Thinking ahead was the mark of an effective insurer in 2021, as the COVID-19 pandemic required constant adaptability and intelligence. When insurance needs were changing day by day and week by week, responding quickly and flexibly with accurate quotes and appropriate product lines was essential. 2022 will be no different. 

We may move past a global pandemic, but new risks are constantly evolving, and insurers must be on their guard. With new coverage markets growing in the uncertain spaces of cyber and climate, companies must be faster and more agile than ever before.

Datasets originating from third-party providers could enrich the insights insurers desperately need to offer accurate and timely quotes to clients. In addition, exciting developments in modeling tools and analytics contribute to an elevated decision-making process for carriers, as underwriting grows easier.  

The more you know… 

Predicting and pricing risk requires insurers to be well-educated on each instance before underwriting, and gathering the necessary information could take valuable time and resources. But with the introduction of spectacular new datasets, insurers can speedily access up-to-date assessments of a risk anywhere in the world. 

These datasets are also more accessible now than ever before, with many data companies dedicated to specific data targeted toward different industries. Not only this, but companies also understand the value of a well-constructed interface, creating digital spaces where insurers can easily navigate gigantic data sources via clickable features and useful plug-ins. Going even further, the incorporation of AI capabilities into these knowledge bases can advance the underwriting process to a new level. Machine learning can even build a preventive element into insurance practices, adding important value beyond a simple quote.  

See also: P&C Commercial Lines in 2021

Capturing new niche markets 

Insurers must be quick off the blocks when building new product lines and securing influence in emerging markets, and the specialized insights datasets provide are invaluable for this. The end customer will only benefit if an insurer can offer more targeted services and stay ahead of the coverage curve, so it makes sense to collect all the information possible around a risk, at speed, to quote accurately. This kind of knowledge will massively improve service delivery, leading to seamless purchasing journeys for clients and simpler underwriting for carriers. Everybody wins. 

Those insurance lines created using the power of data, and constructed on agile, customizable platforms, will make for a radical change in the criteria for quality in the P&C space. Gone are the days of basic and homogenous contracts distributed slowly and without personalization: There are so many resources out there for insurers today that past standards no longer measure up. Insurers must make sure to make the most of the powerhouse of datasets and prioritize finding intelligent, innovative platforms upon which to build these new, richer product lines. 

In 2022, smart insurers will capitalize on every technological innovation available to them, leading the pack in digital transformation and combining data insights with smart product design to leapfrog competitors. If nothing else, the introduction of datasets prove that an insurance revolution is not just on the way: It is already here, and forward-thinking insurers will not be left behind.

For decades, executives at auto makers have complained about all the revenue and profit they create for others but don't get a taste of themselves. The manufacturer generates, say, $3,500 of gross profit on the sale of a $30,000 car while creating far larger opportunities for others -- the commission paid to the dealer, plus revenue from repairs, service, insurance and more.

Auto makers have repeatedly tried to capture more of the downstream revenue related to car sales and are now taking dead aim at insurance. There's reason to think they'll make inroads, too, because insurance is increasingly based on data on driver behavior -- and auto makers have easy access to all that data.

Toyota recently became the latest manufacturer to announce an insurance offering, joining Porsche, Ford, General Motors, Tesla and several others. While traditional insurers need to get drivers to install dongles to monitor their actions behind the wheel or, increasingly, build systems around drivers' smartphones, manufacturers have a raft of sensors already built into cars and just need permission to use them for insurance purposes.

The spread of 5G and increasing power of so-called edge computing make it much easier for manufacturers to monitor driving behavior. Edge computing lets behavior be monitored and evaluated by increasingly powerful processors in the car itself -- at the edge of the computing network, rather than having all the data be transported back to a central data-processing center -- and the rollout of high-bandwidth 5G mobile networks allows for robust, high-speed connections between manufacturers and their products.

Manufacturers can also save on commissions and advertising because they can embed an offer of insurance into the auto sales process, when the car buyer needs to get insurance somewhere and is demonstrating trust for the manufacturer.

Car makers also gain in ways that insurers can't. Tesla, in particular, has talked about taking what it learns about accidents and reflecting that knowledge in the design of future cars. All manufacturers could benefit by using insurance to strengthen a relationship with a customer, making it more likely that the person would use the dealer network for repairs and service.

It's even possible to imagine car makers expanding on the insurance model and helping drivers avoid accidents. While manufacturers already increasingly include safety features such as automated braking, they could use detailed knowledge of danger spots to warn drivers that they're approaching potential trouble. Insurers and other third parties could take this sort of prevention approach, too, but it's always easier to work with a system that's built into a car rather than having to retrofit it.

Traditional insurers still have plenty of advantages -- in particular, all the expertise on pricing and claims processing that they've developed over the decades. So, I'm not saying anybody needs to fold its tent and go home. But I do think auto makes pose a credible threat to traditional insurers and warrant careful monitoring.

Cheers,

Paul

In recognizing some of the latest emerging risks, it would be wise for risk managers to review their policy retention practices. The obvious consideration is how long policies should be kept. Other considerations include whether all policies should be kept the same amount of time, how accessible they should be and what is the best way to store them. Risk managers should consult with their legal and compliance colleagues as well as their brokers and professional associations to determine what is best for their situation. 

Imagine what it was like in the '70s and '80s when the courts were changing the intended meaning of “sudden and accidental pollution” in commercial general liability (CGL) policies. Companies were being sued and having to remediate years of environmental harm from pollutants that had been seeping from their industrial sites.

