PIA Agents Respond to the McKinsey Report: "A Flawed Premise Wrapped in a Faulty Analysis"

WASHINGTON, Nov. 6, 2013 /PRNewswire-USNewswire/ -- Members of the National Association of Professional Insurance Agents (PIA) disagree vehemently with many of the conclusions and observations in a study by McKinsey & Co. on the future of independent insurance agents.

PIA agents and officials recently shared their views on the McKinsey report in a series of interviews for forthcoming articles in both industry and association publications. The verdict: The report is a flawed premise wrapped in a faulty analysis. It contends that the marketplace is marching away from independent agents and toward commoditization of more lines, but then notes with frustration that, "Surprisingly [this] has not yet led to a change in the local insurance agent landscape." But then in a contradictory statement, under a headline, "The End of an Era for the Local Insurance Agent," McKinsey asserts that "the economics of the traditional agent model are beginning to unravel."

"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. "There is a percentage of the market that's going to go direct. Overall, 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.

"Every decade or so, consulting firms will predict the demise of the independent agency distribution system, for their own competitive priorities," said PIA National Senior Vice President Patricia A. Borowski, who has seen this all before. "Often this leads to massive losses by those who buy into this 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 appear to be used to support a predetermined outcome. It is nothing more than an opinion article by a couple of analysts." She added the consensus among the panelists and a number of the conference participants on the Commercial Lines Insurance Agents Panel at the SIR conference was that the report is little more than a dressed-up op-ed article.

Agents Take Issue

Tim Dean, President of Marshall & Sterling Insurance in Poughkeepsie, New York, disagrees with McKinsey's contention that the traditional agent model is "beginning to unravel." "We're not seeing that at all," said Dean. "We hired three additional producers focused exclusively on personal lines in the past two years and they are doing well."

"We have been in business since 1864 and continue to be a hometown agency in the eyes of our clients," Dean said. "Many people prefer to deal locally and keep their dollars in their local communities. Our employees volunteer their time to support charitable initiatives and we also contribute financially to our communities. We will continue to be more than just a price market and have made the choice to not be a seller of commodity insurance. We certainly have a web presence, but it is mainly to drive prospects and clients to talk to us, either on the phone or in person."

The McKinsey report observes that carriers are expanding investments in digital technology but concludes that such investments will marginalize rather than help the agent. PIA agents have found that not to be the case. Cutting-edge agents are using digital technology, especially social media, to attract new clients and build ever stronger relationships with existing clients of their independent agencies.

Stan Logan, a principal of Logan, Lavalle, Hunt Insurance Agency in Louisville, Kentucky, says his agency's strategic investment in online technology is already paying off handsomely.  His agency just beefed up its website and digital platforms. "In the last six months, I've gotten more insurance quote requests than I have in the last six years." He said all have come from new customers.

Asked what he thinks of the argument that because people are doing more online, agents will get pushed out, Logan is emphatic. "People still want to be counseled by trained professionals," he said. "They are reaching out to get the conversation started – but it's just the start of a conversation. We still have to bring value to the table."

PIA National Executive Vice President & CEO Ron Von Haden can take the long view. "I've been around in this business for over 40 years, and I laugh every time that I hear that the independent agency is dead," he said. "If you look back through history that's been said over and over and over, but agents have been able to adapt, evolve and change to keep up with customer expectations and market changes."

"This report attempts to create the impression that the independent agency distribution system is unraveling," Von Haden said. "That is just not true. The independent agent system is expanding. For example, in the past few years, we have noticed that more former captive agents are becoming independent agents and are joining PIA. Membership in PIA nationally is up significantly in the last year, reversing a decline, and the trend line is up."

"In addition, I think it is important that agents not embrace without question some of the observations contained in this report that might on the surface appear to be reasonable. Consider the source. That's like a group of hens saying 'That fox makes a lot of sense.' Agents know to turn to their professional associations for unbiased competitive advice – not to their competitors, who are actively predicting and promoting their demise," he said.

"As for the use of technology, PIA agents have it right," he added. "Rather than inventing new portals to foster price competition, we believe in leveraging technology to build the personal relationships with prospects and existing clients that are key to the success of the agency."

"Marketing methods will change, service methods will change, but independent agents – as they always have done – will rise to the demands of their clients and outperform their competitors," Von Haden said.

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.

Read more online: PIA agents respond to McKinsey: http://www.pianet.com/news/news-about-pia/2013/agentsrespondmckinseyreport110513

This press release is online at: http://www.pianet.com/news/press-releases/2013/piarespondstomckinseyreport110513

SOURCE National Association of Professional Insurance Agents