Disintermediation won't be easy in the personal-lines market, atleast among many of those who work with agents today, with one infour auto policyholders and one in five homeowners surveyed byDeloitte Research indicating they would not buy without their agentor some other intermediary—period.

However, while Deloitte's “Voice of the Personal Lines InsuranceConsumer” surveys found that a significant number of the auto andhomeowners' insurance buyers queried who currently use agentscannot do without an intermediary, many respondents indicated theyare at least open to the idea of buying direct from an insurer,given the proper price incentives and services.

Indeed, when those who used an agent were asked what would betheir preferred way to purchase a new insurance policy, 22 percentof auto respondents and 20 percent of homeowners said buying directfrom an insurer instead would be their top option.

In addition, when this segment was asked if the price ofcoverage was relatively equal, how likely would they be to changeauto insurers to buy over the Internet without an agent or broker,9 percent of auto respondents said they would be very likely and 17percent would be likely to do so. Among homeowners, 8 percent whoused an agent said they would be very likely, while 19 percentwould be likely to buy direct over the Web instead.

On the other hand, the potential for channel changing is not aone-way street. Indeed, the openness of respondents who now buydirect to use an agent in their next renewal was even morepronounced. Among direct-buying homeowner respondents, 39 percentsaid their top preference the next time they purchase a new policywas to work with an agent or some other intermediary—a sentimentechoed by 30 percent of auto respondents.

When asked if the price of coverage was relatively equal, howlikely would they be to change insurers to work with an insuranceagent or broker rather than shop and buy on their own, 9 percent ofauto respondents who had bought direct said they would be verylikely to switch channels, with 20 percent likely to switch. Askedthe same question, 15 percent of homeowners said they would be verylikely to go with an agent, while 21 percent would be likely tochoose an agent.

What specifically might prompt consumers to switch channels?

Since price in general was by far the biggest decision pointcited by the overall sample of 2,160 respondents (54 percent ofauto buyers and 45 percent of homeowners said price was extremelyinfluential, while another 28 percent and 30 percent, respectively,characterized it as very influential in their purchase decision),it's only natural that a majority of those buying through an agent(56 percent of auto respondents and 58 percent of homeowners'consumers) said they used an intermediary to secure a better price.Similarly, about 55 percent of each sample said an agent would getthem more coverage for the same price.

These feelings were stronger among those whosaid they work with an agency representing more than one carrier.Seventy-five percent of both samples said their independent agentcan deliver a better price, while 70 percent of auto buyers and 74percent of homeowners believe their independent agent can get themmore coverage for the same price.

Therefore, demonstrating to agency buyers that they can savesignificant money on their premiums if they bypassed theirintermediaries and went directly to insurers would appear to be thefirst challenge facing direct carriers. The question is how theseprospects would define “significant.”

Indeed, of those with agents who would consider buying direct,it came down to how much the respondent could save on their auto orhomeowners' insurance premium. From these survey samples, itappears that recruiting such channel-changers won't come cheap.

About 23 percent of auto buyers and 21 percent of homeownerssaid they would not abandon their agent and buy direct unless theycould save more than 20 percent on their premium. Around 15 percentof both samples would go direct for a price difference of 16-20percent, with 20 percent willing to consider a shift for 11-15percent in savings. About 15 percent would drop their agent for aprice cut of 6-10 percent, while just a handful (around 5 percent)would go direct if they could save 5 percent or less on theirpremium.

In looking at another aspect of cost—value for the premiumdollar—about 62 percent of those now using agents would considerbuying direct if they could get more coverage for the sameprice.

Still, while price is important, it's not the sole factorrespondents cited when asked why they work with an agent, notingthe support and services agents can provide as well. They cited thebelief that an agent would more clearly explain their coverage (alittle over 80 percent of both samples), could identify all oftheir potential losses and make sure they are covered (75 percent),as well as be their advocate to help get claims paid quickly andfairly (75 percent).

In addition, 70-75 percent of respondents said agents would givethem more objective advice, better represent their interests, andtake care of all their insurance needs beyond either auto orhomeowners' coverage. Seventy percent of both groups said it wouldbe more convenient to buy coverage through an agent.