Risk managers needed to amass the company’s insurance policies dating back over many years so they could make claims to one or various insurers from whom they had coverage during those years. If they did not retain their policies or these were hard to find, they would turn to their broker. However, the brokers involved were not always able to find these old policies, either, due to having been involved in numerous mergers and acquisitions over the years or due to their own ineffective retention practices.

It was quite an uncomfortable, expensive, and time-consuming time for companies, brokers, and insurers. Ultimately, the industry adopted the absolute pollution exclusion in CGL policies, and insurers started offering stand-alone environmental covers. Asbestos claims created the same type of need to gather policies from years past. Out of this debacle, a relatively new type of service firm came into being: insurance archaeology.

There are two new risk phenomena that could create the same type of need to gather policies from years past. 

The first phenomenon is climate litigation. With the growing acceptance of "attribution science," it looks likely that companies of all sorts could be litigated against for having had a detrimental effect on the climate, resulting in floods, fires and other catastrophes. For those unfamiliar with attribution science, one explanation is, “Climate attribution science aims to establish the relationship between anthropogenic emissions and specific extreme weather events. Progress in this field is allowing claimants to better pinpoint and quantify the environmental impact of projects, policies and laws.” In other words, “Attribution science really is this idea that you can go in and examine the climate models and you can run different essentially alternate universes that ask, “What would have happened in our normal climate before global warming? How often would you see a Category 5 storm hit the Gulf Coast? Or how often would you get a million-acre wildfire in California?” Thus, a plaintiff will posit that if were not for CO² emissions from XYZ company’s operations, or other potentially climate-affecting actions, a loss event would not have happened. 

An S&P Global paper states, “We believe the volume of climate litigation may continue to grow, as may the impact of associated juridical decisions in the policies, commitments, finances -- and even business models -- of defendant organizations. Investors are likely aware of the growing body of climate litigation and how it could affect the value-at-risk in their portfolios."

The second risk phenomenon is forever chemicals, also known as PFAS. PFAS is short for perfluoroalky and polyfluoroalkyl substances and includes chemicals known as PFOS, PFOA and GenX, created as early as the 1940s. These chemicals do not easily break down and last for long periods in whatever they are treated with or ingested by. 

According to CNN, “A study from 2007 by the U.S. Centers for Disease Control and Prevention estimated that PFAS chemicals could be detected in the blood of 98% of the U.S. population.”

See also: Navigating the Future of Risk Management

They were used in some food packaging, pots and pans, paints, water repellents, cosmetics and other commonly used products. Today, they can be found in water, in soil and in us. Studies conducted in mice have indicated that such chemicals can cause a variety of health issues.

If or when there is a clear link between these chemicals and specific human health cases, not only the chemical manufacturers but also those that sold the products made with the chemicals could be sued, thus unleashing a tsunami of insurance claims by affected parties. 

The emerging risks will create a need to gather policies for the years leading up to the litigation to see what coverage may apply.  Hence, the need for making sure these documents will be available for review is real and present.

As data and technology become more accessible, insurance companies are finding new ways to use them to outperform the competition. While there are many options to put data to work for your organization, three main strategies have emerged in the insurance industry: 1) introducing new business models; 2) capturing new value; and 3) leveraging new cost structures. The results of these strategies are setting the bar for how a thoughtful approach to data and analytics can change the old and established insurance game.

New business models are here to stay

The direct-to-consumer (D2C) model is well-known and relied on heavily across many industries, such as auto insurance. A number of factors have prevented commercial insurance carriers from selecting the D2C model, though. In fact, direct response carriers write less than 1% of all commercial and workers’ compensation premiums, according to the most recent Market Share Report by the Independent Insurance Agents and Brokers of America (IIABA). According to the IIABA, 25% of personal auto insurance is sold through direct response carriers, a far greater proportion than commercial insurance.

One of the factors that puts personal auto insurance at an advantage over commercial insurance is the simplicity of the product ― hence, a shorter submission process and shorter submission form. That type of experience is what customers expect when buying a product online. Until now, this reality has stymied commercial insurers. However, new data sources are enabling commercial insurers to simplify insurance applications through submission form pre-filling or complete digital on-boarding.

Next Insurance, an MGA turned insurance company, is offering insurance online and drastically reducing the number of questions in a questionnaire by using new data sources and leveraging artificial intelligence and machine learning technology. In fact, most Next Insurance customers can buy a policy in five to 10 minutes. While there are a few other important factors that prevent commercial insurance companies from adopting a D2C model, data from third-party sources helps eliminate the potential for a poor customer experience because of a long questionnaire or unknown risks taken on by the carrier.

One of the ways insurance companies are using their internal data is to establish adjacent businesses, a concept known as data monetization. These new revenue opportunities do not rely on collecting new data; rather, they can repurpose the vast amount of data insurers already collect. An insurer can sell the data anonymously to other industries that find it profitable. This could be useful for predicting trends of a particular car company or even predicting the direction of an entire industry. Quandl, for example, gathers daily counts of how many new car insurance policies are sold by auto insurance providers and sells this information to investors. An adjacent business revenue stream like this is not tied up for liquidity or capital requirements, bringing even more value to insurance companies.

See also: How We Can Overcome Uninsurability With Data

Capturing new value

Lloyd’s Emerging Risk Report about drones highlights negligent or reckless pilots as one of the fundamental risks of drones.

Many insurers ask if photographers use drones, but they do not ask more details about that usage. This can be troubling for insurers, as different uses have different consequences if the pilot is negligent or has an accident. A wedding photographer who has an accident with a drone, for example, would face very different consequences than a landscape photographer would. Not knowing this information during customer acquisition or being too narrow with eligibility requirements can hurt an insurer.

