The collective wisdom in sales coaching recommends that agents aim to be their client’s “trusted adviser.” Timothy Gallwey, the famous peak performance coach, contends that there’s a more effective role for salespeople to play.  He says agents are more likely to succeed by being their client’s “decision coaches.”

Just as sports performance or acting performance can benefit from coaching, so can a client’s decision-performance. A client’s decision process is “inner.” It happens inside the client between their ears. It’s ultimately this decision-process that determines if the salesperson gets the sale. That well-known saying in sales coaching, “the goal of selling is buying,” is very true. Agents won’t get a sale unless their client decides first that the agent will be getting the sale. 

Coaching is about increasing a client’s self-empowerment. Decision coaching empowers clients to achieve their full decision-making potential. Coaches help clients get in touch with their own ability to find solutions.

Advising, on the other hand, isn’t dependent on a client’s ability to find solutions. The adviser proposes the solution. The adviser becomes solely responsible for the quality of whatever solution they proposed.

This big responsibility comes with potential pitfalls. Advisers often make the mistake of thinking that a solution that would work out well for themselves should also work out well for their client. When an agent generalizes this way, it could be  a mistake. Clients may not share the same set of beliefs and values as the adviser.

A coaching approach invites clients to get in touch with their own beliefs and values. These beliefs and values become an integral part of the purchasing decision. This is, in fact, crucial for insurance-related decisions, because insurance decisions require that clients buy in to a commitment that may keep their policy in force for many decades.

Securing client buy-in is also important for policies that can also be used as savings instruments. Each month, a client needs to decide how much they will contribute toward savings. An agent won’t be present at that time to advise the client about what to contribute. A coaching approach taps into the client’s own personal convictions about what they want for themselves. This results in a more sustainable buying decision. A coaching approach ensures that a policy’s usefulness is more likely to be optimized by the client.

Decision coaching requires agents to gain an understanding about their client’s relationship with themselves. For example, a decision coach may need to determine their client’s degree of self-confidence with making financial decisions. A client harboring self-doubt could make an inappropriately conservative decision. 

See also: 3 Key Themes for Check-ins With Clients

It may seem like decision coaching would require more effort from agents. Advising clients about what they should do seems easier and more direct. However, the extra effort involved in decision coaching comes with advantages that could save agents time in the long run.

Decision coaching is a powerful rapport builder. Clients appreciate when agents take the time to learn where they’re coming from. Clients also appreciate when agents invite them to take charge of their own finances. If you were an insurance client, wouldn’t you prefer an agent who helped you feel more empowered to discover what’s best for you?

In contrast, taking an agent’s advice relies upon clients feeling disempowered enough to take the agent’s advice over their own instincts. Empowering clients to discover new capabilities is one of the most powerful ways an agent can offer value. It’s the gift that keeps on giving beyond the agent’s visit.

Agents who think a client trusted them enough to take their advice are missing the full picture. Clients don’t trust agents unless they first trust their own ability to decide if they can trust their agent. In other words, to be a trusted adviser, the agent still must rely on some coaching. Customers need to feel empowered enough to decide if they can take the agent’s advice. To succeed at trusted advising, an agent will need to apply some decision coaching skills.

Agents seeking their client’s trust will be more successful by also recognizing the importance of their clients’ self-trust. Facilitating self-trust for better decision performance is a hallmark of coaching. That decision the client is making could be about purchasing a policy. That decision could also be about how much they can trust their agent. Agents who gain coaching skills are better equipped to serve their clients as well as themselves.

The announcement that Lyft's founders are leaving the company spurred Wired to say it "signaled the end of the gig economy dream," and I think Wired is right.

The luster has been dulling for a good couple of years now, and it's probably time to reset our thinking. Gig work will still exist. It just won't rewrite the rules of the economy. We won't have a gig economy. We'll have the same old economy, just with more gigs available in it. 

That reset will have implications both for how insurers organize their own work and for what they insure.

The Wired article focuses largely on the "dream" part of the "gig economy dream." It talks about the good vibes that the founders wanted to create when they "recruited anyone with a license, a vehicle and a willingness to affix a pink fuzzy mustache to their car and greet strangers with a fist bump, welcoming passengers into their front seats." The article also describes how the founders wanted to reinvent urban planning by removing the need for "too many parking lots taking up space that could become parks or playgrounds or housing" and hoped to "help many people escape the tyranny of car ownership by letting them use other peoples’ vehicles occasionally instead." The article laments the dashing of those dreams in favor of a new CEO who is solely focused on "the realities of turning a failing enterprise around."

But the article also notes that "we are still learning about the complicated effects of decoupling service work from benefits like health care and sick pay" and, in general, tees up what I think should be broader concerns about the gig economy itself--not just the dreams it was supposed to enable.

