Overview

In a competitive insurance space, an effective customer acquisition program is the key to success. Acquisition has become even more crucial as insurers grapple with changing customer needs and market disruptions. This playbook will help savvy insurers develop and implement a data-driven acquisition strategy through real-world examples from John Hancock, Lemonade, Northwestern Mutual, and more.

Robots, biometrics and smart devices. If you had told me 10 years ago I’d not only have access to these innovative technologies but would use them daily, I’m not sure I would have believed you. Yet here I am, using facial recognition to unlock my phone, log into apps and access my bank accounts. And at Hyland, I am working with insurance organizations to understand, strategize and implement disruptive technologies, including robotic process automation (RPA), which works hand in glove with a content services platform. Much like a smart phone provides a variety of tools and capabilities to streamline our day-to-day lives, a content services platform and RPA can help insurance organizations improve their operations, drive efficiencies and meet their digital transformation goals — all of which helps them thrive in an evolving business climate. 

The insurance industry has often been perceived as being slow adopters of technology, often relying on old processes and systems because they worked, even if inefficiently. What can we say…we’re risk-averse. Then, the insurtech era came along and presented us with different and more efficient ways of doing things. Keeping pace with all the new technologies can be stressful, but these technologies are impossible to ignore. As such, RPA has become a technology of interest because of the massive productivity and customer service benefits it offers.

In key business processes, getting all the necessary information and consolidating it often takes more time than deciding whether to issue the policy or pay the claim. RPA can do the gathering and consolidating without human intervention. 

A human might grow tired of doing the same task of collecting and consolidating data again and again…that’s when things can be missed, and mistakes can be made. A bot doesn’t get tired. And, while the RPA bots handle more tedious, manual tasks, your staff is freed to focus on more creative work that drives customer satisfaction. 

See also: Keys to ‘Intelligent Automation’

Setting an effective RPA strategy starts with structure

A successful RPA automation project relies on a vetted and structured format. To achieve this, organizations need to have control over the information feeding the RPA solution. Many insurers have implemented content services platforms as their information hubs, connecting all content within line-of-business systems and ensuring accurate, up-to-date content that RPA solutions rely on. Once fully connected, RPA and the content services platform provide a comprehensive suite to achieve intelligent automation.

To identify which internal processes, tasks and actions are the best candidates for automation via RPA, I recommend looking for those with the following qualities: 

• Standardization: Look for tasks that have a defined sequence and don’t have too much variance. Ideally, the work won’t change any time soon. 
• Structured data: The information and data that feeds the task should be relatively structured – or organized in a fairly predictable way so that it is easily classified. 
• Rule-based: The task or action should be built on a series of well-defined, objective rules. That means it would not require human interpretation to make a decision. 
• High-volume: The chosen tasks and actions should represent a substantial amount of staff time. Manually transferring data from one source to another is typically a good target. 
• Digital data: A task or action that already involves and relies on digital data is best suited for automation. If the task still relies on physical and handwritten documents, optical character recognition (OCR) and machine learning can be implemented to convert them to digital formats. 

Implementation: Finding the right solution…and provider

How can insurers select a solution, and provider, that best fits their unique requirements? Look for an RPA solution that is scalable and configurable to ensure it meets your needs today and into the future. Selecting a solution that complements an existing content services platform or a vendor that can provide both creates an end-to-end, RPA-enhanced automation strategy — one that is designed to empower your organization to automate, optimize and transform tasks, actions and processes. Look for an RPA solution that helps your organization: 

• Analyze: Look for platforms that quickly, accurately and intuitively analyze tasks and processes down to the click level and automatically document process steps. 
• Build: The RPA solution should leverage a low-code toolset to allow you to quickly and easily create automation opportunities. 
• Run: Efficiency is key here – the solution should efficiently run unattended or attended automations, ensuring maximum bot utilization and scalability.
• Manage: The best RPA applications manage and orchestrate bots with ease, using real-time dashboards for live monitoring and intuitive management. 

When investing in any new technology, it’s also important to have a clear understanding of the total cost of ownership (TCO), which includes both the direct and indirect costs associated with the purchase. Be sure to calculate any additional fees for integrations, consulting, maintenance, training and other costs. 