With up-to-date data, carriers can develop new business streams in various directions. For example, as a business changes over time and expands to new areas by offering new services or getting exposed to additional risks, carriers are able to automatically offer additional insurance coverage ― or deny others, and adjust rates and limits in a surgical manner.

Furthermore, carriers can quote businesses based on their exact risk rather than that of other businesses in a similar category. Reducing, or potentially eliminating, information asymmetry can revolutionize insurance. 

Leveraging new cost structures

Data is enabling new and veteran commercial insurers to minimize costs and leverage new cost structures. For example, Lemonade insurance is maximizing automation to create a new expense ratio paradigm. According to a blog post by Lemonade, the company operates with an average of 2,500 policies per employee, compared with other “efficient legacy insurance carriers that have about 1,200 policies per employee.”

Lemonade’s digital platform takes in data through third parties and its own customers throughout a policy’s lifecycle and stores it for easy use across the whole insurance value chain. Thus, data automation at Lemonade can drastically reduce the need for employees to spend time in low-value processes, as the data already moves policies through the customer journey automatically. Lemonade can then deploy its valuable resources, e.g. underwriters and claim adjusters, to profitably generate more and better business. 

Lemonade also handles claims through data. Lemonade’s claims bot can review a claim within a few seconds. The chatbot cross-references the claim with the policy data and applies anti-fraud algorithms, reducing the need to have a person review every claim that comes in. Furthermore, Lemonade automatically collects all incoming data, increasing the accuracy and speed of the anti-fraud algorithms and ultimately reducing false claims.

Summary

Since the inception of insurance, insurers have relied on data and statistics to determine how to price risk. But for many years data was scarce. It is not anymore. The above examples are just the tip of the iceberg of how insurance companies are using data to evolve.

Data improves the customer experience through bots, simpler insurance applications and more tailored coverages and limits. Insurers also have the opportunity to use their own data to create businesses that can be separate from insurance entirely. With super granular data continuously becoming more accurate and available, it will be interesting to see which companies will take advantage of this opportunity to win the market ― and one thing is for sure, those that don’t will not be around to see the change.

In today’s world, a brand’s ability to personalize the customer experience is more critical than ever, perhaps nowhere so much as in the insurance industry. When buyers are busy or stressed and products seem complicated — that’s when personalization comes to the rescue. It makes next steps clear and adds a human touch to each interaction.

Video takes this a step further. It simplifies the message, it’s engaging and, quite frankly, it’s more fun than reading endless paragraphs of legalese.

Gen Z has already discovered this. If you want to reach this newest cohort of consumers, it’s “video or vanish,” as Forbes notes. Video is by far their favorite form of media (twice as important as gaming, Google and music). But it’s not just Gen Z that likes watching video. Already, the medium accounts for over 80% of consumer internet traffic, according to Cisco.

The rise of both video and personalization has only accelerated during COVID-19 as consumers turn to digital tools to replace or enhance in-person interactions. The good news is that personalizing digital communications — including through video — for your insurance customers is easier than ever before. 

For one, consumers are increasingly willing to share data. According to a recent global study by Accenture, 66% would share data on their habits to enable personalized services. Indeed, Accenture included personalization as one of its three pillars for the future of insurance.

Luckily, video has advanced in recent years and is no longer the one-size-fits-all medium of generations ago. It can be dynamic and data-driven, unique for every customer who watches it, even if you have millions of customers around the globe, speaking different languages and living vastly different lives.

The challenge, then, isn’t the technology or even getting the data. It’s how to personalize the customer journey in a way that supports loyalty and retention, and that means more than just adding a first name to an otherwise generic message. When do you reach out? What do you say? What gets results? Answers to all this and more below.

Upgrade Your Quote Follow-Ups

Typically, acquisition efforts are the most difficult to personalize. This is when you have the least data on your prospective customer.

But think about the quote request process. Here, you do have meaningful data about your future customer, so what do you do with it if they don’t convert? This is an important opportunity to remind them how you can help meet their needs and to do it in a way that’s memorable and personal. It’s good for the customer experience and your bottom line.

See also: Why Cyber Strategies Need Personalization

A quote follow-up video does exactly that. It greets people by name and explains their recommended coverage with easy-to-understand language and visuals. This kind of personalized video has increased policies sold by a whopping 40%. You can even add a clickable call-to-action directly in the video, making it easier for viewers to convert.

Tip: If you don’t have data on what potential customers are looking for, let them tell you. The latest video technology lets users input their requirements directly into the video to generate a personalized quote in real time.

Make a Good First Impression

Let’s talk about the onboarding process. Hello, paperwork.

Getting started with a new insurance carrier or plan can be confusing for many people. A personalized welcome starts the relationship off right and is a great way to introduce them to the details of their specific coverage. Here are some important things to include at this stage:

• A personal welcome
• An overview of coverage details
• Outlining benefits
• Steps to set up their online account

Here’s an example from SelectHealth that shows this in action.

https://www.youtube.com/watch?v=l5PmRcLJHk0

And it works. We’ve seen lifts in customer satisfaction of 30% to 50% following personalized onboarding videos.

Take the Pressure Off Your Call Centers

In its road map to digital transformation, McKinsey identified customer service as one of the critical activities to tackle first. The right digital touch here can increase cost savings by 40% and lift ROI by five percentage points.

The key is letting customers self-serve in a way that’s seamless and boosts satisfaction. Enter personalized video. It can be a lifeline to a customer in crisis mode, especially when they’re going through the notoriously complicated claims process. (That’s the other area McKinsey labeled a top candidate for digital transformation).

A video personalized for the customer’s unique situation is human, relevant and cuts through complexity. By providing next steps in an accessible digital format, you’re letting customers get what they need right away, reducing calls to call centers by as much as 73%.