Uber and Lyft certainly captured our collective imagination as exemplars of what the gig economy could be, and back when interest rates were essentially zero, they could raise all the money they wanted and just throw it at problems. But economic reality has a way of setting in, and it has. 

When two colleagues and I did some consulting work five years ago for a major company trying to understand how autonomous vehicles might fit into the ride-sharing market, one of the scenarios we laid out for them had Uber and Lyft going bankrupt by now. An executive at the client had dismissed the companies as being great "for people who don't understand depreciation," so we laid out what might happen when drivers had to face up to the wear and tear they were causing for their vehicles, rather than just looking primarily at what they were paying for gasoline.

We saw that there could be other problems, too. Startups tend to begin with a "land grab." In the case of Uber and Lyft, that meant lining up as many drivers and customers as possible, as fast as possible. But startups have to move beyond the land grab phase to become real businesses, so Uber and Lyft were always going to start taking a heavier cut of the fares and begin raising those fares. That would mean fewer people deciding to spend their time driving, as well as more people deciding to find other means of transportation or just staying put. 

It wasn't clear — at least to my two colleagues and me five years ago — where the equilibrium would be, but it was always clear that the luster would dim. (I wrote at length about the arc for e-commerce startups back in January, in case you're interested in reading more.) While there is still considerable uncertainty about just what the future holds for ride-sharing, especially with autonomous vehicles on the horizon, anecdotal evidence is mounting that ride-sharing will matter much more for those needing to summon a ride somewhere off the beaten path rather than becoming a dominant form of transportation. 

I did my own little test a few weeks ago when I landed at Washington National Airport. While I had reflexively reached for my Uber app, I went to the cab line and saw that a taxi to Georgetown would likely cost me slightly less than the fare I was being quoted by Uber — and sure enough, it did, for a car that was right there rather than for one that would arrive in seven minutes. 

This is the normal course not just for visionary startups but for big ideas. Remember the fuss about crowdsourcing, crystallized in a 2004 book by James Surowiecki? The book was certainly thought-provoking, but the notion is now relegated to niches. Even the political prediction markets that were all the rage have turned out to be interesting but not overly reliable. How about the notion that customer reviews would provide piercing feedback on products and companies? There's certainly some utility, but so many fake reviews get posted that you have to be careful if you're going to glean useful information from Amazon, Yelp, Glassdoor, etc. Or, how about wikinomics, popularized by Don Tapscott in a 2006 book with the grand subtitle, "How Mass Collaboration Changes Everything"? That idea just never played out. Instead of having the great minds of the world collaborating on pharmaceutical breakthroughs, we have low-level gigs being offered on Craigslist or via Amazon's Mechanical Turk, which an academic study in 2018 found pays $1 to $6 an hour. 

So, where does the gig economy go from here?

The key issue that doomed wikinomics and that insurers need to consider as they think about incorporating gig work into their businesses boils down to transaction costs, the expenses incurred when buying or selling a product or service. 

That notion takes me back to the late 1990s, when, in the first flush of the internet boom, tech evangelists talked about how it would eliminate transaction costs and break down the walls erected by major corporations. Companies, the thinking went, would increasingly be organized like major films in Hollywood. A group of talented people would get together for a time, work on a project and then head off to work with others on different projects. 

It happened that I had a connection with Ronald Coase, who had come up with the notion of transaction costs in a 1937 article, "The Nature of the Firm," that eventually led to his being awarded the Nobel Prize in Economics, so I decided to go to the source and ask what he thought. Coase was in his late 80s at the time but was tuned in to the potential of the internet. (He lived to 102.) He agreed that the internet should slash transaction costs and said that some $2 trillion of expense in the U.S. economy could be targeted (giving me my headline for the magazine, Context, that I edited at the time). But he also cautioned that "one man's transaction cost is another man's revenue." In other words, those being targeted weren't just going to roll over. 

Coase's breakthrough idea in "The Nature of the Firm" was that the size of a company depends on an equilibrium based on transaction costs. For instance, it might seem to be more efficient to have few or no permanent lawyers on staff, but if you have to hire them on a per-project basis, you run into transaction costs. You have to vet your prospects. You may have to wait a bit until the right ones become available. You have to bring them up to speed. You have to allow for some misfires. And so on. So the size of your internal legal department depends on a comparison between the cost and utility of having people you know quickly available and the cost and utility of relying on external resources. And that same sort of calculation affects every part of every business. That's why wikinomics didn't work: Coordinating resources on complex projects was just too slow, too complicated, too expensive.

Insurers already have considerable experience coordinating with outside resources, especially with agents but also with adjusters hired on a contract basis, with underwriters at MGAs, with third-party administrators and so on. Insurers are also increasingly using technology to deal with customers directly in ways that used to require an employee or a gig worker — for instance, having customers take their own pictures of the damage to their car after an accident or having them do a guided walk through their home in lieu of a traditional home inspection.

