I disagree. I do business with a number of traditional agency owners and their business is up. I personally would never, ever buy insurance from a direct source without an agent, having that agent there to give you advice and help you through a claims process is just too valuable. In the end, when you compare apples to apples the savings isn't much.
Why would Allstate, a traditional agency centered company, have bought esurance if the agency model was dead? Wouldn't it have been the other way around? Direct internet sales is a niche market, very small % of the policies overall that are purchased. By the virtue of the internet...it looks bigger than it is.
Its just like my business, I'm in the real estate business and people are always saying some thing on the internet is going to come along and do us in, and it just doesn't work that way. Sure the internet changes how we do business, but it doesn't replace us. Same is true in the insurance industry.