Commercial lines insurers have endured their fair share of ups and downs since COVID-19 was declared a global pandemic over two years ago. And, through the course of 2022, geopolitical conflicts and inflation have rocked economies, leading to further uncertainty about the stability of markets worldwide. Undoubtedly, insurers are planning for expected and unexpected events that may disrupt their businesses in the New Year, but are these plans shifting how insurers approach innovative, transformational technologies?

For years, SMA has been tracking insurers' plans and progress in transformational technologies in commercial lines and is revealing new insights in the recently published report, "Transformational Technologies in P&C Commercial Lines: Insurers' Progress in 2022 and Future Predictions." The report examines 13 transformational technologies and their impact now and in the future. What is evident is that investments in digital, artificial intelligence and connected world technologies remain top priorities for insurers, but data shows they are being strategic about how they accelerate certain technologies.

One example of a technology that has high activity around it moving into 2023 is machine learning (ML). Eight in 10 commercial lines insurers are investing in ML today, mainly via predictive models, and insurers increasingly recognize its foundational support of other AI technologies and applications. In fact, at this pace, ML is expected to become embedded in nearly every aspect of the insurance business soon. Computer vision is on a similar trajectory of becoming a revolutionary technology and is slowly gaining traction within commercial lines. Although some insurers have progressed with computer vision in the past few years, most remain in the beginning planning stages. But given how valuable aerial imagery is for claims and underwriting, solutions based on computer vision are expected to become standard and mandatory within the commercial property segment.

See also: The Risks of AI and Machine Learning

Insurers are also keeping a pulse on technologies that may be further out on their strategic planning horizon but have potential long-term implications. For example, autonomous vehicles (AV) could transform many aspects of our lives, and tests are already underway in controlled, campus-like environments. There are vehicles on the roadways with various levels of autonomous features. Insurers' activity in AV today is very low – only 18% have plans moving into 2023 – but it is still critical for commercial lines to fully understand the nuances of these vehicles and the risks they may present.

Although some insurers are practicing moderation in their activity and investment in some technologies, it would be imprudent to hold back plans and risk falling behind peers. The rapidly advancing technological environment and the dramatic changes wrought by the seemingly never-ending pandemic indicate that transformational technologies demand constant monitoring. Insurers must continually renew and review strategies to prioritize and address business problems and new opportunities.

For more information on commercial lines insurers' plans for transformational technologies, see SMA's recently published research report: “Transformational Technologies in P&C Commercial Lines: Insurers' Progress in 2022 and Future Predictions." Watch for a companion report on personal lines that will be released in the near term.

As focused as the South African insurer Discovery has been on breaking new ground with lifestyle-oriented, incentive-driven products and supporting them with a superior customer experience, company officials came to realize that something had to change for those products to fulfill their promise. 

“Our existing processes generated complexity, high costs, significant inefficiencies and high volumes of mundane administrative tasks. We needed to make a change and transform the services we provide to our people,” Kammy Sing, group head of people operations at Discovery, recounted in a recent blog post.

Mission accomplished. Today, the company, which employs about 12,000 people, reports significant improvements in employee productivity and satisfaction as a result of efforts to enhance the employee experience. And that’s translating into success for products like the behavior-based Vitality Drive automotive offering, according to Discovery. The insurer reports that it has seen a sharp reduction in customer accident frequency with the product, along with claims savings, improved loss ratios and a significant increase in good drivers on the books, all while paying out the equivalent of $70 million in incentives to customers.

The insurance industry’s struggles to attract and retain people to replace an aging, eroding employee base are well-documented. But as companies like Discovery have learned, it takes the right people to sustain innovation, stay relevant and grow the bottom line. Here are six creative approaches that are enabling insurers to uncover, connect with and hold on to top talent: 

1) Position insurance as an “in” career path.

“Insurers have a compelling story to tell,” PWC asserts in a 2022 report. “If they open up and start promoting themselves and the industry, they’ll put themselves in a strong position for growth, led and supported by intelligent and capable people.”

The story insurers should be telling is one that resonates with Millennials and Generation Z and rebrands a career in insurance. The goal should be to shift the perception of insurance as a staid, impersonal industry, to one that gives employees an opportunity to be a positive force in peoples’ lives and the community by protecting them from risk and serving them in times of need. Appealing to people's entrepreneurial sensibilities, with pathways for adjusters and independent agents to run their own business, should also be part of that rebranding.

They should promote the opportunity to participate in exciting, higher-risk/higher-reward startup-type opportunities with digital spin-off companies like MassMutual’s Haven Life. How about offering people the chance to build new business ecosystems and lifestyle-oriented products centered on, or involving, insurance? These are the kinds of opportunities that appeal to people who want to ply their skills in the digital economy and, in the process, help to remake an entire industry.