So, I think insurers are already pretty well-positioned for where the gig phenomenon will end up. They don't need to consider reinventing their businesses. They just need to focus on using technology and lots and lots of discipline to continually become more efficient about coordinating all the resources that go into a sale, into underwriting or into handling a claim.

Keep chasing away those transaction costs.

Where insurers might want to do some rethinking is in terms of how much they're gearing up to handle the risks of a gig economy that won't materialize. Lots of auto insurers have been innovating to cover ride-share drivers, but I don't think that market will be as big as many have projected. Yes, loads of writers and software programmers will continue to freelance from home, but, in general, the movement is back toward the office. Companies would love to dodge health insurance costs and other benefits by recategorizing employees as contractors, but a legal backlash seems to be gaining momentum against that tendency.

I often tell people that I've been watching the same movie on digital innovation for decades, since the Wall Street Journal put me on the computer industry beat in the 1980s, so I'm pretty sure I know how this story ends. The gig economy will be seen as a great term and an idea that animated a lot of progress but that didn't mark a fundamental change.

Cheers,

Paul    

Road safety is increasingly coming under the spotlight across the U.S. – at both a state and national level. Latest statistics from the National Highway Traffic Safety Administration (NHTSA) estimate 20,175 people died in motor vehicle traffic crashes in 1H 2022, an increase of about 0.5% from the first half of 2021. The human cost is huge, and the cost of overall motor vehicle crashes to American society is a worrying $340 billion per year, according to recent insights from the NHTSA.

Reducing these overall figures is very much in the sights of the U.S. Department of Transportation. In the words of Secretary Pete Buttigieg: “These deaths are preventable, not inevitable, and we should act accordingly. Safety is our guiding mission at the Department of Transportation, and we will redouble our efforts to reduce the tragic number of deaths on our nation’s roads."

The safety policies are being put in place

At a city-by-city level, more than 45 communities have committed to “Vision Zero” in the U.S. – a strategy to eliminate all traffic fatalities and severe injuries, while increasing safe, healthy, equitable mobility for all. Vision Zero acknowledges that many factors contribute to safe mobility -- including roadway design, speeds, behaviors, technology and policies. It sets clear objectives to achieve a shared goal by engaging stakeholders that span local traffic planners and engineers, policymakers, and public health professionals. 

Technology aids road safety – fleets need to get “on board” with AI 

But policymaking alone will not deliver on the journey to shrink road deaths. There needs to be buy-in from fleet operators and the helping hand of some tech-led innovations. Of course, we aren’t talking driverless vehicles yet, but the NHTSA sees driver-assisted technologies next on its Road to Full Automation.

Artificial intelligence (AI) has a growing role to play within the fleet sector to help improve driver performance, support duty of care and cut costs. Particularly in new developments, AI video telematics is expected to transform how vehicle operations approach road safety. In the broadest sense, AI is about using machines to perform tasks that would typically have required some form of human intervention and demonstrate behaviors associated with human intelligence. Powerful in-vehicle AI video telematics will make it easy to identify key areas of risk, reduce collisions and near misses and ensure employees get home safely.

AI-enabled cameras go beyond the cab 

AI-powered vehicle cameras, using Advanced Driver Assist Systems (ADAS), Driver Status Monitoring (DSM) and Blind Spot Detection (BSD) technologies, are now enabling fleet operators to maintain safety levels for both their drivers and other road users. By automatically monitoring hazards on the road and high-risk behaviors, these devices make it possible to provide real-time feedback straight to the driver. 

Distractions such as cell phone use, eyes away from road, smoking, eating and drinking, can be detected alongside other fleet risk, such as fatigue, tailgating and nearby vulnerable road users, so drivers can be encouraged to change potentially dangerous habits. In fact, in one international deployment of AI-powered video telematics, installed across 16,000 public sector vehicles, there was a reduction in risky driver behavior of over 80% within the first three months.

The latest intelligent detection cameras can even identify and track vulnerable people where driver visibility is poor and risk of injury high. These devices can establish the severity of risk dependent on the proximity of a worker, pedestrian or cyclist to the vehicle, activating internal and external alarms when they enter virtual exclusion zones. This provides the driver with increased time to react and warns other road users of the potential risk. 

See also: 3 Ways AI, Telematics Revolutionize Claims

Humanized AI at work

Moving forward, advances in Vulnerable Road User (VRU) perception technology will enable AI-powered cameras to provide a nuanced understanding of human behavior. Using machine learning techniques, it will be possible to train devices to accurately predict a person’s actions and provide drivers with potential collision warnings that give them vital moments to avoid an incident. Backed by a dataset of hundreds of millions of human behaviors, the edge-based software analyzes age, direction, speed and distraction to deliver a much higher degree of accuracy than traditional ADAS technology.

