Gaining an Edge in Commercial Insurance - Insurance Thought Leadership

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July 26, 2021

Gaining an Edge in Commercial Insurance

Summary:

The biggest insurtech opportunity lies in comparative rating for commercial insurance, following the progress in personal lines.

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Sometimes it’s difficult to see the trees of opportunity amid the forest of competition. This is especially true for carriers looking at commercial markets as the U.S. emerges from the grip of the COVID-19 pandemic.

Despite the insurance industry’s overall surge toward digital transformation, technology also has the ability to substantially influence the competitive landscape. Carriers have huge opportunities to harness the power of data, optimize distribution management and advance the agent experience in commercial lines. Those firms that do will likely open a gap that will last months, if not years, and potentially create a significant boost in share-of-market.

Comparative rating

The biggest immediate insurtech opportunity lies in comparative rating for commercial insurance. On the consumer side, comparative rating has revolutionized insurance by enabling agents to generate rates from multiple carriers in minutes, with a few clicks of a mouse. This game-changing capability, however, is only beginning to reach the commercial segment. 

For independent agents, no third-party rating platform has yet scaled to provide the broad carrier access needed. As a result, most agents are forced to visit multiple carrier websites individually to generate competitive quotes. Each time an agent is presented with a policy opportunity, data must be entered and re-entered into each carrier’s quoting system. This one-by-one, manual data entry not only is inefficient and repetitive but also circumvents the agency’s internal Agency Management System (AMS). Agents can spend hours, even days, preparing customer quotes for coverage.

See also: State of Commercial Insurance Market

These inefficiencies affect carriers, as well. Industry research shows that, due to time constraints, agents typically present just three to four quotes to customers. Many carriers lose out. Some don’t enjoy top-of-mind awareness among agents for a particular risk; in other cases, agents consider a particular carrier’s website too difficult to navigate or, conversely, prefer other sites offering tools that make quoting easier. Where carriers land amid these issues can make the difference in millions of dollars in aggregate business each year.

Efficiency through automation

Solutions, however, are emerging from insurtech providers. Real-time, automated quoting platforms are simplifying the submissions process with systems that enable agents to auto-populate forms in seconds, directly from their AMS. Up to 80% of the typical commercial submission form is pre-filled, allowing agents to quickly generate quotes from multiple carriers.

Commercial quoting solutions can reduce the time needed to prepare small commercial submissions by up to 60%, with similar reductions in errors. Quoting time for mid-to-large commercial submissions are typically reduced by 25%, with overall quote times that are 50% faster—a major improvement in efficiency for agents and carriers alike.

Carriers can position themselves for success in this environment by engaging with comparative rating solutions from multiple insurtech providers and by investing in appetite, quote and bind APIs. This will position them for success when a market leader emerges because agents will no longer have to visit multiple carrier websites for a quote, and the probability that more carriers will get a look at every submission will increase.

Quoting solutions also offer new opportunities for wholesale business among managing general agents (MGAs). The world is changing, and lines of business are opening up for new risks, such as data loss and privacy. Carriers often turn to MGA wholesalers for these niche markets, and adding connectivity via rating platforms will create a more complete, self-contained, digital ecosystem that supports more lines of business while delivering greater value to all stakeholders.

Comparative rating for specialty lines will likely follow the initial success of rating for standard lines. Insurtech leaders will likely be the ones to drive this emerging opportunity between carriers and MGAs, especially in the early stages of development. Carriers that solidify partnerships with distribution insurtechs now will have a leg up as the industry slowly but surely evolves. 

Leveraging data

Distribution is another prime area of competitive opportunity. Especially in commercial lines, carriers can use distribution data to benchmark their pricing and commissions, be more strategic about selecting distribution partners and identify new markets and products. 

Through data analytics, for example, a carrier may find it can price up and still be competitive. Of course, the success of data analytics depends on multiple factors, including applying data in the right cases and creating an infrastructure that properly collects, stores, analyzes and applies digital information.

It’s time to evolve

To take advantage of the power of competitive technology, carriers should accelerate their investments in APIs for automated quoting. They should also solidify their partnership with insurtech providers that offer distribution solutions. 

The primary goal of insurtech is to improve efficiency in all its forms, from reducing time-consuming manual tasks to increasing knowledge of the customer and anticipating change. A major benefit for carriers, however, is the ability to get a leg up on the competition. Marketplace changes demand that the industry become increasingly nimble and flexible. Agility is a key competitive advantage.

Few, if any, carriers have pulled ahead of the pack in easing the process of quoting and selling commercial insurance. It’s time to seize the moment. A few trees may be obscuring the business view, but a good, insightful look will reveal a profitable path through the woods.

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About the Author

Sharmila Ray is head of carrier strategy, solutions and go-to-market at Vertafore. She is a financial services and private equity veteran with more than 20 years of experience in market research, product development and carrier growth.

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