According to the Boston Consulting Group, 2020 was the first time insurance employees included company values among the 10 workplace attributes that they care about most. So, as part of the rebranding, insurers also need to demonstrate and tout their ability to connect people to a higher purpose. 

2) Cast a wider net.

The pandemic has helped usher in an era of recruiting beyond borders, as access to talent is no longer restricted by geographical proximity to a physical office. To take advantage, insurers first need to zero in on the skills they need to recruit to execute their business strategies, then find ways to tap the broader talent pools to which they now have access. 

Besides expanding the scope of their recruiting efforts geographically, companies can use new talent sourcing models to find the right people. Offering the opportunity to work for a multi-company, multi-industry ecosystem with an insurance industry component could be compelling to younger members of the workforce. So could a shared-talent type of model, where someone could have a chance to work for a partnership between an insurer and a fintech company, for example.

Insurers also need to consider new models for attracting and building talent internally. Chubb, for example, launched Chubb Academy to recruit a diverse range of younger talent from across Continental Europe, with no requirement for a university degree or previous insurance industry experience. The program is designed to develop people via a two-year program in property and casualty commercial insurance, with the opportunity to move elsewhere within the company. 

See also: The Staffing Crisis in Insurance

3) Reel them in with a superior recruiting experience.

A highly engaging, transparent and easy-to-navigate recruiting experience is a must for insurers to attract the right talent. Recognizing that hiring processes were lengthy, expensive and risked putting off talented candidates, Discovery reinvented certain key internal and external-facing aspects of the hiring journey with intelligent technologies like robotic process automation (RPA) and virtual assistants, which resulted in a 25% reduction in time-to-hire. 

4) Be progressive and flexible with hybrid work.

During the pandemic, according to BCG, 75% of insurance employees worked remotely some or all of the time (well above the 51% cross-industry average); 94% said they prefer to work remotely some or all of the time. Providing employees with flexibility as to when and where they work not only can help insurers attract and retain talent, it can also reduce costs.

5) Provide a superior employee experience.

Providing an empowering and unique employee experience is a must in today’s talent-constrained world. And while robust benefits and flexible work arrangements are a good start, it’s important that insurers build on that by arming employees with the latest digital tools to excel in their interactions with clients, and in their collaboration and communications internally. The opportunity to be hands-on with artificial intelligence, machine learning and other emerging technologies is highly appealing, particularly to younger members of the workforce. 

In the BCG survey, insurance workers ranked good relationships with colleagues as the most important facet of their job. So, if companies are sourcing talent and assembling teams from geographically diverse areas, they must have tools that enable collaboration and communication from anywhere. 

Insurers also can give themselves an edge by providing superior experiences to their external workforce, such as by providing tools that streamline commission processing and licensing for agents. And behind all this, insurers also need to be hyper-focused on the employee experience, using tools to monitor and manage that experience across every level of the organization.

6) Offer opportunities for mobility and upskilling.

People want the ability to build new skills, take on new challenges and find interesting new pathways within a company. To cater to those sensibilities, “prescient companies are creating rotations within and across functions, especially at junior levels, to create more diversity of experience,” PWC observes. “They’re giving individuals exposure to different parts of the business — including leadership — and even arranging temporary gigs outside the company at start-ups (including insurtechs). The end result is a larger pool of internal talent that can be plugged in when and where it’s needed.”

In early 2021, AXA UK launched a data academy to upskill workers across all its insurance divisions, exactly the type of creative approach insurers should be taking to ensure they’re well-positioned from a talent perspective to thrive in a fast-evolving business environment. 

Legacy strategies for risk management, such as spreadsheets, have retained a stronghold among risk managers in lieu of newer, technology-based solutions like RMIS software. According to a 2018 poll, 60% of risk managers still use spreadsheets, while a mere 10% rely on a fully integrated data management system. This is a testament to the demanding workload risk managers face.

In today’s highly complex risk landscape, spreadsheets can no longer carry their weight in the way they might once have. Instead, risk professionals are left slogging through the administrative burden of maintaining numerous spreadsheets and jeopardizing accuracy in the process.

Instead, industry professionals should look forward to newer solutions that can improve efficiencies with less manual process and provide data analytics and insights.

The Role of Spreadsheets 

Spreadsheets were originally designed to centralize data and serve as a quick look-up tool. While this once aligned with risk management practices, risk management as a business function has since expanded its role under the scrutiny of both internal and external parties. This is compounded by the fact that the risk landscape has changed significantly in the last decade alone.

Today, spreadsheets are holding businesses and their risk management teams back.

Cost of Using Spreadsheets in 2023

Relying on spreadsheets can be risky for the following reasons:

• Reliance on manual processes: Manual processes are time-consuming and prone to human error.
• Workflows divided between departments: Departmental barriers and data silos impede progress and collaboration and can result in more file errors and redundancies.
• Limited analytics: New outputs and changes often require custom programming and can be undermined by even one human error in a formula or calculation. AI-based RMIS software helps anticipate risk through predictive modeling, instead of reacting after the fact.
• Limited room to grow: Legacy systems were not built to support the risk management and claims administration process. As a result, these systems will always have limitations that prevent users from getting ahead of the curve.