Real-time analysis and decision making when incidents occur 

Fleet managers can use the added insight provided by AI video telematics to better understand risk within their vehicle operations and take steps to address issues before they result in a driving incident. However, no vehicle operation has the time and resources to manually review every triggered collision, near miss or driving event, when video uploads can exceed hundreds per day. Due to the size and weight of many vehicles – especially vans, trucks and specialist vehicles – dashcams require highly sensitive g-force settings to detect a collision, which results in large levels of generated events data.

The now….

Computer vision algorithms can now be used to review huge amounts of data, which means fleet managers are only being presented with information that requires immediate intervention. AI post analysis can, for example, help overcome the challenge of manually checking hours of downloaded footage by automatically validating in seconds whether a collision occurred and determining if any action is required. The technology will continue to evolve in the future to detect, monitor and analyze near misses and driver behavior, which will support data-driven safety decision-making and problem-solving.

AI post analysis uses advanced object recognition software to identify different types of vehicles, cyclists and pedestrians, making it possible to distinguish between collisions and false positives that can be generated by harsh driving, potholes or speed humps. This added layer of analysis enables rapid intervention and the ability to quickly summon emergency assistance, resulting in enhanced duty of care and driver welfare, as well as reduced insurance claims costs.

The tech delivery

There are two types of technology – edge- and cloud-based – that will see AI delivery become increasingly embedded in video telematics hardware and software. For edge-based solutions, the processing takes place close to the data source, such as a connected camera device, to provide real-time insight. Cloud-based solutions collect and process information in a centralized data center for powerful post analysis.

See also: How Telematics Improve Fleet Safety

Driving toward a safer future 

The new generation of AI video telematics will ensure fleet operators can access the right information at the right time, presented in a way that enables them to achieve significant change and encourage drivers to operate in the most responsible manner. By automating management processes, data analysis and incident detection, they can take advantage of intelligent solutions to keep drivers, road users and pedestrians safe and reduce the number of collisions.

The U.S. DOT Fatality Analysis Reporting System (FARS) shows large trucks account for nearly 13% of fatalities on the nation’s roads, so there is an opportunity to embrace AI innovation and immediately save lives – and we must not ignore its ability to reduce cost to society, as well. We all want a future where no one is killed or injured on U.S. roads, and fleet technology such as AI has a significant role to play in safer transportation for all.

Carriers are looking to adapt to technological advances, but digitalization across the board is even more challenging when undertaken by a smaller life insurer with limited resources.

Many small carriers and fraternals have limited or outsourced IT resources. The prospect of modernizing their aging policy administration systems and implementing digital sales and service solutions can seem difficult, if not impossible. But it can be done.

Why is digital transformation critical to carriers with limited resources?

Disruption and change are inevitable, so smaller insurers must use the resources they do have to adapt to changing market forces and keep up with the evolving ecosystem.

1. It's important to keep up with stakeholder expectations

Digital transformation is driven by the needs of stakeholders such as members, agents and insurance regulators. And, as insurers grow, they face increasing regulatory challenges. For instance, NSS Life is a small company in terms of headcount, totaling fewer than 30 employees. But they have grown from $52 million to $1.6 billion in assets in the last 15 years. And now, they find themselves in the difficult position of being a small organization that is treated as a large insurer by the regulators.

Easier access to data and adaptable reporting makes it possible to stay compliant even with few resources to assign to the effort.

2. Digital transformation can be a point of differentiation against competitors

Texas Service Life, for example, started looking at digital conversion as a way to differentiate themselves as a very small company against competitors that were 30x larger.

The insurance industry has been slow to catch up with technology. This means that companies that undergo digital transformation sooner rather than later can stand out against other and potentially larger competitors that take more time.

3. Consumers are already enjoying the benefits from digital experiences in other industries

Whether it's personalized concert suggestions sent by music audio streaming companies or subscription-based meal deliveries, consumers are exposed to highly personalized and efficient experiences in almost all industries. Life insurance consumers expect no less.

Like all insurers, smaller carriers risk losing potential customers, especially in younger generations, if they can't deliver real-time and online service, straight-through processing of applications, accelerated claims resolution and a host of other transformative solutions that consumers have come to expect.

Digital transformation isn't just a nice-to-have option for life insurance companies -- it's a requirement if they are going to stay relevant to consumers. Automating manual processes also addresses labor shortages.

You don't have to boil the ocean - companies can undergo digital transformation one step at a time.

See also: Beyond the Digital Transformation Hype

Set your North Star

One key piece of advice for resource-constrained carriers undergoing digital transformation is to define your vision for it. Irrespective of size, it's important to have a vision for your digital transformation. It will enable you to map out the process and take small steps that are always moving the company in the direction of its end goal.

