Profitability is getting harder. Agencies, brokers, MGAs and carriers have seen major shifts in all aspects of their businesses over the past two decades – from what customers expect to how their competition operates. Distribution patterns have changed, mergers and acquisitions are increasing and automated insurance options are eating into margins. In addition, the globalization of insurance markets is becoming more evident every day.
Sound bleak? Yes and no. The fact is, the insurance distribution industry faces many of the same challenges as other industries such as retail and travel -- markets that have had to completely transform how they do business in the face of new customer expectations and nonstop innovation. The common denominator in meeting the challenge is data. More specifically, the answer is data monetization: the process of not only accessing the rich information inside customer and business data but also converting it into actions and business decisions that drive profits.
Customer data is quite literally an additional income source that every agent already has at his or her fingertips. And it can, with the right tools and organizational changes, be used immediately to increase revenues, margins and overall profitability.
Indeed, it’s hard to overstate the potential value of the data that already resides inside outdated agency management software. It represents not only billions of potential dollars being left on the table, but, for many brokers, it is also the only path to survival.
The technology lockbox
Why the insurance industry lags behind others in data monetization is largely a matter of culture and technology. People-oriented and traditionally built on relationships, brokerages have been slower than other industries to adopt and subsequently upgrade their agency management systems. As a result, many agents still use legacy software that houses data but does not then release it in usable form.
While growing competition and shrinking commissions are driving insurance agents to lean harder on technology to compete, those agents will also tell you it’s next to impossible to extract useful data from their systems -- let alone glean value from it. Principals can’t see what’s going on with their producers, producers can’t see opportunities for growth and customers aren’t getting the value they expect. The unfortunate fact is, data alone can’t tell you what products to recommend or which clients to up-sell.
Legacy software is, in fact, a monumental barrier to extracting and monetizing data. Few agents are trained to tap into this vast income-generating resource. Executive teams have too many complex third-party reporting options from which to choose. And there is no defined go-to-market strategy to take advantage of this data even if it is extracted.
See also: Why Data Analytics Are Like Interest
Automating data monetization
Insurance professionals need the ability to turn data into revenue
through all areas of the business, including sales to new and existing customers, operations, policy management, claims and customer service. Brokers must be able to easily, quickly and confidently understand what data means and is telling them to do.
Dashboards and reports must reflect the current state of the business to power better decision making. And brokers must be able to access the system and data any time and from any device (and offer the same experience to their clients).
The gold standard for data monetization is end-to-end software that can manage daily operations AND automatically provide insights into where agents/brokers can leverage their current customer base to increase profits and margins. It must turn client purchasing histories and behavioral patterns into revelations and opportunities for the broker to deliver value to the customer.
Data monetization in action
What does the data monetization process look like in everyday agency practice? Here are some examples:
- Agents know in real time, on every account, where the immediate upsell and cross-sell opportunities. The system recommends these opportunities based on customer industry, size and other factors.
- The system identifies which customers are bleeding agency money and which are profitable, so agents can see precisely how a given renewal would affect the bottom line.
- The system can instantly slice and dice an existing book of business to identify the best leads for a new line of business. It could then assign leads to the right sales person to manage the funnel and provide metrics on conversion rates and other KPIs.
- It would offer real-time analysis of:
- How different business lines are performing
- Which customers are profitable, break-even or unprofitable
- What is the total income a customer brings vs. the number of staff hours and resources the customer requires
- What is a customer’s claims history relative to policy income
- Time, resources and effort invested in the insurance portfolio relative to actual revenue
Ready access to these kinds of answers can be used to guide renewal strategy, pricing decisions and management of staff’s time and resources toward the most profitable outcomes.
While adopting the right technology is vital to data monetization, it must also be accompanied by cultural changes:
See also: Is Big Data a Sort of Voodoo Economics?
Turning data into revenue and a reshaped customer experience
- Staff must have incentives to follow up and make sure revenue opportunities are closed successfully
- Operating procedures must be updated to clarify new rules and how they are to be followed
- Management must follow up weekly for the first few months of implementation
Insurance is a customer-centric business
at its core. However, many agents are not living up to their customers’ expectations when it comes to the experiences they deliver. By adopting a business and technology approach based on data monetization, agents can use real-time customer intelligence to deliver more tailored advice and generate bottom- and top-line value. It’s all there in the data – and it’s time to unlock the box.