See also: It's Time to Rethink the Spreadsheet

The Benefits of Using a Risk Management Platform

Using technology-based tools, companies can improve the efficiency of their insurance and risk management programs.

One major automotive brand, which I'll refer to as “Company A,” has seen these benefits first-hand. Within the past year, Company A began digitizing its insurance process. Prior to doing so, the company’s insurance and risk department relied heavily on spreadsheets with different sources of information, as well as the nuanced knowledge of individual employees to share where to find specific data, its traceability, what processes exist and the history of current information. Realizing the inefficiencies and room for error this created, Company A determined that it needed to capture all the relevant information from different files and platforms and get it together in one system – an RMIS software.

As a result of its new software’s organization and streamlining capabilities, the company’s insurance and risk department was able to better manage and apply its existing information. Previously, Company A’s  claims management was conducted mostly in-house and with portions conducted by third-party vendors, leading to a decentralized system. This process was the same for policy management and was often conducted across multiple spreadsheets. Now, the spreadsheets have been consolidated into the new risk management software, allowing Company A to automate specific evaluation processes.

With an RMIS system and application programming interface (API) technology, this company can collect information more effectively and quickly present that information to insurers and other stakeholders in new ways. With a trustworthy, efficient and fast system, the Company A team can spend more time on risk handling instead of administrative tasks. 

Another example of successful spreadsheet to AI-based insurance and risk management technology implementation is NIP Group. With an extensive amount of data across more than 25 niche industries, the company's complex claims requirements necessitated a solution that addressed unique needs and provided a level of efficiency that spreadsheets were not allowing.

By bringing in AI-based software to help manage data and claims management, the company was able to create a streamlined implementation process with secure data loading and an extract/load/transfer (ELT) tool for automation. This included the ability to customize the data hierarchy based on business needs instead of in a more linear fashion, as is traditional with spreadsheets.

Now, rather than varying spreadsheets, NIP Group can manage different lines of coverage across various industries and entities across one, singular system. Prior to using an AI-based insurance and risk management system, NIP Group was only able to develop and use a small portion of the information it needed. Now the company can see the bigger picture and save significant amounts of time. 

In addition to helping the company streamline internal reporting and file management, it now has more capacity for managing reporting for carriers and tower insurance company groups and can easily maintain compliance with state banking and insurance annual reports.

Benefits of Using Risk and Claims Software

With newer, AI-powered RMIS tools on the market today, relying solely on spreadsheets for data input, tracking and analysis is a legacy management method that comes with its risks – human error and poor use of risk managers’ expertise.

By taking advantage of the right software, companies can better secure their data, automate processes and remove the likelihood of errors – resulting in cost and time savings.

Insurers must keep pace with the constantly evolving risk environment. That means keeping pace with climate change and growing catastrophic event losses; the explosive growth of intangible assets and the challenge of valuing those assets; and the increasing exposure of their portfolio to cyber risks.

Despite changing and challenging conditions, some carriers thrive and prosper – while others stagnate. Almost any seasoned insurance executive can tell you a story or two about how a once-strong carrier devolved into obsolescence. The sum of the story is typically that those that wish to prosper must find new opportunities in an evolving environment – and new ways to innovate.  

The idea that innovators thrive is based on more than just anecdotal evidence. There are detailed analyses that show how and why innovators thrive in the insurance industry.

According to one of these, a recent study by the consulting firm McKinsey, “insurance market shapers,” those that boldly innovate, create significantly more economic value than their peers. According to the report, on average, insurance “market shapers,” innovators in the top 20% of the market, create profits up to 20 times the industry average.

How are these innovators making their mark today? There are certain characteristics, but one area is abundantly clear:  Companies winning the competitive race use advanced data and analytics to select, underwrite and price risks.

Historically, carriers have achieved profitability by ensuring their fundamentals were solid, by running an efficient operation, by tightly managing their portfolios and by mitigating portfolio risks. However, a whole new frontier for competitive differentiation is opening up as a result of the evolution of analytics, data and risk models. In fact, data and analytics likely will be the key to an insurer’s success in the future. 

Today, however, the vast majority of insurers invest their resources and time managing the technical issues related to data and analytics: (1) how to tap into the needed data, (2) how to build risk models and (3) how to integrate analytics and models into workflows. Too often, they sacrifice a focus on the more strategic aspects: determining where to apply analytics in their business – and how to differentiate their data mix and models from their competitors to create strategic advantage.

