The Value of Independent Agents Versus Lower Cost One-Stop Direct Channel Insurers

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Insurance consumers in Texas, Florida, California and other free-market states have been navigating in a “buyer beware” environment for a decade or longer. San Antonio insurance broker Jerry Carnahan says consumers who choose independent insurance agents over direct-buy companies fare best.

When it comes to purchasing insurance, everything the average consumer has learned about getting the best “bang for their buck” may no longer apply.  In a country where insurance regulations and transparency requirements can vary dramatically from state to state, many U.S. policyholders have turned to direct insurers promising lower prices, only to return to an independent agent for expertise and guidance.

Consumers who made the switch from an independent insurance broker to a direct channel, such as Geico, Progressive, State Farm or Allstate, report being lured by ad campaigns promising low-priced premiums in “15 minutes or less.” In an era of instant gratification, where busy consumers prefer their communications swift and unspoken, many assume that cutting out the middleman and buying coverage online or over the phone translates into  cost and time savings.  It appears that direct channel buyers often have a change of heart when they learn that the advice they need to make informed decisions is not readily available.

One recent study by Connecticut research firm InsightExpress, found that 60 percent of consumers who reported purchasing insurance through a direct channel 10 or more years ago, said they switched back to an independent agent for expertise and guidance, especially in so-called “buyer beware” states where navigating the highly-competitive insurance industry can be overwhelming.

“An independent insurance agent is someone who is going to keep their clients abreast of coverage quality changes,” says Jerry Carnahan, owner of Carnahan Insurance Group in San Antonio, Texas. “Not all insurance policies are the same, especially in a free-market state like Texas.”

“When a consumer is shopping with a captive agent—that is, an agent working exclusively for one insurance carrier like a direct channel agency—all that agent needs to do is claim their rates are lower than anyone else’s: they don’t have to tell the customer what they’re losing with those cut-rate policies unless the customer asks.”

Unless policy shoppers are also insurance experts, they may not realize that questions should be asked in order to prevent mistakes that could leave them under- or over-insured.

“Lots of people think all policies are the same, and that they’re all generic, but they’re not and people shouldn’t assume they are. It’s up to the consumer to know what they’re doing and pay a little more attention to get the best results,” says Carnahan.

Consumers can begin by paying closer attention to their individual insurance needs. Knowing what questions to ask an agent or broker requires just a bit of homework.

“The Office of Public Insurance Council in Texas has a great website for consumers to learn more about buying insurance and protecting themselves from making bad choices, provide answers to questions, and even suggest answers to questions that the average individual may not have known to ask.”

Some areas like auto insurance, which accounts for 70 percent of personal insurance premiums, has become increasingly commoditized. Accounting for 30 to 60 percent of most agents’ business, the competition in a free market means consumers may discover that an independent insurance agent can offer more price and coverage options than a direct-channel agent who is limited to working only with their company’s products.

In an industry where direct-channel appeals to consumer demand for fast and cheap results, independent insurance providers are continuously adapting. The ability to thrive in this developing distribution environment requires positioning themselves as the experts worth taking the time to sit down and discuss customized pricing and frontline risk determination in detail.

While homeowner and small business insurance coverage are also vulnerable to commoditization, independent agents continue to insist that selling policies based on price alone is not a good long-term option; every coverage need comes with a unique variety of complexities.

Contact Info:
Name: Jerry Carnahan
Email: Send Email
Organization: Insurance One Agency, LC
Phone: 210-402-0288

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Release ID: 69204

Name: Jerry Carnahan
Email: Send Email
Organization: Insurance One Agency, LC