Agents Circumvented?

It’s no secret that for the last few years more and more carriers have been courting data VARs to sell their network services. It only makes sense for service providers to expand their indirect sales channels and potentially to reach a new set of customers through their “trusted advisers.”

I’ve always assumed this was a good thing because it meant the channel was growing in both number and (hopefully) in the percentage of revenue it brings to carriers.

But now I’m hearing that carriers are viewing VARs in a different way – as a lower-cost substitute for the traditional carrier services agent.

The idea, as I understand it, is that the VARs will act more like referral partners, handing over the hot leads for the carrier to work. In so doing, the carrier pays the VAR less commission (commensurate with less work) and it faces less competition for the business than it might with an agent who presents a multicarrier bid.

The referral agent certainly is not a new concept. Many carriers and agents have legions of PBX dealers that feed them leads in a similar fashion. The difference now apparently is that some carriers are favoring this approach and actively moving away from the traditional agent model.

I certainly can appreciate that carriers grow tired of being quoting machines for non-producing agents. The recent spate of agent contract cancellations (supposedly due to non-performance) also suggests a concerted effort to cut off such resource-hogging low producers. Furthermore, most carriers have a policy of assigning low volume agents under master agencies to reduce support costs. But are carriers really abandoning, or at least de-emphasizing, the full-service agent? Is it a trend? If so, what does it mean for Joe Agent?

Here’s my two cents:

• For some service providers with substantial sales and support resources, this channel-lite approach has a lot of appeal for the reasons stated. But how many of those are there? My feeling is it’s a small number.
• Top producing partners – no matter what type – aren’t going to suddenly lose carrier support. But the low-producing ones are probably not going to get a pass as we have seen in the last 12-18 months. So, resting on your laurels is not the best strategy. If you want to do this part-time, find a good master to shield you from carrier cuts. Or use a carrier or master with auto quoting tools as much as possible to fly under the radar a bit more.
• Savvy customers are going to seek out multicarrier bids, keeping some agents in the “trusted adviser” chair. However, agents would do well to make sure that their value is clearly demonstrated on an ongoing basis.

That said, I’d be interested in your thoughts. Is this a valid concern? If so, what can agents do?