Tip: Try a personalized follow-up after someone contacts support. You can summarize the call and what the customer needs to do now in a personalized video that’s automatically generated and sent to the customer.

Remember — the secret to personalized customer care is being proactive.

See also: 6 Ways to Transform Customer Experience

Using Personalized Video to Wow Customers

Only 28% of insurance customers report being happy with their level of personalization. That’s a lot of room for improvement.

Fortunately, there are many more opportunities to connect personally — yet digitally — with your customers. Offer related insurance products you know will benefit them. Get in touch to remind them of the value you bring, increasing retention for the long term. You might even reach out with a personalized GIF on your customer’s anniversary to let them know you haven’t forgotten the special day. Ultimately, the greater care you put into treating your customer as a valued individual, the greater the impact. 

This strategy has certainly produced results for brands we’ve worked with, including over 20 of the world’s leading insurance companies. MetLife, for example, saw a 12-point NPS increase as a result of their policy renewal personalized video campaign. AXA reported an 8X increase in conversion rates and 20% churn reduction. 

Brands can launch their data-driven video campaigns in a matter of days, doing it themselves with Idomoo’s self-serve platform or letting us handle the details. To see how other companies are leveraging dynamic video, check out some of our favorite personalized insurance campaigns.

The global construction market is set for a sustained period of strong growth post-COVID-19, driven by government spending on infrastructure and the transition to a net-zero society. The switch to more sustainable buildings and infrastructure, the upscaling of clean energy facilities and the adoption of modern building methods will transform the risk landscape, with radical changes in design, materials and processes.

These challenges add to currently stressed supply chains, shortages in materials and labor and increased costs, which all come against the backdrop of years-long tight margins in the industry. A new report from Allianz Global Corporate & Specialty  (AGCS), Managing the new age of construction risk, explores both acute and long-term risk trends for the construction sector. 

The strong growth outlook for the sector is based on a number of factors, such as rising populations in emerging markets and significant investment in alternative forms of energy, such as wind, solar and hydrogen, as well as power storage and transmission systems. The shift to electric transport will require investment in new plants and battery manufacturing facilities and charging infrastructure. Buildings are not only expected to improve their carbon footprint, but will also require improved coastal and flood defenses and sewage and drainage systems in many catastrophe-exposed regions in response to more frequent extreme weather events. 

At the same time, governments in many countries are planning major public investments in large infrastructure projects to both stimulate economic activity after the pandemic crisis and to drive the low-carbon transition. In the U.S., a $1 trillion-plus infrastructure package touches everything from bridges and roads to the nation's broadband, water and energy systems. At the same time, the U.S. has announced plans to invest in a number of large infrastructure projects around the world in 2022 in response to China’s ambitious Belt and Road Initiative, which could stretch from East Asia to Europe. Four countries – China, India, the U.S. and Indonesia – are expected to account for almost 60% of global growth in construction over the next decade.

Downsides of the construction boom

The expected boom brings specific challenges in addition to benefits. In the medium term, sudden surges in demand could put supply chains under additional pressure and exacerbate existing shortages of materials and skilled labor, causing schedule and cost overruns. In addition, many in the industry may need to accelerate the implementation of efficiency and cost-control measures if profit margins have been affected in the COVID-19 economy, which can often impair quality and maintenance levels and increase susceptibility to errors. 

See also: Construction Workers’ Mental Well-Being

Analysis by AGCS shows that design defects and poor workmanship are one of the leading causes of construction and engineering losses, accounting for around 20% of the value of almost 30,000 industry claims examined between 2016 and the end of 2020. 

The enhanced sustainability and net-zero focus will strongly influence the traditional risk landscape in the construction sector. According to the UN Environment Program, buildings and the construction industry account for 38% of all energy-related carbon dioxide emissions. To cut carbon emissions, existing buildings will need to be refurbished and repurposed. Additionally, new materials and construction methods will need to be introduced across the market in relatively short periods. This will bring an increased risk of defects or may have unexpected safety, environmental or health consequences. For example, as a sustainable and cost-efficient material, timber's use in construction has increased in recent years. This has implications for fire and water damage risks. AGCS claims analysis shows that fire and explosion incidents already account for more than a quarter (26%) of the value of construction and engineering claims over the past five years – the most expensive cause of loss.

Upscaling clean energy – renewable risks

Expanding clean energy brings new risks, too. Offshore wind projects are growing and moving farther out to sea and into deeper waters, meaning the costs associated with any delays or repairs are increasing. Offshore wind farms, as well as onshore wind and solar projects, can also be exposed to serial losses. A design or manufacturing fault in a turbine, for example, can affect many projects. There have also been large claims from faulty foundations in solar parks and farms. Repairs to undersea cables, which weigh thousands of tons and require special ships to lay, can take more than a year. An offshore converter station alone can cost as much as $1.5 billion, comparable to an oil rig. A fire or explosion involving a converter, as seen recently in China, can result in a total loss. 

The two sides of modular construction

Ultimately, modern building and production methods have the potential to transform construction, transferring more risk offsite and incorporating greater use of technology. Modular construction, in particular, provides many benefits, such as controlled factory-based quality management, less construction waste, a construction timeline cut in half compared with traditional methods and reduced disruption to the surrounding environment. However, it also raises risk concerns about repetitive loss scenarios.

The shortage of skilled labor in the construction industry is likely to further the trend toward offsite manufacturing and automation. At the same time, digitalization of construction creates cyber exposures, which engineering and building companies need to strengthen their defenses against. Today, the numerous parties involved on a construction site are connected through various shared IT platforms, which increases their vulnerability. Cyber risks can range from malicious attempts to gain access to sensitive data, to disruption of project site control and associated theft, to supply chain disruption, to potential corruption of project design data, resulting in delays and ultimately reputational risk for parties involved.