See also: The Future of Work: Collaborative Robots

Farewell wasted time

The current global health situation has led many insurers to accelerate their digital transformation strategies and new technology. RPA provides a great opportunity to enhance intelligent automation capabilities and further business process automation strategies. Insurers that leverage a digital workforce to complement their human employees provide employees with additional ways to excel at the work they do best, while delivering increased value for the organization.

In today’s data-driven world, bots help combat productivity drains that deplete resources and allow employees to focus their time on higher-priority tasks that build more meaningful connections with the customers they serve.

Insurance carriers that invest in open ecosystems and best-in-class components will experience improved customer satisfaction, lower costs and leapfrog the competition.

In 2020, the insurance industry experienced several years of digital transformation in a few months. The days of monolithic legacy systems, built and maintained in-house for decades, are coming to an end as the market rewards dynamic carriers that leverage application programming interfaces (APIs), microservices and web services to build ecosystems that offer the right experience, to the right people, on the right platform.

What is a digital ecosystem?

A digital ecosystem describes a loose network of connected applications and technologies that act cohesively to meet business objectives. Inspired by ecosystems found in nature, digital ecosystems are characterized by principles of openness, flexibility and self-organization. APIs, web services and microservices often work together to form the framework of a digital ecosystem.

Uber, for example, maintains an ecosystem of over 2,200 microservices. This architecture enables greater flexibility and autonomy, allowing teams to innovate rapidly and swap out specific services without compromising the entire system.

Unlike open ecosystems, closed systems (also known as “walled garden” systems) are typically built and maintained in-house. An example of a closed system is Apple’s iOS operating system, where apps can only be downloaded from Apple’s App Store.

The insurance industry’s next big frontier

According to research firm Novarica, the trend toward digital ecosystems in insurance is powerful, with more than 65% of insurers having deployed APIs/microservices as of Q4 2019. A couple of years ago, insurtech Lemonade made headlines by launching its public API, allowing anyone to offer Lemonade policies through different apps or websites. According to research from Accenture, 84% of insurance executives say ecosystems are important to their strategy. Ecosystems are the insurance industry’s next big frontier for disruption.

For insurers, a digital ecosystem can encompass the entire customer journey, from quote to claim. This frequently involves touchpoints with several applications such as CRMs, policy administration systems, broker portals and third-party data service providers. This barely scratches the surface. For insurers, however, there remains an understandable hesitancy toward adopting open ecosystems.

While carriers acknowledge the importance of adopting innovative new technologies, many find themselves tied to closed systems that struggle to “talk” to new applications. This may result in missed opportunities, declining market share and unhappy customers while rewarding competitors that offer greater flexibility. What monolithic legacy systems do provide, however, is control: governance, security, predictability and change management. These are important concerns in an industry known for its heavy regulation.

For many CIOs, managing a cornucopia of different technologies within a digital ecosystem can seem a tough pill to swallow given security and governance concerns. However, with rapidly evolving customer expectations and a drastic increase in the overall rate of change, greater flexibility is now a must.

A recent survey of European insurers conducted by DXC Technology found that 22% of insurers were already part of an ecosystem providing additional services to their customers, and a further 46% had plans of joining an ecosystem soon. The evidence is clear that the industry is shifting toward greater openness and agility, and insurers must be prepared to commit to the new paradigm.

See also: Big Opportunities in Insurance Ecosystems

Three ways insurance ecosystems drive competitive advantage

1. Optimize Customer Experience

Traditionally, customers had greater loyalty to particular brands, and there were relatively few touchpoints in advance of sales and renewals. Today, customer relationships are more fluid as pricing and plan comparisons have become more transparent, and the customer journey frequently involves several touchpoints across different channels both before and after a policy is sold.

Digital ecosystems enable insurers to optimize the customer experience by increasing the number of touchpoints with customers and by providing new services. Lemonade’s open API is one example, but there are many other opportunities that insurers are seizing to meet modern expectations and grab growth opportunities:

• Chatbots and conversational marketing technologies
• Life insurance applications for managing personal health
• Virtual healthcare delivery
• Partnerships with other businesses to earn digital loyalty points
• Connected smart home and vehicle-safety solutions
• Extensions to manufacturers’ warranties as part of an integrated e-commerce experience
• Advice and estimates provided to customers using voice technology

Insurers that are late to develop their ecosystems will likely lose market share to competitors and disruptors that deliver engaging new experiences.