Best-in-class insurers tend to master three key aspects of data and analytics: 

1. Data Strategy 

First is a focus on data strategy, specifically data acquisition strategy. Insurers are having trouble keeping up with the rate at which data is growing. It is therefore essential that your organization determines how it will acquire, process and integrate data at the speed of business. Without knowing (a) what data you are focused on leveraging, (b) where you are getting that data and (c) how you will incorporate that information into your workflow or model, you are really playing catch-up.  

Make sure you are prepared to integrate all types of new data and information: IoT data for residential properties from devices like Ring, Alexa and Google Home; telematics data from personal automobiles and commercial trucking; and IoT and systems data from commercial businesses.

Data availability will continue to evolve. New data will be brought to market when all kinds of legal, privacy and access issues are resolved. You will be better positioned for success if your organization and systems are prepared to handle this data and pivot.

Cloud-based APIs provide the capability to readily use data as it becomes available – to integrate that data as soon as it is available into core workflows.

See also: How to Unlock Data--and Profitability

2. Next-Generation Analytics and Risk Models

Most insurers are now commonly using analytics models in risk selection and pricing. There are varying degrees of proficiency and sophistication, but the insurance market has widely adopted these technologies.

Where insurers most often struggle with creating models is in finding and refreshing the right data for their model(s); regularly monitoring and adjusting existing models; innovating and testing new models for new business applications; and efficiently managing the entire process to free data scientists to focus on core/strategic priorities.

Most insurers are well aware of the problems in getting the right data into the models in a timely manner. But they are not aware that there are solutions and consultants available to solve this technical problem for them in an efficient and cost-effective manner. Nor are they highly focused on the other challenges of managing and improving their risk models on a regular basis – nor on creating new models in an agile and rapid way. 

Being prolific in experimenting, testing and innovating with risk models across risk selection, underwriting, pricing and claims will eliminate significant pain points and present unimagined opportunities. In this day and age, your organization should have this as one of their primary business priorities.

3. Embedding Analytics into Workflows

The biggest point of failure for firms is in actually operationalizing risk models – in integrating analytics and risk models into workflows and processes across their insurance lifecycle. 

If data, analytics and risk models are not innovated, adopted and put into the hands of those who need them when and where they need them – of what use are they?

Insurers are often proud of their risk models. The models may often be unique and a differentiator for their firm. However, most insurers today simply stall or do not integrate these models into workflows where they can be seen and used by underwriters and adjusters. Yet again, there are solutions and consultants that are adept at handling these technical details at a cost that is well worth the resulting innovation.  

See also: How to Benefit From the Power of Data

Driving From Systems of Record to Systems of Insight

Insurers that want to own the future must understand the strategic importance of these critical steps. A smart approach is to focus on the strategic direction of your data and analytics program – and the strategic projects and models critical to that program – and outsource the technical challenges of acquiring and integrating data and analytics into workflows.

Modern analytics can help insurers more accurately price risk, capture and grow premium, optimize claims outcomes and enhance customer loyalty. Providing unique and embedded insights when and where they are needed empowers your organization to adapt to an ever-changing world.

Each new year brings new challenges to every industry. In 2023, not only are insurance agencies still dealing with the fallout of the pandemic, but they're also competing with personal investment struggles and a pending recession. Here are five challenges insurance agents will be facing in 2023:

First, agents will need to adapt to a post-pandemic sales environment. The majority of people who were selling life insurance prior to COVID met clients face-to-face and will now have to revisit this sales tactic in a post-quarantine climate.

Many insurance agents have switched or attempted to switch to selling over the phone and over Zoom because of the post-pandemic climate. With a new sales cycle developing, agents will need to consider what this adjustment means for them. To me, it often means one of these three things has to happen:

1. Agents will have to understand that they're going to need to work harder and be willing to travel more. If agents choose to continue to sell in person, which many do, they will have to understand there may not be many leads available in their backyard and should prepare to travel a number of hours to any given client. With the increasing ratio of people requesting services online, there is less dependency on direct mail leads.
2. Agents will have to spend more time and effort on leads and lead strategies.
3. Agents will have to train and get good at selling over the phone or virtually.

The second challenge agents will face in 2023 is the changing economy. Politics aside, we're in a recession. Agents have to understand that when people buy life insurance, they buy it for one of two reasons.

1. They buy it because things are going really well, and they have extra money.
2. Or, they buy it because things are tight.

When personal and financial situations are tight, clients tend to fall into a scarcity mindset. Clients start to think about their families and prioritize how much they have put away in case something happens to them. People in this state of mind are filling out forms for a reason: They are asking agents for help because they're thinking about how little they have. Agents in 2023 are going to have to switch to that mindset.

See also: Cybersecurity Trends in 2023

The third challenge is adjusting to the new technology that's available. It's essential to an agent to get in line with everything being instant, adapting with technology and understanding its value. If agents don't do this, they'll get left behind.