See also: COVID-19: Next Steps in Construction

Better protection of building sites against natural hazards and water damage

The need to reduce greenhouse gas emissions will not only drive a more sustainable approach to residential and commercial buildings and infrastructure but may also hasten the trend as the industry looks to achieve efficiencies and minimize waste. Construction sites also need to give more consideration to mitigate the impact of climate-driven events, such as wildfires, flash flooding and landslides. AGCS claims analysis shows that natural hazards are already the second most expensive cause of construction losses, behind fire and explosion, accounting for 20% of the value of claims over the past five years. 

Meanwhile, water damage continues to be a major source of loss during construction. AGCS has seen a number of surprisingly large losses from leaks from pressurized water or fire systems that go undetected or occur out of business hours, on weekends or during periods when personnel are not on-site. Water leak detection and monitoring systems can help reduce the frequency and severity of water damage, mitigating expensive repairs and project delays.

The signs of a seismic shift in how insurance companies intend to compete for, and connect with, customers are difficult to miss. 

In China, Ping An Insurance Group is executing a tech-forward diversification strategy that includes development of integrated business ecosystems in five markets: financial services, health care, auto services, real estate services and smart city services. In North America, AXA XL, the property & casualty and specialty risk division of AXA, is winning awards for its construction ecosystem digital platform, which provides construction industry contractors access to a range of pre-vetted products and services, from curated technology offerings to tailored insurance products to knowledge-share resources. And in Europe, Movinx, a new joint venture between Swiss Re and Daimler Insurance Services, is developing fully digital automotive and mobility insurance products for vehicle manufacturers and mobility providers.

“Our joint long-term ambition,” said Pravina Ladva, Swiss Re’s digital transformation officer, “is to unlock an ecosystem interplay where insurance supports the introduction of new technologies such as advanced driving assistance systems and autonomous cars as well as new business models in the mobility area.” 

Notice a common thread here? Each of these ventures relies on an ecosystem, or extended business network. And these ecosystems are laying the groundwork for a new network-based economic order that promises to reshape our lives and our lifestyles as consumers. They are reinventing how many of the world’s largest industries, including insurance, engage with and deliver products and services to their customers. In industries from insurance to mobility to personal finance and beyond, we are witnessing a disintermediation where entire value chains are collapsing into single, integrated business networks. As this dynamic continues to play out, we are seeing competition shift from company vs. company to ecosystem vs. ecosystem. That’s happening in the mobility sector, for example, where Movinx faces a challenge from the likes of ERGO Mobility Solutions, an arm of European insurer Munich Re, and where companies such as Tesla and General Motors are moving into auto insurance.

Following this ecosystem thread leads to one place: the customer. New plays by Tesla, GM and insurtech Lemonade are pressuring insurance companies to reach across industries to build, or become part of, networks so they, too, can deliver the heightened experiences and rich, value-added services and seamless, end-to-end digital journeys that customers have come to expect. 

The consulting firm McKinsey was among the first to pick up the ecosystem thread. Noting that 71% of consumers say they’re ready for integrated ecosystems, it predicts that by 2030 the integrated network economy — and the 12 ecosystems it sees emerging across the globe — could account for revenue of $70 trillion. This represents 25% of the total economy, up from 1% to 2% today. What’s more, as McKinsey notes, there’s a golden opportunity for insurers to carve out an important role in multiple ecosystems. “The ecosystems most relevant to the insurance industry — and that thus represent the most salient entry points — include mobility, housing, health, wealth protection and B2B services,” McKinsey says.

See also: Power of Partner Ecosystems

An ecosystem-based approach makes sense for insurance companies for multiple reasons. First, it provides opportunities to counter disruptors by developing new revenue streams and business models, opening doors to customers and markets to which the insurers previously lacked access. It affords them access to huge volumes of customer data that they can use to develop, monetize, improve and refine their product and services. What’s more, as McKinsey points out, it “can help generate new leads, lower distribution costs, increase customer retention and improve prevention and assistance to reduce claims.” It also enables them to share risk with, and leverage the strengths of, their ecosystem partners, as AIG is doing in partnering with insurtech company Amodo to fortify the technology behind its usage-based insurance offerings. 

Why take on the huge expense and distraction to develop in-house technologies to support usage-based insurance when a potential ecosystem tech partner has already developed the technology you’re seeking? 

Insurers already are positioning themselves to thrive in a network-based economy by choosing the ecosystem partners with which they want to align, and the products and services to develop. Allianz is doing just that through its new Allianz X digital investment unit, for example. Its target ecosystems are mobility, connected property, connected health, wealth management and retirement, and data intelligence and cybersecurity.

Another critical step for insurers is to define the role they want to play within the ecosystem(s) in which they participate. Do they want to play a lead role and be an ecosystem orchestrator, as Ping An is doing, or are they better suited to supporting a risk-management/risk-mitigation role? While there are merits to both, the Amazons and Googles of the world have shown that being an orchestrator can pay big dividends. Because insurance touches so many industries, insurers should have plenty of potential roles from which to choose. 

And let’s not overlook the vital role data and digital technologies will play in the success of these ecosystems and the products and services they offer. Companies will need the ability to securely and seamlessly share, digest and act upon huge amounts of data (financial, operational, customer experience, etc.) in collaboration with their ecosystem partners. They’ll need machine learning and artificial intelligence tools to create the kinds of elevated experiences and outcomes their customers expect. They’ll need a robust, yet flexible, digital infrastructure to accommodate and integrate new business models, revenue streams and partners. And they will also need advanced analytics, modeling and business process tools to help them evaluate how those new business models are performing and how to innovate by developing new products and services on tighter launch cycles. 