2. "Componentization" of insurance ecosystems boosts agility and innovation

Open ecosystems that combine discrete components enable insurers to reduce costs and improve agility and system reliability while supporting innovation.

Flexibility is enabled by modularity: the ability to continuously swap out components based on evolving business needs. Similarly, if a single service goes down, it can be replaced without jeopardizing other components.

"Componentization" also forces IT planners to clearly define the roles of different components. This clarifies ownership and makes it easier to identify bottlenecks and efficiencies, improving the quality of services and reducing the overall IT spending.

At Global IQX, we built a componentized platform from the ground up. Our platform enables carriers in the group and voluntary benefits business to select specific components that fit within their digital strategies while integrating with their existing CRM, PAS and other applications. Whether insurers decide to build upon IQX or another platform, the principles of flexibility and componentization must reign supreme.

In the context of digital ecosystems, CIOs and CTOs are curators. Their role is to constantly evaluate and select best-in-class components for each function of the ecosystem within an established governance model. In the digital ecosystem economy, there is also a greater emphasis on maintaining and scaling partnerships with external vendors and data-service providers to remain at the forefront of innovation.

3. Securing Data Dominance

Big data analytics is changing the game in the insurance industry. More data is produced than ever before, providing ample opportunities for insurers. For example, auto insurers are now leveraging the four terabytes of data produced by connected cars each day to provide more personalized experiences to their customers. Similarly, life and health insurers are leveraging connected data from wearables that track thousands of data points such as an insured’s heart rate and sleep patterns.

To achieve data dominance, insurers must build and scale big data ecosystems. These can include analytics platforms, data visualization platforms, business intelligence platforms, artificial intelligence tools and Internet of Things (IoT) technology such as wearables and smart home devices. Global IQX, for example, includes the option for employees to connect their FitBits during enrolment to receive applicable discounts.

Most carriers already have vast amounts of data. New technologies can be leveraged to better visualize data sets and to suggest optimal benefits plan design based on past success factors. When data-protection and privacy laws pose challenges to personalization, artificial intelligence tools can be used to produce synthetic data that does not expose customer information.

Carriers that can most effectively leverage big data will be able to deliver more personalized customer experiences, increase customer retention, cut costs and produce more accurate quotes, faster.

Insurance ecosystems: Seize the opportunity for differentiation

Ecosystems might be the single greatest opportunity for insurers to differentiate themselves in a period of rapid digital transformation. Indeed, according to 2019 research from Accenture, only 5% of insurers can be considered “ecosystem masters.”

See also: Ecosystem-Based Business Models

While the benefits are clear, it is not always easy to develop and scale a digital ecosystem business model. There will be organizational, cultural and technical challenges along the way. Once you establish the foundational platform and define parameters you’ll have the opportunity to improve your service offerings, increase customer loyalty and drive growth in a competitive landscape.

JANUARY 2021 FOCUS OF THE MONTH
Commercial Insurance

 

FROM THE EDITOR

 

Much of the focus on innovation has related to personal lines. That makes some sense: Policies tend to be more cookie-cutter than in commercial lines, and individuals, spoiled by Amazon and other online resources, have demanded a better experience from insurers. But don't sleep on commercial lines. As businesses see what's changing in personal lines, they aren't going to be left behind. Businesses are demanding simpler interactions and more understandable policies, as well as better prices. Insurers are responding with smooth digital communications, augmented by AI; with autofill to diminish the drudgery of forms; with analytics that provide a better understanding of customers' businesses; and even with the Holy Grail for insurance: an ability to help customers foresee and prevent losses, rather than just indemnifying companies after the losses occur. Check out the hand-picked content below and stay up to date on the latest in commercial insurance.

 

- Paul Carroll, ITL's Editor-in-Chief

 

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6 QUESTIONS FOR STEPHEN APPLEBAUM

We asked Stephen Applebaum, Managing Partner, Insurance Solutions Group, 6 things.

