Auto Insurance Agency / Carrier Pricing Dynamics | In Practise

Auto Insurance Agency / Carrier Pricing Dynamics

Founder and CEO at Auto Mate Insurance

Learning outcomes

  • Why an auto insurance customer would go via an agent vs direct
  • How customer behavior is changing; switching, discounts, policy terms
  • Commission structure between independent agents and carriers
  • How large insurers look to retain customers that wish to switch
  • The power of the insurance bundle for large insurers
  • Why customers are not switching to Root and Metromile
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Executive Bio

Stephen Santi

Founder and CEO at Auto Mate Insurance

Stephen has over 15 years in the insurance agency business and is the Founder and CEO of Auto Mate, an independent auto insurance agency that works with 70 carriers for all property and casualty lines. Stephen was the number one Farmers agent in Oregon and has been working both as a captive and independent agent over the last decade. Read more

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Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Stephen, could you please provide some context around your experience in the industry?

I have been in the industry for 15 years. I was 25 years old when I started at my first insurance agency called Farmers Insurance which was a big brand name. I was the number one Farmers agent in the Portland, Oregon metro area and following that, opened the first insurance agency inside a car dealership. That was done inside a very large Toyota dealership, as part of the Allstate agency, where I had to intertwine the two businesses to have them work. From scratch, we quickly became the largest producing Allstate agency in the state of Oregon and the second largest in Northwestern United States. After that, I have opened Auto Mate which is an insurance broker based out of Portland Oregon.

We are now working across five different States; Washington, Oregon, California, Arizona and North Carolina. We are relatively young, being founded in 2015 but we aimed to upset a market with long-standing competition. Other brokerages we compete against are 70 to 100 year old companies. A large swath of our employees are former agents who have worked for other large brand name insurance companies. Auto Mate contracts with over 70 different insurance companies, helping consumers and businesses like nobody else can. We are quickly becoming the company your insurance agent calls if they are not able to help with your problem.

Is that across all lines of insurance?

Yes; we deal primarily with auto, home and business insurance. There are many products within that but it is generally considered to be property and casualty insurance. We decided to take that as our niche and be very good at that. We have found that, in the insurance market, it is wise as most successful agents and brokerages find a niche to play in. We work with many of the brand name companies and currently operate with four internal office staff and six independent agents that work on their own but work through our program.

We created the program to not only help consumers but also independent insurance agents who are very good at their jobs and have a robust clientele. We offer them help on the business management side to aid in their success.

Could we walk through a typical customer journey. If I want to insure my vehicle, what is the process? Clearly, I do some online research prior to buying the insurance but what is a typical process from research to engaging with an agent?

The insurance process has changed vastly over the past decade. Insurance agents used to be local and in a retail environment where sales were made face to face and completed with a hand shake. That has been completely upset by the internet. Like many different industries, we have seen it go from that local buying experience, with an agent whom you sit at their desk and talk with, to a more regional sales process with people telephoning to much larger communities.

From there, we have seen it go to more of a national automated experience, where customers are no longer even buying from people face to face. Instead, they are doing online research as you mentioned to figure out the type of company they want to work with and feeling out the brand more. The typical customer experience is going to be getting your information out there. How much work you need to put in depends on where you go. I would say that it has become a dumbed-down experience over the last decade. Many consumers believe insurance to be similar wherever you go and will make phone calls or go online to submit quotes, filling in their information and hoping an affordable price comes back.

Another avenue would be working with an insurance broker, such as Auto Mate, where you either input or give the information once to an independent agent or broker, who shop things out for you and come back with advice on things you should be aware of or do or perhaps what benefits different companies offer. I believe information is readily accessible but so is disinformation, at this point. You can find practically anything you want online. Customers, these days, research different companies by looking at online reviews and social media content. The attention has relocated and the buying habits of consumers have changed significantly.

Why would I choose an agent versus going direct to Geico or Progressive? What is the real value add of going through a broker like Auto Mate?

Insurance has been dumbed-down over the past decade. Large companies such as Geico have pushed the idea that insurance is all the same so do something quick that saves money. Education is something we advocate for in an industry which is, typically, very misunderstood. There are three big differences to going directly to a company versus working with a broker. One of them is access. Agents are typically sales people and when you call an insurance company, they have access to one price, one product, one set of rules and one way of doing business.

Despite how hard they want your business, if their company is not competitive for you or your particular market, they won’t be either. Whereas brokers and independent agents have access to multiple markets. They are expected to know more and be able to differentiate between what is good and what some of the downfalls are with going in any direction. They develop relationships with different companies which helps fine tune their offer to the customer, thereby providing the best fit.

Do you mainly drive growth via word of mouth or directly on social media with paid marketing?

That is something which is changing and the best insurance agents and brokerages are figuring out how to get in front of people where they are. We have stopped doing much of the historical advertising of sending out mailers or putting bigger signs outside and have instead invested in digital; being at the top of a Google search, being on different social media platforms, having YouTube explainer videos to help people understand, in quick bites, the different things they should realize. We think that putting information out there, even for free, will help drive people in.

Before we move on, I want to go back to the two additional points on the difference between Geico and a broker like Auto Mate. The second thing there was having professional advisers which I think has been lost slightly. Most people use advisers when working on their retirement, investments and other financial matters. What makes insurance different? If you speak to a financial adviser, they will direct you to a broker like Auto Mate who will ensure you have the required coverage. The biggest reason people are denied insurance claims is not buying the right products up front. We see hundreds of thousands in declined claims each year for things that could have cost the customers $5 a month or less.

Many items are commonly skipped by companies when competing on price, as it limits their responsibility for what they need to pay down the road. Finally, there is leverage. Insurance agents who work for a single company such as State Farm, Allstate, Farmers or American Family, only have access to the one and lack leverage with that company when difficulties arise. Whereas with an insurance broker, insurance companies are much more willing to help out because they know the brokerage could take a half million dollars away from them at any given point.

Are insurance companies more apt to listen to you and help you out when you only represent $2,000 to them in insurance each year compared with being represented by a firm who brings them $2 million annually? Who do you think gets better service? Having leverage with an independent agent or brokerage is significant because they can use that leverage to demand the $15,000 on a claim or threaten to take their $2 million of business elsewhere.

How has consumer behavior changed in how they choose certain policies over the last five years?

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Auto Insurance Agency / Carrier Pricing Dynamics

December 17, 2020

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