See also: Insurance Ecosystems: Opportunity Knocks

Most important, perhaps, to their success in an ecosystem-driven economy is a willingness to evolve and embrace a new network-driven, collaborative and highly customer-centric competitive mindset. Customers inside and outside the insurance market have made it clear they expect convenient, quick and seamless digital journeys that ultimately lead to value-added services. If insurance companies and their partners can’t meet those expectations, customers will find someone that can. And that someone could be Amazon or Tesla or some other skilled ecosystem orchestrator.

A Wake-Up Call on Claims Paul Carroll, Editor-in-Chief of ITL Digitizing the claims process has been one of the shining examples of innovation in insurance — or so it seemed. But J.D. Power threw some cold water on that notion in a report released last week. “The industry is lagging far behind financial services and utilities providers when it comes to the digital customer experience,” according to the J.D. Power 2021 U.S. Claims Digital Experience Study. “Adoption remains stubbornly low. During the course of this year, just 40% of claimants interacted with an estimator via digital channels and only 47% made a claim via a website.” continue reading > An Underwriting Arms Race Join Denise Garth for an all new podcast featuring Vantage Risk's Gail McGiffin where they discuss what are the underlying drivers in commercial/specialty lines segment, how data is driving the volution of underwriting, and insights in how to change your mindset to achieve speed to market. Listen Now SIX THINGS Employer Trends Shaping Workplace by Kimberly George and Mark Walls If the pandemic has proven the need for anything, it is flexible and hybrid work environments. Read More As Digitizing Increases, So Does Fraud Risk by Manoj Upreti While digitizing has improved customer experience, sped service and cut costs, it also opened opportunities for bad actors to commit fraud. Read More The Virtual Insurance Agent Sponsored by Creative Virtual  With conversational AI, insurance companies can deliver easier and more convenient digital support to customers, improve agent experience and productivity, and reduce contact center traffic. Read Now The Future of the Independent Agent by Kaitlyn Taylor The COVID-19 pandemic changed how we sell insurance and rewrote the role of the independent agent forever. Read More What to Understand About Gen Z by Stephen Boucher Generation Z's appetite for personalized, digital-first experiences can unlock new revenue opportunities, both now and in the future. Read More How to Work With Insurtechs by Rick Bushell The key to success is to remember that an insurer will be co-developing a solution with the startup; transparency is a must. Read More 3 Common Mistakes When Verifying COIs by David Thomas You may be setting the bar too high for third parties. You may be insisting on "one-size-fits-all." You're surely doing too much manual work. Read More Creating Room for Innovation  Sponsored by Rimini Street  What if it’s possible to spend less time and money on legacy systems, freeing resources to focus on developing systems that will really move the needle for the business? Read More MORE FROM ITL December Focus: Smart Home "Even before a commercial version of the internet browser was invented in the early 1990s, the rich, geeky types I dealt with in my travels at the Wall Street Journal were figuring out ways to wire their homes to ward off possible intruders." Read More Global Insurance Forum Experts Series   Sponsored by International Insurance Society  Over this six-part series, hear from industry leaders about building an innovation culture, leveraging data for success, and more. Watch Now Partner with ITL to create expert thought leadership content. Custom Content Promoted Content Display Advertising Custom Webinars Monthly Topic Sponsorships ITL Partner Packages and more Learn more and get the 2021 Media Kit GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started SPREAD THE WORD Share Share Tweet Forward SUBSCRIBE TO SIX THINGS

Well, now we know. Insurance’s direct sales didn’t drive the agency channel out of existence. It’s thriving. Customers still enjoy working with agents. Agents still enjoy working with customers and insurers. The greatest change brought about in the past few years is the steady retirement of Boomer agents and the increase in agency mergers and consolidations.

Insurers are now faced with the reality of competing for shelf space --- due to fewer agents, with a smaller crop of new agents to fill the void. Insurers are also faced with creating products and service processes that will fit the new generation of agents and the next generation of customers. Insurers need to become… digitally attractive. They need to fit with the flow. They need to bond with the agent.

It’s a two-way relationship. Independent agents crave great relationships with their insurers. A new Celent survey report, commissioned by Majesco, found that “those that make the placement decision (the leaders who choose the priority insurers for their agency) are very satisfied with the relationship with their current preferred insurer(s) — perhaps because…they are able to choose where to place the business and can choose to place it with the insurer they prefer.”

This is great news for insurers that work with independent agencies for both P&C and L&A. It means that, if they go through the hoops of creating a positive sales environment with processes that work and have reasonable pricing, agents will choose them, and the relationship will be the insurer’s to lose.

Inside the mind of the independent agent

Any insurer of nearly any type or size should be fascinated with the perspectives of independent agents. Because agents are still the largest channel for insurance sales, insurers need to keep tabs on what they are thinking and how they perceive insurers. Even for insurers with captive agents, agency service can be the make or break point of growth.

Majesco is interested in the agent and agency viewpoint, as well, so we regularly research all aspects of distribution management to keep our customers and partners ready for what’s to come. In August 2021, we asked Celent to execute a study on our behalf. Celent interviewed 231 captive agents, roughly split between one-third life agents, one-third P&C and one-third who carry a mix of both. The Celent report, Reshaping the Distributor Insurer Relationship, provides interesting insights … some of which will surprise you!  We discuss the report results in a webinar that we encourage you to watch.

Today we’ll discuss a few of the agent insights in the Celent report across some very concrete details of the insurer/agent relationship.