Thousands of important calls will have to be made as conditions evolve during the modernization journey. Not all those decisions will be clear-cut, easy or even a choice between good and bad outcomes. Your digital transformation vision makes priorities clear and gives you a North Star to guide you toward your destination, no matter how convoluted the path may become.

According to recent market research, blockchain in insurance will expand from $64.5 million of revenue and cost savings in 2018 to $1.4 billion this year -- a compound annual growth rate of 85%!

Blockchain has the power to bring about significant efficiency gains, cost savings, faster payouts and fraud mitigation while allowing for data to be shared in real time among various parties in a trusted and traceable manner. Insurers are looking to harness the power of blockchain to infuse insurance processes with the three T's: trustworthiness, transparency and tamper-resistance.

As such, they are attempting to reinvigorate the very roots of the insurance industry.

Advantages of Blockchain

The application of blockchain for insurance industry makes absolute sense when one considers the following advantages:

Stronger Trust Mechanism

Blockchain technology has set the gold standard for trust and fairness. The distributed and immutable nature of blockchain ledgers makes them more transparent and reliable. In addition to inspiring accountability, the consensus algorithm of blockchain technology ensures that all stakeholders, be they policyholders, insurers, agents or brokers, agree on the underlying principles of the policy. Such measures set the stage for smart contracts that establish provenance while maintaining auditability. Blockchain can also establish a tamper-proof repository of customer data that can be safely shared among organizations.

Blockchain can also reduce risk of error and duplication of effort through this mechanism of cooperation, saving time and resources. Overall, it improves visibility of customers’ activity across firms, improving compliance and regulatory oversight.

Room for Automation

The insurance industry gets bogged down by money- and time-wasting inefficiency stemming from billions of forms, human error and poor communication among parties. Digital ledger systems like blockchain can help automate outdated processes, save billions of hours of paperwork each year and reduce human error because all forms and data are safely stored along the chain.

Smart contracts can achieve a lot more than granting visibility to transactions. Insurance agencies using blockchain-based smart contracts can inject automation into insurance processes and workflows. As the name indicates, smart contracts are self-actualizing lines of code that execute when their governing conditions are met. Accordingly, setting these ground rules can act as the rule-based algorithm that automatically sets off the smart contract. 

Better Data Management

The rapidly digitalizing world churns out high volumes of data that can benefit insurers. However, data management can be a nightmare. With blockchain, such data packets can be stored on the network where an AI-powered engine can read and vet this data. Such a system helps establish a single source of truth and improve products and services in multivariate ways.

Blockchain technology can also be used in secure and transparent data management by providing a decentralized ledger for recording transactions. This eliminates the need for intermediaries, reducing the risk of data breaches and cyber-attacks.

Faster Fraud Detection

One of the biggest pain points of the insurance industry is fraud. Blockchain’s innate feature of capturing time-stamped transactions with complete audit trials makes it extremely difficult for fraudsters. For instance, a blockchain-powered ledger can be used to track data around high-value items like jewelery. This ledger can also replace authenticity certificates to avoid duplicate claims, fake replacements and fake insurance claims. 

Blockchain for the insurance industry can maintain an auditable trail of policyholder behavior. Such a trustworthy and reliable record can act as a precedent for tracking customer behavior. Any action that does not fit the defined set of patterns can be flagged as fraud or attempt to defraud, and immediate action can be taken to mitigate its effect.

See also: Blockchain’s Future in Surety Industry

Lower Administrative Costs

The use of blockchain will reduce operational and administrative costs in many ways. For starters, it will help consolidate and validate data automatically, which significantly reduces clerical tasks. At the same time, it helps establish policyholder identity and performs routine activities like know your customer (KYC) verification or anti-money-laundering (AML) processes.

Similarly, blockchain can even support automated claims processing by checking policy-related data and adjusting the claim. Such actions will cut the need for human resources, reduce costly errors and improve overall cost-efficiency.

Addressing Underserved Markets

The low cost of smart contracts and their transactions means that many products can be rendered more competitive for penetration of underinsured markets in the developing world. 

Practical Use Cases

Here are some examples of different verticals of insurance using blockchain technology to solve real-world problems:

Health and Medical Insurance

Medical insurance using blockchain-based patient files can maintain an accurate and detailed medical record on the network. It can also be used to establish a ring of security as such confidential data does not pass through several hands and only authorized personnel can handle it. Healthcare providers can seamlessly share data with insurers, which will allow the latter to process claims faster and without any risks.

Travel Insurance

Disruptions during travel can upset a well-curated itinerary. Travelers can offset such unpleasant shocks and protect their interests through travel insurance. With the involvement of blockchain technology in insurance, smart contracts can automatically execute in the event of flight cancellation or delay, and the policyholder will get the reimbursement directly in their account even without having to raise a claim!