The fourth challenge for a sales agent is truly monitoring their businesses. Agents need to understand that in the insurance industry, business advanced payments can create issues later on if not managed properly. When an agent writes policies for clients, it's under the assumption the client will keep the policy for the full term. However, if the client cancels the policy in the first 12 months or so, there are chargebacks to the agent. Monitoring your insurance business, and doing a good job of selling, will help agents through these moments.

Tip: Agents should focus on selling the value of life insurance, not necessarily just the price. If agents sell only on price in a really good market, the consequences are not as severe. However, if agents sell only on price in a tough market, they'll lose more business and have more chargebacks.

For insurance agents, the final challenge for 2023 is staying focused on building their businesses. Most insurance agents don't want to only be insurance agents, they also want to build a team. The biggest challenge is understanding this might be the greatest time ever to recruit people. Recent polls are showing that nearly 70% of employed individuals state they need a second income to make ends meet. That means there's a need for new opportunities, and almost everyone is a candidate for an agency team. The challenge for agents is simply identifying that this is the case, then going out in the field and recruiting as hard as possible.

The demise, or at least the irrelevance of, independent insurance agents has long been predicted, probably going back to the 1960s. Captive and direct response agency companies will rule the consumer, the pundits declared. Even independent agency carriers like The Hartford hedged their bets, doing deals to sell direct via affinity groups like AARP. In the late 1990s, pundits predicted that everyone would get their insurance coverage via a dot.com. And, more recently, the anti-agent noise has accelerated within the insurtech sector. 

Everyone needs to calm down.

Independent insurance agents and brokers are alive and well — and expanding their numbers. Even the “just OK” firms are doing quite well, thank you.

Independent agents have been around since the 1800s. The so-called Yonkers Case, in New York, in 1904 affirmed the right of these agents to ownership of their renewals and to place a customer’s business with any carrier they saw fit.

For a long time, local independent insurance agencies pretty much looked the same. They were mom and pop offices on Main Street all across the country. Today the entire system has evolved into a wide variety of models. COVID-19 sped up some of the changes that were happening anyway. 

But make no mistake: Independent agents are as relevant as ever, and they have opportunities everywhere. Even the mom and pops.

What has enabled agents to thrive? What drives those strong valuations and volumes of agency merger and acquisition (M&A) transactions? And why are the terms “agency distribution channel” or “system” no longer valid or all-encompassing? 

I chatted recently with insurance industry pundit, author, speaker and historian Brian Sullivan, who’s been covering personal lines marketplace issues for a long time. Coincidentally, he and I were working on talks we were soon to deliver at different agent conventions.

To begin with, we agreed that we all should rethink the terms independent agency “system,” “channel” and “distribution.”

See also: When Captive Agents Go Independent

Variety of models

The agency distribution system actually is a diverse collection of channels. Imagine a huge “insurance farm” generating hundreds of billions in premium revenue, with multiple silos. The agents are all on the farm; they’re all providing some form of risk management and insurance advice. But each occupies only one area of the larger farm. 

That diversity is a strength. It is why agents have maintained and even grown market share in multiple lines of insurance business. 

The models include:

• Large, multiline agents
• Small, niche, expertise-driven agents
• Commercial or personal lines-only agents
• Franchise agents (e.g., Brightway)
• New, marketing-focused agents trained at large captives
• Specialized niche and program agents
• Commercial specialists that have evolved into wholesalers, managing general agents and managing general underwriters
• Online-only or virtual agencies (no physical offices)
• Semi-captive agents (Erie, Mercury)
• “And, yes,” Sullivan told me, “old-school agencies with family member principals and Main Street storefronts that sponsor Little League teams!”

Growth of aggregators

Another trend, which started in the 1980s, has been the growth of agency aggregators. These networks, alliances, clusters, etc., provide back-office tech and service support, marketing and increased commission dollars for affiliated agencies. These organizations have grown rapidly in the last 10 to 15 years.

Overall, the number of independent agencies has increased. In 2022, the estimated total number of independent property-casualty agents and brokers in the U.S. stands at 40,000, an increase from 36,000 in 2020. It’s pretty amazing that we saw a growth of 4,000 agencies during the pandemic.

M&A activity continues to affect the agency channel. But the increase in the number of agencies is driven by small agencies, as agents continue to establish their own agencies or move from the captive to independent space. In fact, State Farm is the only major captive agent company left. The other biggies, Nationwide and Allstate, have gone independent.

Back to the farm analogy: Just as farmers have embraced technology to increase their harvest yields, smart independent agents are investing in digital marketing, efficient CRM systems, consumer apps, etc., to increase their harvest.    

See also: A Heyday for Independent Agents

Employment branding is key

These various distribution models have a bright future as employers. Emerging professionals in their 20s (Gen Z) like a stable work environment, giving back to the community, flexible schedules and measurable results. As consumers, they like shopping local. They are drawn to bespoke things like craft beer; thus, they appreciate tailored financial advice — maybe more so than boomers, Sullivan reasons.

