Last year saw the insurance industry continue its accelerated pace toward centralized distribution. Wal-Mart entered into a partnership agreement with AutoInsurance.com to sell insurance online. The model started with only eight states, but has been highly successful and has now more than doubled to include 17 states.

Admittedly, agency owners reading this blog will likely, and perhaps accurately, claim that the types of shoppers Wal-Mart attracts are not their ideal client profile. This made a similar move by Costco (partnership with Ameriprise) more worrying. Costco catered, even as far back as 20 years ago, to successful suburban families and small business owners. The “holy grail,” so to speak, of the independent insurance agent.

Enter Google, the search giant and beneficiary of the search term “insurance,” the most expensive AdWord money can buy. Armies of Search Engine Optimization (organic) and Search Engine Marketing (paid) professionals from captives, carriers, MGAs, direct writers, and independent agencies have clashed for a decade on this field of battle. However, in classic Vegas fashion, the house always wins, and, in this case, Google has borrowed a page from its British playbook and is bringing a price comparison feature directly to its search results.

It’s important to remember, at this point, that consumer behavior is driving this change. As comScore’s auto insurance shopping report indicates, consumers are becoming more comfortable with shopping for insurance online, and they are increasingly driven by price.

As many agents have told me recently, “the only thing loyalty buys you now is a longer apology from your client when they leave.” This statement is validated by the EY 2014 Global Consumer Insurance Survey for our neck of the woods.

The key statistics are not particularly surprising, but very enlightening:

• Only 65% of North American customers report “complete or moderate trust” in their insurers
• 67% say they are likely to recommend their insurance provider, but 38% have closed policies or switched providers during the past 18 months
• Only 17% of customers are satisfied with the communications they receive from their insurers

The study also outlined five key findings that everyone in this industry should ponder closely:

“High turnover and low trust signal serious relationship issues.”

“Insurers are less trusted than banks, supermarkets, car manufacturers, and online shopping sites. The survey results also reveal that far more insurance consumers switch insurers than express an intention to switch — an almost unprecedented finding in market research.”

Solution: This is a significant problem. And it mainly stems from the lack of quality, relevant communication by agents to their customers (see bullet point three above). Since margins are thin on the retail side, effectively limiting the amount of proactive contact an agent can have with their clients, automation and inexpensive information distribution is critical. This is why agencies that regularly blog and automate relevant, timely emails to their customers often drive significantly more business than their digitally silent counterparts.

“Just because they leave doesn’t mean they don’t love you.”

“Traditional notions of loyalty and advocacy don’t necessarily apply to insurance consumers. ‘Advocates’ are not necessarily loyal, meaning ‘likelihood to recommend’ metrics are largely irrelevant. The fact that ‘alumni consumers’ may be open to purchasing new policies in the future underscores the need for deeper, more detailed customer intelligence across segments.”

Solution: This is fancy talk, meaning agents need to focus much more on maximizing their existing book of business. Increasing PIF (policies in force) rates correlate closely with higher retention and CLV (customer lifetime value). With the cost of acquiring new customers continually escalating, agents need to focus on adding policies internally.

“Insurers have so few interactions with their customers that each one becomes a critical moment of truth.”

“Consumers have so few interactions with their insurers that even the simplest administrative tasks can become a ‘moment of truth’ that shift the perception of insurers or brokers in the consumers’ minds. How insurers perform in these instances can lead directly to coverage increases and new policy sales.”

Solution: Thinking about this in the context of the wireless industry is helpful. Churn is so high in that industry, despite the fact that you can receive data and place phone calls successfully more than 95% of the time. It’s high because one single mediocre support experience, and the promise of lower prices (I’m looking at you, Sprint), causes customers to pile out of the exits. Don’t let your clients’ only experiences with your agency include a pleasant answering of the phone and a bill from the carrier.

“Consumers want more frequent, meaningful, and personalized communications.”

“A full 57% of global insurance consumers, across all product types, prefer to hear from their providers at least semi-annually. Today, only 47% receive that level of contact. In an era when many consumers feel bombarded by push communications and suffer from information overload, it is particularly interesting for survey respondents to express a desire for more communications.”

Solution: One of the reasons our system puts so much emphasis on relevant communications (commercial emails based on “Nature of Business,” cross-selling campaigns based on existing policies, x-date emails delivered at precisely the right time, etc.) is because customers generally don’t like newsletters. They are highly impersonal and make customers feel like a number. Most importantly, they get lower open rates and drive less business.

“As consumers embrace digital, insurers must rethink their distribution strategies and partner relationships.”

“While consumers still gravitate toward traditional contact methods, digital and remote options are fast reaching parity for a range of tasks and inquiries. No matter their precise distribution strategy and service models, insurers need to offer consumers the right mix of channels to maintain healthy relationships — and prepare to manage the potential channel conflict that is likely to result.”

To bring it full circle, this is why Google, Costco, Walmart, and others are getting into the insurance game (for brevity, I’ve deliberately avoided tackling similar trends in commercial distribution). Carriers are desperate for new business in this incredibly competitive industry, and independent agents need to prove their value both to them and their customers. The war is hardly over, and the most successful agents are arming themselves with better weapons to take back the offensive.