Property and Casualty Insurance

Blockchain can transform the property and casualty (P&C) segment of insurance. From smarter underwriting and vigilant risk assessment to seamless onboarding and smart policy generation to claims registration and payment -- blockchain-based P&C insurance software can improve everything. Moreover, it grants coverage to a variety of assets, from homes to automobiles, which come under the ambit of P&C insurance and centralizes all the insurance-related data.

See also: Blockchain in Insurance: 3 Use Cases

Closing Thoughts

It is evident that blockchain technology is steering the industry in the right direction. Different verticals of the insurance industry can enjoy the benefits of blockchain technology, be it industry-specific or generalized.

However, the goal of insurance using blockchain is quite complicated. You would still have to reinforce security against cyberattacks, maintain consumer data privacy and confidentiality and justify the cost of a technology overhaul. Fortunately, you can overcome any potential problems with the right set of developers or technology partners that can lead the way.

It’s not uncommon for agents/brokers and carriers to express frustration with one another. For many risks, especially those more complex, agents are prone to gripe about carriers’ submission processes, which are often laborious and require a lot of back and forth with the underwriter. On the other hand, carriers frequently encounter challenges with agents misunderstanding their appetite or adopting new tech capabilities slowly. These challenges – and others – underscore the importance of carriers investing in digital capabilities to support distributors and improve customer experience, increase efficiencies, and grow business. 

SMA recently surveyed agency executives in commercial lines to understand their satisfaction with insurers’ digital sales and servicing offerings and the capabilities they believe insurers should invest in to support their needs. The study’s results were published in two separate research reports focused on the small commercial and mid/large commercial segments. 

Immediately, the research shows significant misalignment between commercial lines agents’ most-wanted digital sales capabilities and carriers’ current investment plans across the 16 options presented. Of course, it is unrealistic to expect 100% alignment across the board, as the objectives and needs of agencies and carriers are different. But as co-dependent partners, there should be closer alignment in the many areas where there is mutual advantage.   

In the mid/large commercial arena, over two-thirds of agents seek agency management system (AMS) real-time upload integration, whereas only a quarter of carriers are investing in this technology. In this segment, carriers are also hyper-focusing on enhancing their agent sales portal, but only 14% of agents say this area currently needs greater improvement. In contrast, agents and carriers in small commercial lines see eye-to-eye on the needs and investments in both of these capabilities. Instead, they do not align with other technologies, such as risk appetite and proposal tools.  

See also: Dissatisfaction With Digital Sales Capabilities

There is greater consensus among commercial lines agents and carriers regarding the 17 digital servicing capabilities featured in the survey. In both small and mid/large commercial lines, agents’ needs align with carriers’ investments in commission dashboards and pay-a-bill technologies. Agents in mid/large commercial lines also emphasize the importance of self-servicing capabilities, such as policy download and claims filing capabilities, and carriers appear to meet demands in these areas. One area where commercial lines agents and carriers don’t align is in auto certificates. Half of mid/large commercial agents and 36% of small commercial agents say this is a top need for their practices. Still, fewer than 20% of carriers in both segments are funding projects in the capability.   

Despite agents and brokers becoming increasingly satisfied with digital sales and servicing offerings, there continues to be a division between where agents want carriers to invest and carriers’ actual investment plans. Agents want further investment in distribution technologies that will help them increase efficiency and service their policyholders. Carriers that can align strategies and investments with both their internal and distributor needs will differentiate themselves and become partners of choice for commercial lines agents and brokers. 

For more information on agencies’ digital strategies and priorities in small commercial and mid/large commercial lines, read our recent research reports: "P&C Agency Distribution: Digital Strategies and Plans for Small Commercial Lines in 2023" and “P&C Agency Distribution: Digital Strategies and Plans for Mid/Large Commercial Lines in 2023.” 

Where’s the distribution disruption?

When I started working in the insurance industry in 2015, I (regrettably) used the word “disruption” a lot. I was making a career shift from capital markets into a buzzy, fairly new space called “fintech,” and I became excited about the massive total addressable market (TAM) and archaic user experience (UX) in insurance. Insurance felt like a maximally unsexy, almost contrarian way to bet on the continued digitization of financial services. I was convinced that this meant radically changing and reinventing distribution.

A common narrative among industry outsiders at the time (like me) was that direct and fully online channels would inevitably displace traditional agent distribution. This turned out to be pretty naive and way off the ball. In the years that followed, we’ve seen a classic investment cycle rapidly play out, as insurtech surged and evolved into a consensus venture opportunity space. For a while, people even stopped asking me why I work in insurance. Insurtech attracted over $14 billion in private capital in 2021 alone, before macro turned and a spate of unsuccessful exits and broken IPOs crushed insurance investor enthusiasm along with revenue multiples.

