Recent demographic studies in our area reveal a total year-round population of approximately 13,000, which rises in the summer to approximately 25,000. We have a relatively high number of seniors and many younger, newly-formed families dependent on government assistance living mostly in a rural, unserviced, thinly populated area. This makes it costly to service our clients. Long distance phone bills represent our second largest expense (our two offices each have their own toll free phone numbers) and the cost of visiting our insureds to do home inspections is time consuming due to the large area we service.
We are targeting seniors which have proven to be a profitable, stable market for our brokerage in spite of our present difficult economy.
We are fortunate that we have not yet had the intrusion to a large degree of mass merchandising programs like "Silver Power." Smaller brokers have made inroads into our traditional rural business, with low cost farm markets that sell home and auto insurance. We understand that some of these markets are in a poor financial position and may cease to be a factor in the future.
Our market consists of senior citizens, lower-income young families (many of who are on social assistance) and the small, family-run business (many of which are seasonal and based on the tourist trade). There are a few industrial risks and those that are located here are branches of larger industries which obtain their insurance through large brokers in Bigtown.
Our target market is the seniors, family business, and middle income earners in our area. Statistics show that over 42% of our permanent population is above 45 years of age. The average family income is approximately $27,000 and the unemployment rate 9%.
We are cautious about encouraging business from lower income prospects since they tend to have wood heat, homes in poor repair, and many attempt to install and repair their own plumbing, wiring, and heating systems.
Another market of concern is out-of-area clients who may have been payment or claim problems to local brokers and attempt to find a distant broker to provide coverage instead of making the necessary adjustments in their own lifestyle to prevent claims.
Clients who have moved repeatedly can be difficult to obtain proper underwriting information and past claims experience on, and we feel our staff is to be commended for their ability to properly assess if a client should be placed to our standard markets or would be better served by a specialty company.
The past few years have seen tremendous upheaval in the insurance industry. The number of players has decreased in both the broker and company communities. The automobile product has, in the mind of the public, become unaffordable, unavailable, and impossible to understand. The recession has curtailed insureds from properly maintaining their homes and automobiles, and to exacerbate the situation, many clients have turned to wood heat and started doing their own repairs and maintenance which may have increased the number and severity of claims. Insurance fraud has become a major issue for the entire insurance industry.
Our traditional close relationship with our companies has been strained. Brokers are concerned that in spite of commission reductions, quotas, contract cancellations, and refusal to write new auto business by some markets, they now may find themselves in competition with some of the traditional broker distribution companies that are setting up direct marketing facilities and branches. The banks, even though thwarted by the federal government in its last budget to retail insurance from their premises, will continue pressure on the government and now have announced they will open stand alone insurance offices to retail insurance.
In spite of the above, we believe that the independent broker will survive. We are more automated than most service industries. We are close to the customer, regardless of some insurance companies' attempts to sever the traditional broker-client relationship. Our clients, in most cases, still do not care or know which company we place them with. They trust our judgement in selecting the proper coverage and company to place them in.
The new federal government is close to adopting a new automobile contract that hopefully will make it affordable, understandable, and available to our clients. A profitable automobile product will entice the companies to aggressively seek new sales and more brokers will see companies offering contracts.
Upload/download capabilities are in many brokers offices, including our own. This will cut costs, improve efficiency and accuracy, and help us meet the competition from banks and direct writers. Companies that truly value and trust the broker distribution system will align themselves with professional brokers and grant more underwriting authority similar to Lloyds.
Local independent brokers
Cal Roberts, Patrick C. Johnson, Rob Champlain
Agents (such as Co-operators)
Our own Companies
Mass merchandise programs heavily advertised over the radio such as "Gray Power"
Group Plans - teachers, public employees
The main volume of income for our brokerage is generated by automobile premiums because they are relatively higher priced to insure than property, and because automobile insurance is mandatory in the region.
As stated previously, our success is dependent on our staff and our companies convincing our clients and prospective clients that price, although important, is not the only criteria for the purchase of insurance. Our advertising stresses that we have two offices, open six days a week with after-hours support and we have been an active, concerned, community involved, local business since 1938.
Still, price is very important and we must work with our markets to ensure that our insurance products are available and affordable to a large part of the market. It is the broker's job to ensure the client understands what he is buying, and if circumstances dictate a lower-priced product, we must make our insured aware of the trade-off in coverage versus price.
Our trading area is rural. Premiums are relatively low and therefore not subject to large brokerages or specialty direct writers mounting aggressive advertising campaigns to bring in business. There are few group plans providing insurance coverage with the exception of our teachers. Smalltown has two independent brokers and a Co-Operators agent, Nexttown has two independent brokers, and Southtown has one. We have just started to see some move by locals to "Silver Power" and other specialty retailers who advertise on radio and television. The banks are still a future unknown.