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Buying Car Insurance Online: Are Insurance Agents Obsolete?

Insurance agent showing thumbs up in front of car insurance policy flat concept image

With over $200 billion in policy premiums written in the personal lines auto insurance market in the United States, consumers are utilizing the internet more frequently to compare and buy policies.

Direct writers like GEICO have made large investments in their online presence and digital channels in order to facilitate a smooth shopping experience. Even agency writers like State Farm have made the move to provide online quotes in an attempt to retain or recapture some of the business lost to companies selling direct.

Did the Internet Kill the Insurance Agent?

With these large pushes into cyberspace and the digital realm, are insurance agents becoming obsolete? Are the days of sitting down with a trusted agent and discussing insurance needs over a cup of coffee gone?

Insurance agents are a hardy bunch, who are accustomed to having to change practices at the whims of new government regulations or contract requirements. While online quoting does make it easier to compare rates, and direct writers give consumers more options, there is still a need for insurance agents.

Online close rates suffer

More and more people are turning to the web to compare quotes, with J.D. Power’s 2016 U.S. Insurance Shopping Study stating that 74% of car insurance shoppers are using the web to either research or obtain quotes.

Nearly 50% of shoppers actually get a comparison quote, but only 25% end up actually purchasing a policy online. The remainder of shoppers who purchase a policy either contact an agent to purchase the policy, or buy via call center.

Agency writers who offer consumers the ability to quote and buy online are only seeing about 10% of policies quoted online actually closed online. They are quoting approximately the same amount of policies online as through agents, but the close rate of online quotes is much lower.

Trends show fewer shoppers looking to switch

While nearly three-fourths of shoppers are using the internet to research or quote car insurance, fewer consumers are actually shopping around. Out of 100 policies, only 33 were shopped around in 2016, down from 39 in 2015. The average amount of savings dropped from $388 to $356 during that time frame, which is less incentive for drivers to switch companies.

Insurer satisfaction rate drops

There is a lot of incentive for insurance companies to sell policies online, as it reduces acquisition costs significantly. But with less human interaction, consumers are less satisfied with the overall process. Converting the sales process to a digital medium is not conveying the sense of satisfaction that results from interacting with an agent.

Older shoppers are not converting

Shoppers under the age of 50 are using the internet much more than older shoppers, with 29% of younger shoppers using the internet exclusively for quoting rates. Only 17% of older shoppers are using the web for price comparisons.

This can best be summed up as a generation gap, as older generations are much more accustomed to having personal interaction and less inclined to make purchasing decisions by the click of a mouse or tap of a finger.

Opportunities for insurance agents

Insurance agents who see the digital trend as a negative are missing the boat entirely. Millennials were raised with cellphones in their hands and instant access to everything, and these are the same people who will be the lifeblood of any successful agency in the future.

Insurance digital channels

Agents can either adapt or wither away into obsolescence. It can be painful adopting new digital strategies and social marketing plans, but this is the future of the insurance industry.

Human interaction cannot be replaced

As the data suggests, there is still a very real need for human interaction in the insurance sales process. Poor online close rates show that there needs to be a human involved in the sales process at some step. Whether via phone, online chat, or actual office sit-down, agents need to adopt an online strategy but still offer clients the option for instant contact.

Insurance is a relationship industry

Customer relationships will always be a part of insurance. As any successful agent knows, there is much more to a sale than price alone. And there will always be customers who realize that price is not as important as service. Insurance is a service industry, and always will be, despite direct writers attempts to convince consumers that price is the only factor that matters.

In the end, the internet has not killed the insurance agent, but rather it provides them with a shiny new platform to connect with and convert potential customers into clients.

The internet provides consumers a great way to compare rates and see how other prices compare. More power to the shopper who understands insurance and is comfortable managing their own risk. But for the rest, there will always be a question of ‘Do I have adequate coverage?’ for which an insurance agent can provide the answer.

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