But can this future talent find their local agencies? Especially some of the more invisible models noted above that lack a storefront presence? Finding qualified staff and marketing continue to be key agency challenges, according to the 2022 “Agency Universe Study,” published by the Independent Insurance Agents & Brokers of America. More than four in 10 of agents find it challenging to find and screen job candidates with strong potential. Overall, this was the No. 1 challenge identified by agents.

That is why agents need to market their internal brands, and the culture they can provide, at least as much as they market products and services. It will behoove agency owners to restock their talent with younger, diverse workers to match what’s happening to their customer base. Most have been challenged to do that for decades, but the population shift makes this more urgent today.

The average agency principal is 54 years old, and 17% are age 66 or older, according to the Agency Universe Study. But inclusion has gained some ground. In 2022, 47% of agency principals are women, a gain from 42% in 2020, and 83% are white, down from 88% in 2020. Medium-sized and larger agencies are especially likely to have male principals or senior managers.

While it appears to be under the radar, the retail independent agency is a fantastic business. Even average firms crank out a nice profit. The highly profitable ones already have been bought, or they’re buying others. Private equity, aggregators and larger agencies have been buying independent agents at a feverish pace, although their pace will slow with higher interest rates and reduced available capital.

In my 40 years of working in this business, I’ve never met a destitute independent insurance agent.

Some agents are just smarter than others, Mr. Sullivan and I have agreed.

With the New Year dawning, ITL Editor-in-Chief Paul Carroll sat down with Aimee Kilpatrick, chief operating officer at Cadence Insurance, a division of Cadence Bank, to ask about the large regional broker's plans for 2023. As you'll see, she describes an innovative way that Cadence is tackling the industry-wide talent shortage, which the emerging, hybrid world of work has made even more complicated. She also describes how clients' needs have changed since the start of the pandemic.

ITL:

At the end of a year and beginning of a new one, people tend to set agendas. So, I wonder: What is the biggest thing you'll be thinking about doing with your agent workforce in 2023?

Aimee Kilpatrick:

The first item is probably one that you hear, really, from anybody in our space, and that's around talent. We just can't find talent, train them and help them develop fast enough. We very much have a talent shortage in our industry. So, as a firm, we have a lot of efforts under way.

Some are things we've been doing for a while, while others are new. We announced a partnership earlier this year with the University of Mississippi that focuses on providing opportunities for students at HBCUs [historically Black colleges and universities] in Mississippi. We're very much committed to figuring out how we can get people in the pipeline, attract them and then support them through training and development.

On the other side, in these last couple of years that have been so crazy for the whole world, our business has evolved. What our clients need today may not be what they needed a few years ago. We have to figure out: How can we best meet their needs? What can we do to empower our producers and client-facing teams to deliver everything a client's asking them for?

ITL:

I'd love to explore both of those points. Let's start with the talent piece. How does our new world of hybrid work or even remote work fit into your talent plans?

Kilpatrick:

That new world of work complicates things. Historically, people coming into the business learned partly by immersion. You learn a lot by sitting in an office and hearing what the person next to you is dealing with. They can pull you in and explain a scenario.

So, we do a lot of what I would call classroom training, where an instructor goes through technical elements and coverages, but the immersion piece isn't there like it was pre-COVID.

We understand that people want flexibility. We also want them to learn and to be exposed to our business. So, there might be a period when we really want you in the office because that's how we can best train you and introduce you to our culture. Then, once you get a little bit of experience under your belt, we can introduce a hybrid schedule that allows you to do some things on your own from home, or wherever, and then come back into the office periodically throughout the week as well. It's not perfect, but because of the talent shortage, employers have to figure out how to meet people where they are.

ITL:

You mentioned the HBCUs, which certainly sound like a great source. Are there other places you're looking for talent?

Kilpatrick:

Traditional college/university insurance programs have been a long-standing pipeline into our industry, as are finance, marketing and other traditional business majors. The HBCUs are a unique opportunity because none in Mississippi has an insurance minor certification or any sort of path to insurance. The program with Ole Miss provides that path without taking the students out of the HBCUs they’re attending.

Aon has done an amazing job of being trailblazer on apprenticeships, so we have learned a lot from them and are trying to explore the opportunity. We’ve gotten really good at teaching people or leaning on The Institutes and other resources to help us teach them. We just need the talent to come to the table, and that's where apprenticeships create a lot of interest.

ITL:

My time at the Wall Street Journal was largely spent covering information technology, and I wonder what role it can play in getting people up to speed quickly.

Kilpatrick:

I think there are two elements. One is tools like Google—as well as other online resources. People can use these tools to get a quick answer. Before, you had to go look it up or even research it (in a book!). Those resources mean we can get people up to speed faster than we ever could before. There's also a technology-driven path to learning, like we're doing with The Institutes. We have a way to touch base and make sure people have mastered the concepts. Learning can be more interactive. Gamification is certainly a thing, too. We're trying to figure out how to leverage all our resources to help people learn and retain things.

