Insurance-Wise: Why Working a 5-Mile Radius Doesn’t Work Anymore

Fran Majidi August 1, 2022
buying organically generated leads

Selling insurance locally is a great way to start a business. You can begin by selling policies to family members, friends, and associates, like your hair stylist, your dog groomer and even your local butcher. Add a referral program to this modest model and you’ll soon have friends of friends signing on. You’ll feel great until you realize that you have capped yourself off with this small-scale strategy. Everyone you know and their mother have bought policies from you. Now what?

It’s important to think big when you’re selling insurance. Instead of focusing on one city, you should think of the whole state as your target demographic. You also need to market yourself like crazy! Many brick-and-mortar insurance shops have already closed down because insurance buying habits are changing. People buying insurance from a nearby shop out of convenience are now buying insurance online because it’s even easier.

What does this all mean for you, the agent? You need to be where consumers are--Online. If you hate social media and networking online, you’ll have to use the resources of companies like SmartFinancial, a cutting-edge technology firm that generates leads and transfers them to you, either via live calls or with emailed information on prospects.

“I Only Do Business with People Who Come to My Shop”

This model is beyond restrictive and outdated. It used to be that insurance sales were only made locally, with agents “feeling out” clients as a way of deciding their risk factor. However, there are now complicated equations used to determine risk. Rarely are decisions made based on one’s instincts.

When people are asked who their insurer is, they usually offer the carrier name, not the agent or agency name. No longer is the consumer associating the agent with the product they bought. In large part, this is due to the millions spent on advertising efforts by the insurance companies. The role of the agent has changed when it comes to selling personal lines, like auto and home insurance, as well as in selling small commercial lines of business. Increasingly, customers expect to speak directly with a carrier, who has a captive agent ready to sign on new business.

It used to be that carriers relied on many independent insurance agents to sell their products but technology companies are slowly satisfying the demand for leads that these professionals once satisfied. Independent agents, who are slowly being squeezed by the changes in the insurance industry, are also becoming reliant on ad-tech companies like SmartFinancial to take their sales figures to the next level. In many cases, it’s more cost effective to invest in leads than it is to brand and market yourself as an agent! Think about it: you’re competing the big companies, like Progressive and Farmers, which are spending millions on advertising.

Even if you live in an idyllic community where everyone nurtures each other, you will never survive by restricting yourself and covering too little ground. You’ll cap out in no time if you stick with the 5-mile radius of your office. There’s no winning against these behemoth companies, so buy leads in your state and beyond.

“A Referral Program Is My Long-Term Strategy”

Referrals are a great way to sell insurance products without making too much effort at all. In most cases, if you find a great rate for one client, you’ll bring in their family and friends too. When you get those people to refer their friends, family and acquaintances, your reach will ripple outward. But even then you’ll be capping out not too far down the road. What you can do to keep growing is to have this ripple effect take place in many clusters throughout your state and beyond. If it’s hard for you to network outside of your geographic location, create centers elsewhere by buying leads. Then, kickstart your referral program in those locations after you gain a foothold.

What About Homeowners or Commercial Lines?

Whereas auto insurance is becoming very easy for consumers to price-compare without the help of an agent, people buying homeowners and commercial lines of insurance are still reliant on agents. With auto insurance, it seems the main job of the agent these days is to close the deal with a financial transaction, but the opposite is true with home insurance and business insurance. There is no full automation for the underwriting of these more complex policies. Plus, people still look for expertise in these more complicated areas of insurance. Unlike auto insurance, people buying these lines are resistant to a DIY approach. They want some hand holding.

Overall, agents have to work hard to bring value to the role they play in the insurance marketplace as technology companies take over the price generation that was once unique to their jobs. Like travel agents, there will probably be a decline in the number of working agents but the ones who survive will be handling more complicated lines of business. No longer will the focus be on a 5-mile radius but rather on a net that will sweep over a much wider geographic area.

What Trends Should Insurance Agents Expect to See?

One major change for insurance agents is that they will be required to do more extensive digital marketing of the resources they provide as experts in the areas of homeowners and business insurance. They will need to become the source of good advice when it comes to insurance packages for personal needs. They will also need to tailor commercial policies to fit their clients’ professional needs.

Some industry experts predict that agent specialization in each line of insurance will prevail. Others see a future filled only with virtual agents with no specified geographic location, a sharp focus on sales and very little time spent on customer service. Another prophecy is that agencies will need to sell many more policies than they do now and there will be much fewer of them overall.

Regardless of what the future brings, the present is here and buying organically generated leads seems to be how agents gain an edge over their competitors.