Sources: Bloomberg Finance; Yahoo Finance (1/11/2023)

Today, as insurance investors learn from past mistakes, it’s worth thinking about which assumptions were wrong and how expectations evolved. I find it instructive to refer to the Gartner Hype Cycle (below), which plots evolving excitement levels and innovation themes over time. After parabolic growth and a steep descent to disillusionment, the valley we’re in today offers a great vantage point for retrospection and redirection. There are lots of valuable lessons to glean.

Source: Gartner

Some of the takeaways are macro and relevant across consumer fintech generally (e.g., growth at all costs isn’t great in a rising rate environment!). Other lessons, however, are specific to insurtech business models and therefore relevant as we look to the future. For example:

• Unvalidated underwriting frameworks drove large losses
• Lifeterm value (LTV) was stubbornly low, as cross-selling proved to be difficult and customer loyalty to insurtechs remained low
• High customer acquisition costs (CACs) worsened as the market became more crowded
• Customers turned out not to get super-excited about purchasing insurance products (especially the non-compulsory ones), even with a modern UX

See also: How to Prevent Agent Gaming

Another important learning (and the one I will focus on in this post) is that legacy distribution is much more resilient than insurtech enthusiasts (again, like me) anticipated. The core hypothesis that digitization would massively displace legacy/agent distribution did not bear out, and the disruptive potential of new channels was overestimated. The dynamic of legacy channels remaining relevant is something we’ve also seen in other categories — like retail, where there was a resurgence of focus on physical retail and omnichannel strategies after a head fake of e-commerce acceleration. Similarly, insurance agents continue to play an important role in distribution, and firmly coexist alongside the digital channels that emerged.

So much has changed in insurance over the past decade as digital innovation enabled new customer experiences, better price discovery and vastly more use of data. But one thing that’s hardly budged? The share of premiums through direct channels. Ninety percent of P&C products continue to be placed through agents, brokers and branches, and the number of independent P&C agents in the U.S. actually increased by roughly 10% from 2020 to 2022. Across P&C and commercial lines, the share of premiums owned by agencies increased between 2017 and 2021. So much for the disappearance of the insurance agent. Despite massive investment in new channels and years of COVID-related business interruptions, agent and broker distribution remains as relevant as ever.

Source: McKinsey

Ultimately, the call for the disruption and eventual disappearance of agents turned out to be wrong on two key fronts. First, it underestimated the centrality of the agency value proposition to purchaser habits and preferences. As we’ve said before at Equal, the business of insurance distribution is fundamentally built on relationships — and those relationships are crucial to customer purchasing decisions. In a 2021 survey of insurance purchasers conducted by Nationwide, 88% said they value having an agent to call, and more than 50% still value having an agent in physical proximity. Far from going extinct, independent agents and brokers remain the most important links in the complex and fragmented chain of insurance distribution channels.

Predictions also overemphasized the extent to which digitization would be a force for disintermediation. New technology turned out to improve agent and broker distribution more than threaten it. A 2021 survey of independent agents found that the majority are concerned about the disruptive potential of new technology, and yet virtually all respondents also said that new digital tools have made their job easier. McKinsey similarly reports that >60% of insurtechs operate within the traditional value chain, as opposed to prioritizing industry disruption.

See also: 4 Ways to Improve Agent Experience

Staying Power in a Changed Game

Agents, brokers and advisers will continue to play an important role in distribution. But it’s simultaneously true that the playbook for running and growing an enduring agency business has changed as a result of digitization. Consumers have made it clear that they want access to trusted agents with whom they maintain a relationship; but they are also increasingly demanding the convenience of virtual service and modern, digital user experiences. An overwhelming majority of insurance purchasers say they want personalized advice and products, yet >60% also prefer the flexibility to interact across communication channels. The data resoundingly shows that failure to deliver on consumer preferences has a sharp impact on topline performance.

Agents have demonstrated impressive staying power over the past decade, but even if the channel remains dominant overall, profits and growth will disproportionately go to the agencies that adopt digital best practices. As BCG put it, agents who “get by on charm…are a vanishing breed” and instead, top agents in the future will rely on “digital channels and AI-based insights.” Agents who fail to adapt will have their lunch eaten by agents who do.

For agencies willing to adopt digital best practices, there are clear advantages. A 2021 study conducted by Liberty Mutual and Safeco found that agencies that ranked in the top one-third on digital adoption experienced 70% higher revenue growth compared with the other two-thirds of agencies. And beyond topline growth, there is an equally compelling opportunity for agencies to leverage technology to increase their profitability. Legacy workflows are uncompetitive compared with data-driven and automated processes. The data is clear that cross-selling effectiveness, customer satisfaction and agent productivity can all be readily addressed and improved via technology.

