buyer preferences is required.” Commercial Insurance Customers have been relying on the advice and council of their Professional Insurance Agent, just as they have with their CPA and Legal Counselor.

The 2012 survey on personal lines found that customers value what agents can do for them more than they value having a choice of products and policy coverages, and they are eager for producers to take a more active role in delivering those services. It found customers are looking for expert advice and counseling, personalized attention and interaction, the ability to offer comprehensive protection to meet individual needs and excellent relationship-based customer service. The survey also found that customers care about coverage and that price is not the primary determining factor.

Current PIA Partnership companies include: Encompass Insurance; Erie Insurance; Harleysville Insurance; Liberty Mutual Insurance; MetLife Auto & Home; Progressive Insurance; Selective Insurance Group; State Auto Group; The Central Insurance Companies; The Hanover Insurance Group; The Hartford; The Motorists Insurance Group; and Travelers.

Outgoing PIA National President Andrew C. Harris, CIC, CPCU, CRM, ARM, AIS, gave a report on the state of the Association during the September 22, 2013 Board of Directors meeting held in Las Vegas, Nevada. Harris’ term concludes on October 1, 2013 as he begins a one-year stint on the Executive Committee as Immediate Past President.

Harris outlined the many changes made and highlighted many of the resulting accomplishments over the past year.

“Going into this year, we realized we needed to align the mission that PIA National has with our affiliates,” said Harris. “We did that by putting together a plan and a vision. It was simple, because there was only one way to go, and that was up.”

“One of the first things that we had to do was build consensus,” Harris said. “How? You meet with people, talk with people and you have forums. We started that under [previous president] Tom Adderhold. We had forums at every meeting, where we promised you that there were no secrets; everything was on the table. That transparency and candor has to work in both directions for it to succeed. We set the example, and we need to have frank and honest feedback to the PIA leadership. The dialogue itself is the important thing. We don’t ever always agree on everything, but it’s important to know where your partners are coming from. We have to respect our partners.”

Harris said that one of his first priorities was conducting a comprehensive search for a new executive vice president. He said the lengthy, exhaustive process resulted in the hiring of Ron Von Haden as Executive Vice President of PIA National. He said that was “probably the best decision” made during the entire year.

Harris then gave a partial list accomplishments, including visiting 25 affiliates during the year; reestablishing our relationship with the PIA Trust; creating the Membership Committee; securing PIA Trust funding for the Membership Marketing Campaign and creating it; getting on track to achieve 10 percent growth in new members, with a positive net, nationwide; adding two new E&O carriers, Liberty Mutual and Markel, to compliment the offerings of PIAPRO; transforming the President’s Advisory Board into a breeding ground for new ideas; and expanding PIA’s commitment to the PIA Partnership, to “not only produce tools for agents to use, but to also talk about how together, PIA and carriers can work to change the dynamic and improve the market for us and them at the same time.”

“We have made some very positive changes during the last year. It’s really the first step along a very long process,” Harris said. “We have 19 years before we celebrate our 100th Anniversary. Let’s hope we can keep our changes focused in the same positive direction over the next 19 years.”

“The last challenge I have to this organization is to reclaim our birthright,” he concluded. “We were once a superpower. Somehow, we got off track. We recognized that, we accepted that and we said ‘We want to go forward together.’ If we try, I would love – assuming I’m still around – to celebrate the 100th Anniversary of PIA as the #1 agents association in the country. I believe we can do that if we all pull together, and if we all try. So, that’s my challenge to you.”

“It has been an honor and a privilege to serve you,” said Harris.

Audio excerpt of Andy Harris’ remarks (9/22/13)

Most customers who are lured away from independent agents by direct insurers promising lower prices will ultimately return to an independent agent. According to a recent study commissioned by The Hanover Insurance Group, nearly 60 percent of consumers who had purchased insurance through a direct channel ten or more years ago reported switching back to an independent agent because they wanted more value.

This study was conducted for The Hanover, an independent agency company and member of the PIA Partnership, by the research firm InsightExpress, which surveyed 1,000 consumers who purchased insurance through direct channels 10 or more years ago. Most consumers who switched back to independent agents cited expertise and convenience for their decision. According to the survey, the motivators for consumers who switched to work with independent agents also included the benefits of having one point of contact to handle insurance needs and questions and having the guidance of an experienced personal insurance professional.

“This research demonstrates that consumers really value the advice provided by independent agents and the personal relationships they build with their customers,” said Mark R. Desrochers, president, personal lines insurance at The Hanover. “The majority of respondents said their number one reason for switching from a direct insurance provider was to have someone to guide them through their insurance buying decisions. Clearly trust and expertise are important to consumers.”

“The study shows that consumers realize the value that independent agents bring. That’s why we deliver our products exclusively through agents who are ‘the value creating channel,’” said Dick Lavey, president of field operations and chief marketing officer at The Hanover.

Study Shows Consumers Who Go Direct Return to Independent Agents (Hanover 8/12/13)