• Interaction Preferences — How do agents want to do business with their preferred insurer?
• Current Satisfaction — Are independent agents, on the whole, pleased with their preferred insurer?
• Current vs. Future Level of Digital Interactions — If an insurer is going to meet agent expectations for the next three years, which capabilities will need to become digital?
• Anticipated Future Satisfaction — If insurers meet expectations, just how satisfied will this make agents with their preferred agent relationship?

Let’s listen to the agents and see what they have to say.

How does the agent like to communicate with the insurer?

Insurer/agent communication is complicated. Some tasks are straightforward. Others require nuanced communication. Some communication falls into the category of advice. Other communication requires equations, reports and varied presentation options. It shouldn’t be a surprise then that the question, “How do you prefer to communicate with your preferred insurer?” would need to be broken down into subsets.

When it comes to interaction preferences, Celent chose to solicit both the high-level view and to dig into interaction preferences across the varied functions of the broker/insurer relationship.

“The Silent Generation and Baby Boomers were more likely to prefer to use technology (for communication) than the younger generations," Celent found. "And surprisingly, almost 30% of Generation Z said they prefer to do everything via phone, email or in person rather than use technology alone to process business – the highest percentage across generations.”

Yes. You read that right. The older agents prefer to use technology to facilitate their communication, and the younger generations trend toward wanting to pick up the phone. Looking closer at the actual results, we see more of a middle road. Most agents prefer any and all forms of communication. In general, most agents like to use the technology to get started and then pick up the phone for confirmation or further discussion.

See also: Underwriting in the Digital Age

Digging a little deeper, we find out that younger agents are still in the learning cycle. They are most comfortable with a voice telling them something because it can be explained. As they mature in their positions, they will likely lean more on the efficiency of the technology and less on the expertise of the insurer on the other end of the line.

But, there’s another twist. Gen Z and millennials switch jobs and occupations more frequently than the Silent Generation, Boomers or even Generation X. Onboarding and educating agents needs to happen more quickly and with a more intuitive format. So, Celent’s suggestion is that insurers “can build additional tools, training and advice support into their portals.” They can build recommendation engines. They can consider gamification techniques for learning.  

Are independent agents pleased with their preferred insurer?

Satisfaction varies widely. Agents who are empowered to place the business are most satisfied with their preferred insurers. (96% are very satisfied or somewhat satisfied.) But when the end customer is allowed to make the choice without agent involvement, only 84% of agents are very satisfied or somewhat satisfied. What will improve satisfaction throughout all groups is an overall increase in digital capabilities.

Which capabilities need to become digital?

Insurers have been investing in the future, many of them attempting to bring digital processes to the agency. Agents are expecting that these improvements will increase and cross all of their functions. For example, new business quoting is only considered by 40% of agents to happen digitally with their insurer. In the next three years, 59% of them expect to be able to quote using a digital process. License management would be an excellent place for insurers to grow their digital capabilities. Only 49% of agents seem to be using a digital process, yet 61% consider this to be an area their insurer should digitize in the next three years.

Agents are also ready for additional changes in policy inquiries. Though it’s a nice touch-base point with insurers, 60% of agents feel that they should be able to use more of a digital process in the next three years. Information on demand is an essential aspect for agents who need to win the business and keep the business.

Agency interaction is also variable based on P&C vs. life agents. The Celent report points out that their level of digitization isn’t equal:

“For property casualty agents, the five activities with the highest level of digital interactions today are getting reports, policy changes, renewals, compensation and commissions and policy inquiries. For life agents, the top five digital activities are getting reports, compensation and commissions, updating and managing licenses, policy changes and renewals. Property casualty agents are more likely to be handling policy transactions in a digital manner, and life agents are more likely to be handling agency management transactions in a digital manner.”

In all interactions, though, insurers are increasingly going to need to provide digital options.

Celent found: “Insurers need to be investing for the future. Agents have high expectations for increased digital interaction across all types of activities.”

How satisfied will agents be with insurers that make their lives easier?

It might be stereotyping, but if there is one thing that agents are good at it is thinking through a process and how to improve it. That’s the nature of selling. The person who sells has to think ahead for their clients, for their business and for themselves, tweaking pitches and processes to land the business and then keep it. This makes agents good at thinking ahead, envisioning and anticipating the outcomes of future scenarios.

For example, Celent asked agents about their preferences about policyholder self-service for certain tasks. The agents came back with more than data. They came back with insightful context regarding what should be allowed via self-service and what must be guarded for the security of the business. Celent also asked agents to look out into the future of their preferred insurer satisfaction. This is highly relevant to an insurer’s technology decisions, shedding light on the prioritization of service improvements over the next three years.

Celent said, “While agents don’t expect insurers to become significantly less effective, they do believe insurers will become more efficient. And although they expect more transactions to be automated, meaning less human interaction, they don’t foresee any negative impact on personal relationships.”

The larger the independent agency is, the more likely it is to view insurer technology as crucial. 

Celent said: “Large agencies — those generating over $10 million of revenue annually — are 50% more likely to say they believe future investments will impact the insurers’ effectiveness in working with the agency. They also report an expectation that the personal relationship will improve, moving from 40% to 54%. Clearly, those insurers that expect to work with large agencies in the future will continue to face pressure to digitize their operations.”

See also: Building Your Digital Sales Arsenal

The case for catering to distributors

There are, of course, dozens of areas where insurers would be best-served to adapt now and reap the rewards later. Data makes its own case for a new approach among insurers. How can an insurer’s use of data dramatically improve the effectiveness of agents at the same time it reduces loss?