What is the biggest change you expect to see in commercial lines in the next 12 months?

COVID-19 related claims, notably first-party property business interruption and third-party liability, will proliferate and create new distractions in commercial insurance once the complete extent of losses is tallied in 2021 and beyond, attracting growing attention from media, regulators and other public watchdog groups, further complicating commercial policy renewals and new business and challenging actuaries, underwriters, agents and brokers. Adoption of policy process automation, including automated underwriting workstations, will accelerate as carriers struggle to regain operating efficiency while managing risk more accurately.

Connected auto, home and business insurance models will begin to see meaningful adoption. Telematics program adoption, featuring innovative partnerships will explode in commercial auto insurance for fleets, especially small business, offering more compelling value propositions focused on driver safety/behavior modification, rewards and fleet and asset management benefits. Commercial property will follow this trend.

Read the Full Interview

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WHAT TO WATCH

The Future of Blockchain Series Episode 2: Usage in Commercial Lines Blockchain has incredible potential to streamline business functions and open up opportunities for a wide range of innovations Watch Now

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WHAT TO READ

	Property Claims: It’s Time for Innovation Those that solve for the dynamics of the many opportunities are likely to be the future industry leaders. Read More
	5 Liability Loss Mega Trends Fines and remediation standards are on the increase, so environmental management should be a boardroom priority. Read More
	How to Minimize Flood Losses Flood warnings have two weaknesses: lack of detailed information on the precise locations at risk of flood and too many false alarms. Read More
	COVID-19 Is No Black Swan There were clear warnings about COVID from credible institutions. The real issue is how we are going to deal with "grey rhinos." Read More
	How ‘Explainable AI’ Changes the Game AI often performs its magic with little insight into how it reached its recommendations. "Explainable AI" makes all the difference. Read More
	New Paradigm for Reinsurance Can the global reinsurance market morph into a new paradigm, allowing a more responsible and sustainable market to emerge? Read More

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WHO TO KNOW

Get to know this month's FOCUS article authors:

Stephen Applebaum	Ciara Brady	Matteo Carbone
Hélène Galy	Jonathan Jackson	Vincent Romans
James Vickers

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Learn More about ITL Focus

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Blockchain has incredible potential to streamline business functions and open up opportunities for a wide range of innovations

Blockchain provides a single source of truth that is kept up to date in real time and is accessible (through permissions) by all stakeholders. Having that source creates unprecedented efficiencies by eliminating much of the phone tag and other wastes of time that come with the document-sharing that characterizes so many processes in the insurance industry. This webinar dives into the technology’s use in commercial lines, highlighting production-ready use cases in surety bonds, workers' comp and certificates of insurance. The possibilities are breath-taking.

Watch to learn:

• Where blockchain is about to make a big impact  
  
• The road map for the future of blockchain
  
• The status of active use cases and their testing schedule
  
• How you can prepare to reap the benefits

Don’t miss this free on demand panel discussion.

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Speakers:

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Did you miss the first in our blockchain series? View it here.