Trust was also a big factor for a large segment of theserespondents, as four in 10 among both samples said they use anagent because they don't trust insurers to deal with themfairly.

Among other motivating factors cited, abouthalf of the respondents using agents said they might buy directfrom a carrier if the insurer more clearly explained theircoverage, offered more expert advice, took care of all theirinsurance needs beyond just auto or homeowners' coverage, and if itwere easier and more convenient to buy straight from the company.However, fewer than one in five cited any of these factors asextremely or very influential in their decision whether to godirect.

Another obstacle facing carriers looking to sell direct toconsumers is the fact that satisfaction and loyalty indicators werevery high among respondents who work with agents. Nine out of 10auto consumers surveyed are either very satisfied (47 percent) orat least satisfied (42 percent) with their current agent—a resultechoed by respondents with homeowners' policies. As a result, fourin 10 auto and homeowner respondents had been with the same agencyfor over a decade.

One interesting finding was that a large segment of respondentsusing agents were not aware whether their intermediary isindependent or exclusive to their current carrier.

Among auto respondents, half said their intermediary onlyrepresents their current insurer, and 21 percent said their agentis independent and sells coverage for multiple carriers. But 30percent said they did not know whether their current agentrepresents just their current insurer or additional carriers aswell. This finding was even more pronounced among homeownerrespondents, as 39 percent said they don't know whether their agentrepresents just one or multiple carriers, while 38 percent workwith exclusive agents and 23 percent with independents.

However, those who do recognize their agents are independentproducers were the most enthusiastic about the benefits theirintermediary has to offer, while their expectations of whatindependent agents can deliver in terms of price and service werethe highest recorded in the survey. This would indicate that itwould serve independent agents well to make sure their clientsrealize they represent multiple carriers and to explain whatadvantages that might present for buyers.

So, why do certain respondents prefer to deal directly with acarrier, without an agent?

Price and convenience are two key factors.About 60 percent of direct personal-lines buyers responding to thesurveys indicated they believe that intermediaries just add cost tothe transaction, while two out of three auto respondents (and 59percent of homeowners) believe that buying direct would get them abetter price. In addition, 75 percent of auto buyers said it's moreconvenient to buy direct, a view echoed by 70 percent of homeownerrespondents—with about one-third of each sample strongly agreeingon this point.

However, on a wide array of additional factors—from whetherinsurers will manage claims fairly, cover all their exposures orhandle all of their insurance needs beyond a singlepolicy—direct-buyer respondents were less enthusiastic about thebenefits of going direct than were those who had bought throughagents.

Among these two survey samples, younger respondents were morelikely to buy direct, perhaps in part because of their generation'sgreater proclivity to live their social lives and conduct theirbusiness online.

One critical point is that the surveys revealed a flipside tothe coin on the trust factor cited earlier, as around four out of10 in both the auto and homeowner samples said one reason they buydirect is because they don't trust agents to objectively representtheir interests.

Could this be residual fallout from the contingency-feecontroversy of a few years ago, prompting some consumers to wonderwhere the independent agent's loyalty ultimately lies—with theclient or the carrier? In any case, the industry definitely hastrust issues to overcome and reputational risk challenges tomanage.

Still, no matter how consumers buy personal-lines insurance, thesurveys found that consumers are keen on accessing information anddealing with carriers in a variety of ways. In my next blog I'lladdress the fact that respondents in both surveys indicated thatthe ability to interact with insurers over a multitude ofchannels—in person or on the phone; over the Internet or viaapplications on their mobile smartphones—will be a majorconsideration when they make their next personal-lines policypurchase, regardless of how or from whom they buy theircoverage.

(We welcome your feedback and questions throughout this seriesof articles. You may download the full report on “The Voice of thePersonal Lines Insurance Consumer” from Deloitte Research athttp://www.deloitte.com/view/en_US/us/Industries/Insurance-Financial-Services/a0f93dffd16f5310VgnVCM2000001b56f00aRCRD.htm.)