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Do you have a response to the McKinsey Report?

If you have not read this compelling report, “Agents of the Future: The Evolution of Property and Casualty Insurance Distribution,” the report can be found here.  It is a 15 minute read and well worth the time.

I strongly suggest you read the report, but here are just a few excerpts:

Article Excerpts

“Where agents once served as the front line in risk selection and pricing, advances in predictive models are making this role obsolete.”

“Today, carriers rely far less on the intuition of their agents.  The increasing sophistication and accuracy of predictive models, and the rise in straight-through underwriting, are diminishing the agent’s role in risk selection in both personal and small commercial lines.”

“To survive in a changing environment, insurance agents will need to develop new strengths and capabilities, and a value proposition that is compelling for both carriers and consumers.”

“Travel agents faced similar dis-intermediating forces. Many disappeared, to be sure; but those that survived did so by reinventing their business models in multiple ways.”

Core Capabilities & The Agency of the Future

There are three core capabilities that are discussed in the paper.  The first capability is “defining and reaching a target market”.  This includes finding more effective ways to get in front of potential customers.

Next, “expertise” is critical.  This supports the market demand for deep expertise and tailored solutions.

Finally, “operational efficiency and scale” will be necessary to counter rising operating expenses and flat commissions.  One solution presented is new revenue sources.

Agent Models of the Future

Six models are discussed.  But, I find one model, “traditional commercial lines agents” to fit best with this discussion.  This model describes a professionally and efficiently run firm with industry-focused producers who target larger accounts.  For our blog audience, this is probably the future and highlights the need, along with the other quotes mentioned above, for the following:

  • You need deep expertise in one or more targeted industries and in the area of analytics (having SIGMA on your team will provide significant analytical resources).
  • You need resources that can be efficiently applied when needed but don’t create overhead (SIGMA is an “overhead free” resource).
  • You need producers that work as a team and all understand a common, and possibly firm specific, process for delivering the expertise of the organization (SIGMA’s educational materials will get everyone speaking from the same page).

How can SIGMA Actuarial Help You Respond and Prepare?

If you are going to follow the traditional commercial lines model that offers both expertise and efficiency, then SIGMA needs to be on your team.  This is how you do that:

  1. If you have not already signed up for our free “Powered by SIGMA” portal, go to www.SIGMAactuary.com/register.  This will give you full access to our library of resources to help you self-educate and then communicate about analytical topics relating to alternative loss financing.
  2. As a PBS member, I will be able to contact you when I am in your city and set up a meeting to meet you in person and gain better understanding of your firm (of course, this is optional).  I have had the opportunity to do this with over 200 brokerage firms and agencies in the past couple of years (I travel a lot!). I am confident that these firms benefited from the discussions.
  3. By registering, you will get special alerts and notices from us, notices about changes in rules or regulations in your state, and special free webinars.
  4. New models, such as our captive pro-forma spreadsheet model (under development), are only available to “Powered by SIGMA” registrants.  Current models already in the portal include an automated actuarial assessment tool and a captive needs assessment tool.
  5. Access to our staff for “brain storming” sessions is immediately available as a “Powered by SIGMA” member.

Join us! It is a small step, but it is a step in the right direction toward continuing to be a successful firm as the industry passes the tipping point and change comes rapidly. I look forward to personally meeting you, better understanding your organization, and sharing the powerful resources available here at SIGMA Actuarial Consulting Group, Inc.

SIGMA's Resource Portal

Register for “Powered by SIGMA” at: www.SIGMAactuary.com/register

(Already Registered? Please forward to colleagues and encourage them to register)

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Timothy L. Coomer, Ph.D.

About Timothy L. Coomer, Ph.D.

Dr. Coomer has a Bachelor of Engineering Degree with a double major in Mechanical Engineering and Mathematics from Vanderbilt University. He holds a Masters in Business Administration with a concentration in Finance from the Owen Graduate School of Management at Vanderbilt University and received his PhD from the Spears School of Business at Oklahoma State University. He founded Specific Software Solutions, LLC (1990) and developed the ModMaster Suite of software products. Dr. Coomer also co-founded SIGMA Actuarial Consulting Group, Inc. (1995). He presently serves as Chief Executive Officer of SIGMA and retired from Specific Software Solutions, LLC in 2010 after selling the business to Zywave, Inc. Dr. Coomer is now focusing on leading SIGMA’s RISK66.com effort along with traveling to meet brokers and clients around the country.

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