A great example would be the collection of agency data. Transactions tell stories. Is the customer at risk for shopping a policy around? Are they at risk for fraud? Customer touchpoints can potentially shed light on the past and the future. How closely aligned is the technology that resides in the insurer’s back office with the technology at the independent agent? Agents want technology that is easy to use. They want more help from insurers with their technologies. Is this desire a potential bridge into better use of transactional data?

What about communication channels?

Celent’s findings seem to indicate that insurers should be less concerned with pushing agents to use particular communication channels and instead prepare for the seamless use of all of them. Maybe this is the great takeaway:

The future of insurance is going to include stronger insurer/distributor relationships. Agents want it. Insurers need it. Customers will benefit from it.

Yet, many insurers aren’t ready to deliver on their part of the relationship. They need a fresh look at the benefits and the full opportunity. They need a road map on how to make the organization as attractive as possible to agents across most products and geographies.

In our next look at the Celent report, we’ll take a close look at insurer options. What is the best path forward for an insurer that is concerned about growing the business through agency partners? For another look at what drives agents and brokers, revisit my blog on “Consumer-Grade Digital Experiences for Agents and Brokers,” or view our webinar, "A New Digital Experience for Agents and Brokers."

Open insurance continues to be the next game changer in insurance. The second edition of the INNOPAY Open Insurance Monitor, which keeps track of how the global Open Insurance landscape is evolving, reveals a rise in the number of insurtech players that are providing access by connecting insurers with digital ecosystems. Meanwhile, one application programming interface (API) marketplace has become the first in incorporating Open Insurance services in its digital offering. Based on our analysis of the findings, we can conclude that the traditional industry players – incumbent insurers and banks – still seem in no rush to strengthen their currently weaker position to capture the value from Open Insurance. 

The Global Open Insurance Trend Is Expanding, Albeit Slowly

The updated edition of the Open Insurance Monitor includes several new players with insurance API propositions, both insurtechs and Open Insurance marketplaces. We can draw the following three key insights from the latest Open Insurance Monitor:

1. Insurtechs are entering the game

Most of the new entrants in this edition of the Open Insurance Monitor are insurtech players. They all offer "insurance as a service" that facilitates integration between insurers and third-party sales channels, with the developer portal environment as part of the offering. However, there is significant variation in the amount of functionality they offer, the level of developer experience and how they position themselves.

Boost and Ancileo, both located on the left of the spectrum, have a relatively small API scope focused on quotation, purchase and insurance policy modification. Although their developer experience is also relatively limited, they make up for it with clear API documentation that contains the necessary components for adequate interpretation and usage of the APIs. Meanwhile, Plansource offers benefits APIs as part of its complete HR solution to provide employing organizations a direct connection with insurance carriers for employees to have a seamless benefits shopping experience. The APIs include services for plan subscription and retrieval of relevant coverage data.

Another notable insurtech is Dutch-based CCS, which positions itself solidly on both axes. CCS has a wide API scope that covers multiple components of the insurance value chain, plus it acts as an API marketplace for its customers. Its developer experience is more advanced than its insurtech peers. For example, CCS offers proper developer usability features such as automatic onboarding, software development kits (SDKs) and app management and analytics functionality.

2. API marketplaces as a one-stop shop for insurance services

API marketplaces offer a variety of different API services from different providers, thus functioning as a one-stop shop for organizations that are looking to strengthen their capabilities through external APIs. The marketplace serves as a single integration layer, thereby reducing the implementation hassle.   

LUXHUB is the first to integrate insurance services into its marketplace environment. It recently announced a new partnership with Baloise to provide mortgage insurance quotations directly to banks. As part of this new partnership, LUXHUB now publishes quotation and subscription request APIs on its portal. Although Baloise already had its own developer portal in place aimed at retail insurance, this partnership enables Baloise to directly integrate with core banking systems via the LUXHUB marketplace.

3. Existing players are not yet shifting focus

As highlighted in the first edition of the Open Insurance Monitor, insurers appear to be focused mostly on establishing their API portfolio, with their top priority being API documentation to allow developers to understand and use their APIs properly. There is little to suggest that insurers are shifting their focus toward other developer portal capabilities, while some extension of the API portfolio can be witnessed. For example, Nationwide has added several new API functionalities, including within its life domain, thereby moving closer to AXA as a functional innovator.

The same holds true for banks, whose superior developer experience is a result of their earlier Open Banking efforts. Their insurance-related API scope remains limited, but a few of them are improving their developer experience. For instance, Citibank has strengthened its developer usability with analytics and group role functionalities within app management and has enhanced community development by showcasing partner projects for inspiration. Meanwhile, Standard Chartered has launched an academy via its developer portal, where developers can improve their knowledge and skills on topics such as cloud transformation, APIs and emerging technologies. This feature is unique in both the Open Banking and Open Insurance space.

See also: Why Open Insurance Is the Future

Insurers Need to Start Deciding how to Compete Against or Benefit From Tech Players

The INNOPAY Open Insurance Monitor demonstrates that Open Insurance has been progressing slowly, but the presence of insurtech and API marketplaces in the Open Insurance space seems to suggest that the pace is accelerating. This presents incumbents with a choice: Fight the competition, team up with these tech-savvy new entrants or attempt a combination of the two. The "no regrets" move for insurers (and banks) would be to extend their own API portfolio and develop the necessary Open Insurance capabilities themselves. This would pave the way for an innovation platform that enables partnerships to be leveraged at scale. Insurtechs can play a role, for instance by providing direct access to a vast amount of different digital ecosystems for (white-label) product distribution. Because a wait-and-see approach is clearly no option, insurers need to carefully weigh up their choices and make the right decisions to safeguard their future position.