ITL:

To turn to the client side of the equation: You mentioned that you're seeing their needs change. What are one or two big things you're going to address in 2023?

Kilpatrick:

In the employee benefits space, our clients are asking for a lot more help on communication with their teams, their workforces. They're especially interested in health resources, whether that be mental health or physical health. They want help educating employees on how to stay healthy by using all the resources the employer is offering them. That’s one area that's become more important and that needs to be handled differently than pre-pandemic, before the hybrid workforce. You used to be able to get everybody in a room once a month and talk to them, but you don't always get the luxury to do that these days.

Clients also look to us to help them make their purchasing decisions. And while every client is different, we need to provide them with strong tools that help them with the data behind some of the decisions they’re making. That could be something as simple as: Okay, I'm a general contractor in southern Louisiana, what are my peers doing? What limits are they purchasing? That's a simple example, but it shows the kind of thing people want to know to make sure they're in line both with the market and with the company’s culture and risk appetite.

ITL:

Perfect. Thanks for taking the time. I hope 2023 works out great for you and Cadence.

About Aimee Kilpatrick

Aimee Kilpatrick, CIC, CRM, is executive vice president and chief operating officer of Cadence Insurance. Cadence Insurance is one of the nation's largest independent insurance agencies, consistently ranking among Business Insurance's Top 100, including achieving a ranking of 43rd in 2022 and employing close to 750 insurance professionals.

As part of Cadence Bank, Cadence Insurance is the second-largest bank-owned insurance agency in the nation. As a member of Cadence Insurance’s executive team, she is responsible for helping to set and guide the strategic direction of Cadence Insurance as well as implement key initiatives and strategies.

Passionate about organizational development, Aimee launched BXSI-University, an in-house training program that educates new employees and supports their growth and success. Since its inception in 2012, more than 400 employees have participated in the program. She remains active in the insurance industry, serving as immediate past chair of the National Alliance for Insurance Education & Research’s CIC Board of Governors, chair of The Institutes’ Insurance Broker Advisory Board, a member of The Council of Insurance Agents & Brokers Future Advisory Committee, and member and past chair of CIAB's HR Working Group. Additionally, she is a member of Troy University's Risk Management and Insurance Advisory Board and Gamma Iota Sigma’s Advisory Council.

Aimee holds an MBA from Louisiana State University and a BBA and BA in international business from Mississippi State University. She is a graduate of the Baton Rouge Business Report’s Leadership Academy and the Ole Miss School of Banking. Aimee holds the Certified Insurance Counselor (CIC) and Certified Risk Manager (CRM) designations. Additionally, Aimee is a sustaining member of the Junior League of Baton Rouge.

As hot as the world has been in the past couple of years, we may actually have had it easy because La Niña has kept the equatorial waters in the Pacific cooler than normal and helped lower temperatures around the world -- but that is expected to change this year as the warmer, El Niño weather pattern takes over in the Pacific. 

Buckle your seatbelts. 

As an article in Wired explains, La Niña is expected to end sometime this spring, having lasted a near-record three years, and give way to El Nino. "When it does," the article says, "the extreme weather that has rampaged across our planet in 2021 and 2022 will pale into insignificance."

A global temperature increase of 1.5°C above the 1850-1900 average is generally treated as a break point in climate change, above which major danger lurks. Wired says that in 2021 the figure was 1.2°C, "while in 2019—before the development of the latest La Niña—it was a worryingly high 1.36°C. As the heat builds again in 2023, it is perfectly possible that we will touch or even exceed 1.5°C for the first time."

The article adds: "I wouldn't be at all surprised to see the record for the highest recorded temperature—currently 54.4°C (129.9°F) in California's Death Valley—shattered. This could well happen somewhere in the Middle East or South Asia, where temperatures could climb above 55°C [131°F]. The heat could exceed the blistering 40°C [104°F] mark again in the UK, and for the first time, top 50°C [122°F] in parts of Europe."   

The result would be severe droughts in many areas, slashing harvests and exacerbating food shortages at a time when the Russian invasion of Ukraine has already created concerns about grain supplies. Civil unrest could follow.

In the U.S., the article says, the most affected region would be the Southwest, where a 22-year drought already threatens "lakes and dams [that] provide water and power for millions of people in seven states, including California. The breakdown of this supply would be catastrophic for agriculture, industry and populations right across the region."

Because La Niña tends to limit hurricane development in the Atlantic, its disappearance could facilitate more tropical storms after a year that saw surprisingly few. The storms could also be more powerful than hurricanes in previous years because they will pull their energy from ever-warmer surface waters. The storms could also be wetter, because warmer air can hold more moisture. We saw what happened this year with Hurricane Ian, which gathered an enormous amount of energy and water just before making landfall in Florida.

