The personal lines market is seeing direct insurance carriers gaining market share at an extraordinary clip. Direct carriers have always been a strong competitive force but recently, more than ever before, have been slashing prices and selling customers on price alone. Spending more than $7 billion each year on advertising, direct carriers are selling consumers commoditized personal insurance products everywhere they look.

As a result, independent agents are finding it increasingly challenging to generate new business leads and retain customers. In 2020, consumer auto insurance shopping rose to an all-time high of 41%, according to a recent report by LexisNexis.

Of those who do shop, 1 in 4 will leave the independent agency channel within 90 days of shopping, and 90% of those shoppers won't request a remarket quote from their agent, according to research by The Hanover, posing a significant risk to independent agencies and the channel.

While this represents a significant challenge, many agencies are winning the battle, finding new and critical ways to differentiate and build their agencies.

Here are five ways agents can step up to the challenge and grow their agencies:

1) Take an account-focused approach. When an individual's policies are placed with more than one carrier, not only can coverage gaps occur, but it also makes it more challenging and time-consuming for the customer. An account-focused approach with a single carrier that has a broad portfolio of coverages that can grow with customers' needs helps eliminate current and future coverage gaps and also reduces the likelihood customers will shop their policies, increasing an agent's retention. 

2) Focus on value, not price. There will always be a cheaper policy, but independent agents must sell value and experienced counsel. This is especially true for more complex accounts. Agents can benefit from moving up market where the focus on consultation is highly valued. As licensed risk experts, agents are well-positioned to advise customers on their options, align coverages to individual needs, and provide clients peace of mind through properly tailored insurance coverage. Often, when a one-size-fits-all homeowners policy is purchased, homeowners are left with gaps in coverage.

3) Select carriers with pricing stability. Remarketing each year can detract from the “value versus price" conversation and create a shopping habit for customers. On average, agents can offer a 12% decrease in premium for each policy they remarket, according to The Hanover's research. If an agency remarkets at each renewal, eventually, the few dollars saved with a new carrier won't meet the customers' expectations and these price-sensitive customers will take that opportunity to shop with a direct writer to find a lower price, which means lost revenue for the agency.

To avoid this, agencies are partnering with carriers that offer more price stability. Additionally, agencies that communicate with customers frequently—instead of just at renewal—are more successful in retaining those customers. The Hanover data shows that 60% of customers who plan to shop their policies do so outside the renewal period, making an argument for more frequent touchpoints throughout the year.

4) Take advantage of carrier resources. Agents who effectively combine technology with carrier resources can provide a more efficient service experience for both the agency and the customer. Agents are looking for customer-centric carrier technology, such as self-service apps and digital tools that enable electronic signatures. 

At the same time, agents are also looking for carriers that make it easy to quote new business and whose service centers offer extended hours of operation. Carrier service centers are a great way for agents to improve their efficiency and customer satisfaction at the same time. Agents who use carrier service centers report 46% more business written in the first year, according to The Hanover data.

5) Leverage their agency management systems to understand their data. This can be a goldmine for an agency—if it's used to its full potential.

Agents who maintain updated, accurate data can leverage this information to identify areas of concern or opportunity and take swift action to personalize product offerings for their customers. The Hanover's data shows that agents who understand and use their data grow more than 9% faster, have an increase in customer premium of 3%, see a 5% increase in the number of policies per customer and gain one point in retention.

Agents should seek out carriers that value programs and analytics that help their agent partners truly understand and leverage their books of business.

While independent agencies will need to continuously evolve to compete with direct carriers head-on, they have proven their resilience in the past and will continue to do so. Partnering with carriers that are committed to the independent agency channel is a great start. With the right approach, tools and carrier support, agencies will continue to deliver increasing value to their customers, grow their businesses and compete against direct writers.

Daniel Halsey is president of personal lines at The Hanover Insurance Group Inc.