In-house agents refer to agents who are employees of a given insurance company and are exclusively tied to selling insurance policies of that company only. This opposed to independent agents who sells for more than one company (Cummins & Venard, 2007). An auto insurance company is more likely to use in-house agents because of the following reasons.
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First auto insurance policy is subject to future renewals. As a result an insurer who wants his clients to renew their policies with them instead of shifting to another provider must have well trained agents who only deal with the company. This is opposed to life insurance policy which has virtually a certain maturity period and has no need for renewal (Dionne, 2001).
Secondly, most insurance firms will always try to have few claims so as to stay in business.In addition auto insurance has a high frequency risk as compared to life insurance. On the other hand independent agents are not normally attached to one insurer; therefore in the event that the event insured against happens then the independent agent can work together with the policy holder to push for compensation from the insurer.
This is because the agent knows that if the client is not treated to their expectation they can transfer them to another provider. However in-house agents are employees of the insurer and therefore they can’t betray their loyalty to the employee, but will also work to retain the client (Dionne, 2001).
Thirdly, in auto insurance policy there is an opportunity of one client buying more than one policy. Therefore the company needs to train its clients so that they will be able to work with a given client to expand business with them. This not needed in life insurance, in addition independent customers may advice customers who are with one insurer to purchase other related policies from other providers depending on the commission offered.
Life insurance policies are difficult to market due to the high level of intangibility; therefore they also require an agent who has a high understanding of the product which can be achieved through thorough training. This shows the need for in-house agents but their need is still less compared to that of auto insurance companies (Dionne, 2001).
Why auto insurance companies assign the tasks of selling and customer service to different people
There are various reasons why an auto insurer will separate the task of selling form customer service. First, to use customer service as a competitive advantage, particularly because most of the auto insurance policies are similar in what they cover. Therefore in order for an insurer to differentiate itself from other providers it needs to offer strong customer service. This is only possible when the two tasks are separated.
Secondly the provider of auto insurance is always determined to retain the customer for future renewal contracts. Customer service ensures that those customers who have signed contracts with them prefer them over other companies when they want to renew their contracts. As a result a different group should be assigned that duty of ensuring customers are there for a long term (Cummins & Santomero, 1999).
Thirdly is to prevent conflict of interest. The sales agent is focused on securing new sales and therefore if given another duty of keeping in touch with current customers to ensure they are satisfied his effectiveness will be reduced.
Particularly because selling policies involves bringing in the catch, and therefore another body should be tasked with the duty of explaining the policies that is if the client wants to change or add more policies (Cummins & Santomero, 1999).
Cummins, J. D and Santomero, A. M. (1999). Changes in the life insurance industry: efficiency, technology, and risk management Norwell, MA: Khluwer Academic Publishers
Cummins, J. D. and Venard, B. (2007). Handbook of international insurance: between global dynamics and local contingencies New York, NY: Springer
Dionne, G. (2001). Handbook of Insurance Norwell, MA: Khluwer Academic Publishers