In Six Things at the beginning of this year, I joked that it should be dubbed "Hindsight," because hindsight is 20/20. (Yes, I'm aware that I'm hardly the only one to come up with that little chuckle.) Now that 2020 -- the longest, strangest year of my life -- is finally headed into the books, we have some actual hindsight, and I'm delighted to share these examples of cutting-edge thinking, from among the most-read pieces that we published this year.    I hope they continue to provide food for thought as we get set for a year in which we should be able to consolidate the hard-earned gains in innovation and efficiency that 2020 forced us to make -- and even accelerate them.   In the meantime, I wish you all a joyous (and safe) holiday season.   Cheers,  Paul   TOP OF 2020 4 Post-COVID-19 Trends for Insurers by Roger Peverelli and Reggy De Feniks It’s not all gloom and doom. A crisis usually functions as a great breeding ground for innovation. Read More The End of Auto Insurance by Denise Garth The greatest threat may be auto insurers’ continued 100-plus-year-old view of auto insurance as a policy transaction. Read More Blockchain in Insurance: 3 Use Cases by Ivan Kot Many blockchain insurance projects are lingering at the proof of concept stage, but three trailblazing applications are emerging. Read More 9 Months on: COVID and Workers’ Comp by Kimberly George and Mark Walls Does COVID open the door for future infectious disease coverage under workers’ comp? Likely, yes. Read More Should Insurers Use Amazon Model? by Barry Rabkin The short answer is: No. Insurance is very different from the business of Amazon (and Netflix) and must be approached differently. Read More Why Traditional Insurance Won’t Work by Tal Daskal With the sudden shift to remote-only interactions, insurers can no longer dictate the speed of their transformations. Read More 6 Megatrends Shaping Life Insurance by Ed Majkowski and Nicole Michaels The life insurance and retirement market is set for profound change in the next decade. Read More How Insurers Are Applying AI by Tiffany Wang and Jeff Goldberg Insurers should not invest in technology-driven projects; instead, look for use-case-driven projects. Read More Why Work-From-Home Threatens Innovation by Stephen Applebaum Non-insurance competitors such as Amazon, Google, Tesla, Comcast, General Motors and many others are not standing still, and neither should insurers. Read More The Next Wave of Insurtech by Paul Carroll Innovation will focus less on bells and whistles and more on improvements across entire processes and organizations. But incumbents must start preparing. Read More GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet SUBSCRIBE TO SIX THINGS

The premise is simple: Risk mitigation happens when people take everyday actions that promote their safety for the long term. In the realm of health, life and auto insurance, where such everyday actions constitute much of a policyholder’s risk profile, motivating behavioral change through financial and psychological incentives can dramatically improve outcomes.

That’s the power of behavioral science in insurance. It explains how economic, social and psychological factors influence the way we make decisions. Over the past decade, those insights have been revolutionizing the way insurers approach pricing, underwriting and customer experience.

Encouraging positive lifestyle changes doesn’t just make for healthier policyholders – it’s a symbiotic relationship. Insurance providers can leverage behavioral incentives to increase brand engagement, improve underwriting accuracy and lower costs.

Coupled with tech advances that enable better risk assessment, behavioral science could just be insurers’ silver bullet in a period of stagnant growth and financial strain from the pandemic. Here’s how it works:

Step 1: Focus on Risk Prevention by Encouraging Healthy Behaviors

Over the past 10 or so years, major insurance carriers have begun to incorporate wellness programs into their policies. That’s because prevention is always better than cure.

Serious illnesses that make up the leading causes of death in the U.S. – including heart disease and cancer – result in millions of expensive claims every year. Faced with this troubling reality, insurers asked: Which everyday behaviors do we have the power to encourage that can improve health outcomes and reduce costs?

For many patients, diseases are preventable through lifestyle changes and early risk detection. While not directly involved with policyholders’ medical care and lifestyle activities, insurers realized they could add an incentive to build healthy habits by lowering insurance rates as a reward.

Through partnerships with wellness companies and technology providers, many insurers now encourage healthy behaviors by offering lower premiums:

• Life insurers track your daily steps. A handful of life insurers have partnered with Apple Watch and Fitbit to create step-tracking programs that decrease rates for frequent walkers. Walking more increases life expectancy, which means fewer payouts.
• Medical insurers make it cheaper to go to the gym. A number of medical insurers now provide gym membership discounts and lower premiums when policyholders log their gym visits.
• Medical insurers encourage routine screenings. Insurers lower premiums when customers with genetic risk factors for diseases like cancer and diabetes attend annual screenings and checkups.
• Auto insurers use telematics to encourage safe driving behaviors. Perhaps the best-known example of a prevention model in insurance is the use of telematics to reward more responsible drivers with lower premiums.

See also: 3 Tips for Increasing Customer Engagement

Step 2: Boost Engagement Through Experience Gamification and Brand Touchpoints

Financial incentives aren’t the only powerful motivators in human behavior. Insurers can motivate healthy lifestyle decisions – and enhance the customer experience – by gamifying their products.

The insurance industry has often struggled to build brand loyalty and customer satisfaction because its product is, by nature, easy to ignore. As many as 44% of customers have had no interactions with their insurers during the last 18 months. Unless policyholders have a very negative interaction with their insurer, they’re unlikely to have a memorable brand experience, or even remember the name of their carrier.