The insurance space will continue to rapidly evolve–the secular trends catalyzing more digitization, more effective risk transfer and frictionless purchasing experiences are well in motion. While the thesis of digital-only distribution fundamentally failed, I have more conviction than ever that the age of digital transformation in insurance is here.

This article first appeared here. It is the first in a series of posts about digitization in insurance agencies and brokerages. Subsequent posts will explore technology applications, business model innovation and investment opportunities emerging from digitization of the agency stack.

Digital underwriting platforms are quickly becoming a business necessity rather than a luxury. Gone are the days of double and triple entry, as customers will no longer accept long wait times to receive their surety bond in the mail.  Businesses across varying industries and professions need surety bonds quickly, especially to maintain compliance, complete on-site projects and file with their local courts and municipal authorities. The archaic processes that still exist in today’s industry can no longer be endured.  

Despite the insurtech movement, the surety bond industry has been largely ignored when it comes to technology. The product is typically a smaller percentage of overall insurance professionals’ books of business, so there has not been a great deal of time or money spent on modernizing processes even though surety bonds remain a profitable and unmistakable source of revenue. The industry has been ripe for disruption for a long time.

Let’s dive into a few ways digital underwriting platforms will undoubtedly transform how carriers and agencies issue surety bonds in the future. 

1. Cut processing time by eliminating manual delays

While surety bonds enjoy historically low loss ratios, the same cannot be said for the expense side of the equation. Especially in the transactional space, where ease of access and delivery are king, expenses have hindered progress. End users will often spend time filling out multi-page applications to send to their insurance agent. The agent must then copy this information into a carrier legacy system or send it out for approval. This process can take days when the consumer wants the bond in minutes. All these hands-on efforts and back-and-forth hardly make a $100 premium—even though typically loss-free—worthwhile.

With digital underwriting platforms, processing times are cut dramatically. Agents can be more efficient, and end users receive their surety bond just minutes after submitting their application.  

2. Streamline operations through application programming interface (API) integration

Digital underwriting platforms offer various efficiencies to customers, agents, brokers and even carriers. At Propeller, we have developed a front-end system that allows both consumers and agents to interact with our experienced underwriters if needed to quote, bind and issue surety bonds in just minutes. This allows insurance agents to provide a seamless experience to their clients while simultaneously earning their standard commissions. Insurance professionals are completely removed from the issuance and billing process, allowing them more time to focus on what they do best: selling insurance and surety bonds.

API connectivity also helps carriers close the loop to eliminate the final entry of each transaction, which provides efficiencies by streamlining the reporting and revenue recognition process.

See also: Automation 2.0: What's After RPA

3. Guarantee a seamless and efficient customer experience every time

These new underwriting platforms are changing the way the industry operates and are forcing agents and carriers alike to adapt to the new normal. With customer experience driving over two-thirds of loyalty to brands, insurance professionals can no longer wait for the business to come through the door; they must meet the customer where they are.

The end user, whether a contractor, lawyer, mortgage banker or freight broker, is already using the internet to purchase everything else in their life. They are looking for nothing less than speed, ease of use and same-day service.

Oftentimes, people forget that the actual customer in the process is the principal—the person or business buying the bond—not the insurance agent or the underwriter. True digital underwriting platforms will solve the needs of all members of the value chain, which includes the principal and the obligee (the entity requiring the bond). The ability to instantly issue surety bonds increases efficiencies across industries by keeping projects moving, roads open and courts functioning.   

Digital underwriting platforms and digital surety bond issuance are here to stay. Successful adopters of these technologies understand that these tools are making jobs easier, not eliminating them. Agents and underwriters who embrace these platforms will have more time to spend on higher-value tasks and clients while letting the platforms underwrite and service lower-ticket items.

Tech-savvy users will find ways to put the technology in customers' hands at the point of sale. At that point, the technology is not only cost-saving but also a revenue generator. Only time will tell the full extent of these digital underwriting platforms' impact on the industry, but if the last several years are any indication, this is just the beginning.

Join us as we host a special webinar in honor of Women’s History Month. Women’s History Month is a time to acknowledge and celebrate the contributions of all women in the risk management and insurance industry, including those that have broken down barriers and inspired innovation. Studies have shown that women outnumber men in the insurance industry and companies that have more gender diversity on their executive teams are more profitable when compared to companies without. While great progress has been made in gender equality, there is still a long way to go to ensure that the lived experience of women in the industry is heard and understood and that diversity, equity, inclusion and belonging remain a priority in company policies and practices. During this panel discussion, the speakers will discuss the successes and challenges that they have endured, as well as the work that the risk management and insurance industry can do to better support and increase the representation of women.

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The purpose of the webinar will be to discuss how far Black people have come in history, the industry, and what it will look like in the foreseeable future. 

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