Not all effects with be negative, of course. For instance, in my neck of the woods in northern California, La Niña tends to limit precipitation during our winter rainy season and has contributed to a withering drought that has enabled massive wildfires, so a move to El Niño could give this part of the world a break. (Even with La Niña, we've already had a major storm and expect a series of them over the next week-plus.)

In general, though, I'm afraid that my Happy New Year greeting comes with a caveat: We may well have some rough weather ahead.

Cheers,

Paul

Insurance used to be a people business, but the legacy of insurance technology tells a different story. Despite a decade-long focus on digital transformation, those projects don't seem to have had a profound impact on the insurance ownership gap, which is widening across insurance segments and projected to reach $1.86 trillion by 2025, according to PwC. Meanwhile, insurance productivity has been mostly flat, according to McKinsey.

And while everyone talks about moving away from legacy and modern legacy systems, more than half of insurers responding to the "2022 Gartner CIO and Technology Executive Survey" said they are increasing funding for legacy application modernization.

Gartner forecast that global IT spending within insurance will grow to $271 billion in 2025, while retail spending will grow to an estimated $257.1 billion, but few people would argue insurance has kept pace with the advancements we've seen in retail, despite spending more.

So, what's missing from those legacy and modern legacy systems that makes them so inherently limiting?

To create seamless experiences offered by digital ecosystems leaders such as Netflix and Amazon -- in which people receive well-informed product recommendations, personalized bundles of products from a range of partners and the well-timed delivery of buying opportunities -- insurers' software applications, partners and data sources need to be connected via application programming interfaces (APIs).

APIs: Building blocks for customer-centric insurance

An API serves as a communications intermediary between technology systems, such as your policy admin system and a policyholder's IoT-connected usage-based insurance (telematics) dongle, fitness tracker or app, for example.

Because every API handles a specific communications task, complex interactions among technology applications typically require multiple APIs or a means of adapting them to different types of users. More technologically advanced insurance systems offer "persona-based APIs," which are simply specific APIs for different types of users and the tasks they perform. A billing agent, for example, needs different access to different data than a claims agent, or even a customer looking to review their billing information. These persona-based APIs accelerate insurers' ability to create customer-self service experiences and offer customized workflows that help customers, brokers, customer service representatives (CSRs), agents, partners and others do more with greater accuracy and speed.

This makes investing in an open (non-proprietary), API-rich technology platform the first step for ambitious insurers. Whether you use it to replace your monolithic legacy systems or deploy it as an integration layer to give you the real-time flexibility, agility and upgradability you need, an API-first digital insurance platform is crucial to delivering the personalized customer experiences that people now expect.

APIs, customer experience and retention

In most industries, brand loyalty is something to aspire to. But until insurers are able to consistently provide the right products and customer experiences -- those that create faster and simpler sales and services, produce better outcomes and promote well being -- they will remain in a price-driven market, where customers are motivated to change carriers based on discounts or disappointing customer experiences.

Through brokers and agents, insurers used to be good at knowing customers and servicing them as they marry, accumulate wealth and property, plan futures, start businesses and manage their health. But insurers' reliance on outdated technologies now stand in the way of the personalized products, services and real-time communications that create customers for life.

While it's a business imperative to decrease the total cost of ownership and increase operational efficiencies, they're just not market differentiators any more. To succeed, across business segments, insurers need to improve the user experience. We need to learn from the successes of other industries and create the ability to add, remove and change partners, systems, data sources and ecosystems as the market continues to change.

Open APIs -- designed for data accessibility and supporting insurance ecosystems -- unlock insurance data and can transform traditional administrative capabilities, such as underwriting, enrollment, billing, product setup and claims processing. Data accessibility truly is foundational to value delivery, improving the agent, broker, CSR, partner and insured's user experience and delivering better outcomes.

See also: A Wake-Up Call for Insurers

Insurers shouldn't use APIs as legacy lipstick

So, can you keep your legacy system and jump into the modern era by using tools to integrate with APIs? Sure, there are many options available that can enable you to link your legacy tech to the modern world via APIs. Just remember, while this might appear to be a quick fix, underneath the covers you still have a legacy system with all of the inherent legacy problems that come with it. You are simply putting off larger issues such as security risks, unmanageable IT costs, technical debt with maintaining multiple systems, the ability to attract and retain IT talent that can manage your legacy code, issues with unsupported code and hardware, compliance and certification barriers, to name just a few.

A better approach is to look at replacing your legacy sub-systems one at a time and migrating to a technology platform that follows the MACH foundation (microservices-based, API-first, cloud-native and headless). Truly ambitious insurers understand that to have a digital ecosystem such as Netflix or Amazon requires having a microservices based, API-first, cloud native and headless solution at the foundation.