Wellness and prevention models are appealing because they're fun. People love games and gratification: It’s triply rewarding when, after going to the gym, policyholders know they’ve not only done something good for their health and their wallet, but they can earn more points on their app.

A gamified product is also an opportunity for more digital brand touchpoints. By creating apps and online platforms for tracking wellness behaviors, insurers can create a stronger brand relationship with their policyholders – and ultimately improve the customer experience.

Step 3: Leverage Data to Price and Underwrite More Accurately and More Efficiently

Encouraging policyholders to take certain actions is only one piece of the puzzle. Once insurers change the way people behave for the better, how can they translate that into tangible business benefits?

The insurance industry has been headed toward digital transformation for the past several years. The increased adoption of tools like artificial intelligence, automation and machine learning has made dynamic behavioral risk assessment models possible. 

Insurers collect data upon data on their policyholders’ risk profiles and behavioral patterns. To convert that data into cost savings for their business, insurers will need to leverage tech to write policies on the back end. 

By digitizing and automating the pricing and underwriting process, insurers can efficiently and accurately provide fair rates based on healthy habits. A life insurer can assess FitBit data to deliver a lower premium, or an auto insurer can analyze telematics data to determine whether a premium should decrease based on safe driving practices.

At Beam Dental, for example, we underwrite tens of thousands of policies exclusively via AI and ML. This allows us to compare new policyholders against historical claims data to precisely predict pricing and suitable dental plans. And by offering a connected electric toothbrush that tracks daily brushing, we can offer policyholders with good dental habits lower premiums.

See also: How Will Strategies Change in 2021?

Better Health Outcomes, Better Savings, Better Customer Experience

The insurance industry has long needed a jolt of innovation. COVID-19 may be the tipping point in the digital transformation that was already underway.

Now that more and more insurers have access to cutting-edge tech that supports better risk assessment and digital experiences, they have the tools necessary to encourage, track and reward behaviors that reduce risk. Technology is the means, behavioral science is the roadmap and better outcomes for insurers and policyholders alike are the outcome.

To say that 2020 was a whirlwind would be an understatement. Our world was completely rocked by the impact of COVID-19, quarantine and adjusting to the reality of working remotely from home. And it wasn’t just people who were forced to adjust; businesses were also burdened with having to quickly change course, some with little direction and few resources.

Take independent agents (IAs) -- we recently conducted a survey on the state of the independent agent landscape, and a resounding 60% of agents said that they were unprepared to move their businesses to a fully remote structure, which strained client relationships and led to struggles with retention. Agents reportedly saw an average 38% drop in revenue and sales due to COVID-19. In hindsight, 57% of IAs wish they had better technology to assist them and their businesses during the pandemic. The pandemic taught IAs quite a few hard-fought lessons, which they will need to keep in mind as they begin the work of recovering their businesses.

Here are my top four predictions for what will most help IAs with this process.  

1. 2021 will be the year independent agents take the lead on technology investment 

The time to invest in digital solutions is now -- but independent agents themselves acknowledge that they tend to pivot slowly, with 91% agreeing that IAs have traditionally been slow to adopt new technology. The pandemic was a much-needed reality check for IAs. Three-quarters believe that technology investment will be crucial for them to remain a vital part of the insurance ecosystem. 73% of agents say that increased investment in digital solutions will help them attract new clients, while 80% believe it will help maintain and retain current relationships. Agents also believe that technology will inevitably make them more valuable to their carriers, with three-quarters saying that better technology would allow them to be stronger business partners. 59% agree that a continued focus on innovation will be crucial. 

2. While digital demands are here to stay, human touch points remain vital 

When it comes to increasing investment in technology, agents cannot simply think about themselves. Customers are also on the hunt for the newest and latest digital tools and solutions. In fact, 48% of agents say that providing customers with digital access to products and services is a key way for them to provide value. Nearly all (93%) said customer expectations are evolving. COVID-19 created a sense of urgency for IAs as consumers increasingly insisted on interacting exclusively online. Today, agents report an increase in customer expectations surrounding automated processes (76%) and digital tools (75%) -- and agents are now 23% more likely to say they are looking out for digital solutions than they were before the pandemic. 

