Independent agents must adapt to maintain dominance among distribution channels due to COVID-19, rising competition and evolving consumer appetites, according to the J.D. Power U.S. Independent Agent Performance and Satisfaction Study, which was developed in alliance with the Big “I."

The COVID-19 pandemic has accentuated consumers' need for a more personalized approach, and the study highlights areas in which independent agents need to up their game to remain competitive with direct-to-consumer insurers. 

The study “provides excellent insights into the evolution of the independent agency channel and serves as a guide for the development of more productive agency and company relations," says Madelyn Flannagan, Big “I" vice president, agent development, education and research. “The Big 'I' values the partnership with J.D. Power on this annual survey." 

“The effects of COVID-19 have highlighted the importance of personalized insurance as consumers seek help navigating their way through this period," says Tom Super, head of property & casualty insurance intelligence at J.D. Power. “Ironically, in many instances, it was direct-based carriers, which have made a concerted effort in recent years to emulate the high-touch and high-quality agent experience, that were able to step up and deliver during this crisis."

More than one-third (36%) of agents say they were unaware of their carriers' efforts during the pandemic. While 42% of independent agent customers say they were contacted to help manage their policy costs during the crisis, 52% of direct customers say the same, according to the report.

“The independent agent channel should use this as a learning experience and redouble efforts toward improved alignment, execution and efficiency to drive more beneficial customer outcomes," Super says.

Other key findings from the report include a focus on the current challenges facing agents:

1) Traditional agents versus virtual agents. Four-fifths of consumers surveyed say they would be open to working with virtual insurance agents to perform core insurance activities, indicating that the traditional agency distribution is threatened by technological innovation.

2) Progressive's influence grows. Independent agents write 58% of all p-c policies but their market share is falling, particularly in personal lines auto where agents write just 31% of all policies. Progressive's agency channel accounts for 52% of all personal lines' growth, solidifying its expansion across both direct and agent channels.

3) Working with carriers. Satisfaction among independent agents is highest when carriers offer diversified products such as those that allow agents to offer flexible design and onboarding or enabling them to offer product bundling for clients. Fewer than half, at 43%, of independent agents indicate receiving such support from carriers.

4) Digital support and satisfaction. Email and online dashboards are agents' preferred means of communicating with insurers as well as those that drive focus on sales, product training and identification of cross-selling opportunities. While associated with high levels of agent satisfaction, these digital offerings are used by fewer than 60% of agents.

5) Cost efficiency and agent satisfaction. The study finds that simply paying agents a higher commission does not translate to higher agent satisfaction and improved business outcomes. Many of the top-performing agent-based insurers have been able to maintain expense discipline while also delivering on agent expectations, according to the report.

6) Alignment with carriers. Among the independent agents in the study, overall satisfaction with carriers that demonstrate better market alignment is 126 points higher (on a 1,000-point scale) than those carriers that do not provide adequate support for targeted markets.

Olivia Overman is IA content editor.