Walmart made a lot of waves in the insurance world last week by announcing that its in-house brokerage unit, known as Walmart Insurance Services, would begin selling Medicare Advantage and Part D plans for the 2020 Annual Enrollment Period this fall. This understandably created concern among independent insurance agents that we would now be directly competing with Walmart for our clients, a position that clearly not many people whose name doesn’t begin with “Amazon” are anxious to be in. Indeed, there are very few who can compete effectively with Walmart for most products.
But there are a couple of factors that make Walmart insurance very different from other types of products they sell. Generally, Walmart only has one bullet in its marketing gun – low prices. If Walmart were to become an insurance carrier like Aetna, Humana, or Cigna, and begin underwriting their own Walmart branded policies and paying claims, it’s possible they might be able to offer lower prices on their policies because they would control the underwriting and premiums. But that isn’t what they are doing. Walmart is a broker (i.e., agent), and they are selling the exact same Humana, United, and Wellcare policies that every broker in the country has access to. That means you pay the exact same amount for your policy whether you buy it through Walmart or an independent agent, and thereby Walmart loses their one weapon – the ability to control price.
The other thing that makes insurance different is the basic economic difference between products and services. Walmart products are commodities – things that you can buy virtually anywhere. It doesn’t matter whether you buy your peanut butter at Walmart, Kroger, Dollar General, or Sprint Mart. It’s still the exact same peanut butter, and the only difference is how much you pay at the different outlets. Commodities is where Walmart steamrolls everyone. But insurance is not a product; it’s a personalized service. A good agent has to take the time to develop a relationship with you in order to thoroughly understand your needs and recommend the product that is right for you, even if it means a lower commission for the agent. Most insurance products also have varying underwriting requirements, and the simple fact is that a lot of applications that get submitted through Walmart will be denied because the agent either didn’t understand the client’s needs or have the experience to know which companies have the most favorable underwriting. You can’t just choose a policy based on a price tag, and insurance is a relationship business that can’t be run through the express checkout lane.
Products are easy, and Walmart is good at them. Services are hard and require time, experience, and relationships in order to be provided the way they are supposed to be, and Walmart is not good at that. When was the last time you got quality, personalized service at Walmart? Right, that’s what I thought. So while there will unquestionably be some people who find Walmart insurance compelling, they are almost certainly the same people who would never have gone to a quality independent broker anyway. Our business will always be built on personal relationships, trust, and expertise.
So, self-checkout insurance? I don’t think so.