However, while digital demands will continue to rise in the post-COVID world, that does not negate the fact that customers still have an appetite for personal interaction with agents. In fact, 91% of agents say that they have seen an increase in their customers wanting to speak with them when they have questions, with seven in 10 saying they have seen an increase in customers wanting to meet in-person. Three-quarters of agents say that they have noticed a rise in their customers both valuing and following their advice. Customer expectations have forever changed, and IAs willing to implement a hybrid approach to addressing evolving consumer needs will be best set up for success. 

3. Adjacencies and affinity groups will be the go-to source for lead generation 

When it comes to generating sales leads, the tried-and-true method for agents has historically been word of mouth and referrals. While those are still vital channels, affinity groups can provide agents with thousands of prospects they might not have come across otherwise -- and, when working to rebuild a business, you need all the customers you can get. 81% of our agents say affinity groups have been a strong driver of leads, with employers, financial institutions, real estate agents, car dealers and alumni associations being the top partners. The key is to partner with local affiliates of those trusted sources and have all of the modern tools required to serve a partner’s constituents in a seamless, omni-channel manner. 

See also: Of Independent Agents, Heirloom Tomatoes

4. More investment and support from carriers

Insurance companies have truly stepped up to the plate to support both agents and their customers. Insurers have provided customers low-driving discounts and payment flexibility throughout the pandemic. For agents, insurance companies have provided financial support, including advanced commissions and early contingency payments. Many increased investment in digital tools and solutions for agents, and we can expect to see this trend continue in 2021. The independent agent channel is crucial to carriers, and they will continue to invest in helping IAs modernize. 

Independent agents undoubtedly have some work to do as they begin to rebound from all COVID-19 has thrown at them, but the promise of coming back bigger and stronger is there. Business as usual is a thing of the past, and agents must be open to adopting new technologies into their business practices. The purchasing landscape is evolving -- and those unwilling to adapt will be left in the dust.

Individuals with strategy and planning roles have had a busy time in 2020 adapting to the evolving realities of the pandemic and economic uncertainties. 2021 is likely to be more of the same for people in these roles. Entering into 2020, personal lines insurers were on a transformation path. Innovative and bold strategies and headline-grabbing news about new initiatives were becoming common. Every insurer recognized the need to build a strong foundation with a modern core, accelerate digital transformation and become more aggressive in areas like expanding distribution and improving the customer agent/experience. Many had moved toward parallel transformation paths – operationalizing strategies and new target operating models to optimize the business while simultaneously driving breakthrough innovation with new products, new business models and new distribution approaches. However, the events of 2020 caused many to change course.

SMA's recent research report, 2021 Strategic Initiatives: P&C Personal Lines, provides insights into how strategies are shifting. All indications are that the transformation that began several years ago will continue in 2021. However, some significant changes are occurring in strategies as insurers consider the new realities of the business environment, risk landscape and workforce shifts. Some of the big themes for 2021 include: 

• Cost management and optimization dominate: In uncertain times, the first reaction is often to double down on expense management and operational efficiencies. To a certain extent, these areas are always a part of the equation. But in 2021, they will play a larger role as companies position for the post-pandemic environment.
• The leveraging of transformational technologies forges ahead: It may seem counter-intuitive that companies are going back to the basics, yet at the same time are looking to implement new technologies like machine learning, bots and computer vision. But these technologies have the potential to contribute to operational efficiencies as well as provide insights to improve profitability.
• Foundational initiatives like core modernization and business intelligence (BI) remain vital: All signs point to a constant level of high activity as personal lines insurers advance their core and BI projects. These large, mission-critical projects become even more important as companies recognize the need to have a strong foundation.

It would be erroneous to imply that innovation and "big news" type events will not occur in 2021. Even during this pandemic year, we have seen astounding IPOs, acquisitions, new products and new partnerships. Leaders will never stop innovating and looking for advantage. This will probably be the case throughout 2021, as well. In fact, bold leaders often see times like these as an opportunity to position for the next wave of growth and get even further ahead of their competitors. However, it is just as likely that most mainstream companies in the industry will be laser-focused on cost management, business optimization and successfully completing and executing projects that are already in motion. One thing is sure: Entering into 2021, personal lines insurers will continue to closely monitor development related to COVID-19, the economy, customer behavior patterns and many other dimensions that affect risk, claims and business opportunities. It will not be surprising to see adjustments to strategic initiatives happening throughout the year.

See also: Best AI Tech for P&C Personal Lines

You may have noticed that the word “ecosystem” has crept into the insurance industry vernacular. Consequently, we risk turning an important concept into a cliché, one so overused outside of its original context that its impact and meaning become fuzzy and  eventually lost.

To be clear, I am not suggesting that “ecosystem” does not apply or is not fundamental to the transformation of the insurance industry – quite the opposite, actually. But we should understand its origin, respect its meaning and use it appropriately.

The word "ecosystem" derives from the Greek words oikos, meaning "home," and systema, or "system." It was first used in 1935 in a publication by British ecologist Arthur Tansley to draw attention to the importance of transfers of materials between organisms and their environment. In the early 1990s, James F. Moore originated the strategic planning concept of a business ecosystem, now widely adopted in the high-tech community. The basic definition comes from Moore's book, “The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.”

Using biological ecology as a metaphor, Moore reveals how today's business environment parallels the natural world and how, just like organisms in nature, companies must coexist and coevolve within their own business ecosystems. He identified radically new cooperative and competitive relationships and provided a comprehensive framework that businesses can use to enhance their own collaborations with their customers, suppliers, investors and communities.

Insurance Platforms and Ecosystems

Powerful and exciting insurance industry ecosystems have emerged – and continue to evolve like living organisms – as connected sets of services in a single integrated experience. Platforms enable and support ecosystems in that they connect offerings from cross-industry and inter-industry players in P&C, life, health and accident.

Platforms and the ecosystems they support will increasingly enable insurers to turn strategic visions into realities. Today, insurers succeed by offering products. In the future, insurers will win by providing access to risk prevention and assistance services — and by offering the right product to the right customer at the right time.

McKinsey research found that ecosystems will generate $60 trillion in revenue by 2025 — which will constitute 30% of global sales in that year. Consequently, many insurance executives are looking beyond industry borders to understand the growing opportunities and threats that come from new partners and competitors in the ecosystems relevant to them, from mobility to healthcare and beyond.

Platform businesses are the most efficient value creators, compared with other types of businesses, because they harness the power of distributed supply and network effects. The network effect is a phenomenon whereby increased numbers of people or participants rapidly improve the value of a product or service.

See also: Ecosystem-Based Business Models

Purpose-Built Insurance Ecosystems

The P&C insurance industry has already developed ecosystems to support specific business functions and continues to do so. Some examples date back to 1980 when information providers built platforms linking auto insurers to collision repair facilities to streamline the repair process. These ecosystems quickly expanded to include independent appraisers and adjusters, auto glass and car rental vendors, salvage pool and towing operators, parts providers and others. Today the ecosystems are beginning to include telematics service providers and auto manufacturers and dealers.

New property claims ecosystems are emerging to include a full suite of contractors, inspection technology, digital payments and other service providers, enabling insurers to resolve claims in hours instead of days or weeks. According to Paul Carroll, editor in chief of Insurance Thought Leadership, "Innovation will focus less on bells and whistles and more on improvements across entire processes and organizations. But incumbents must start preparing."

Future Insurance Ecosystems

Look no further for a brilliant and powerful new ecosystem extension than the recent announcement that Credit Karma, a unit of Intuit, has partnered with Progressive Insurance to offer usage-based auto insurance to Credit Karma’s millions of financial service smartphone app members, using its integration with DMVs to obtain instant driver and vehicle information.

And as if on cue, in her “11 insurtech predictions for 2021,” Martha Notaras, managing partner, Brewer Lane Ventures, predicts that "insurance will be embedded in every financial and retail transaction." 

“It is not a matter of if, but when, the insurance industry will have to adopt an ecosystem approach. The industry is not immune to the changing demands of the market,” says Dr. Geoffrey Parker, professor of engineering at Dartmouth College and a visiting scholar and fellow at the MIT Initiative on the Digital Economy.