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June 20, 2015

Next-Gen Analytics Drive Efficiency

Summary:

Major advancements in technology will make new analytics platforms more accessible to insurers, brokers and agencies of all sizes.

Photo Courtesy of Don Hankins

Across the insurance industry, analytics has become the most heralded technology investment for insurance companies, wholesalers, brokers, agents and other intermediaries. Yet, with soft market conditions, thinning margins, intensifying competition, escalating M&A activity and rapidly evolving technology, making the right choices and investments is imperative.

Not surprisingly, many insurers and intermediaries have opted to maintain systems that have long become obsolete before jumping into what they’re led to believe may be the next generation of features.

The issue is where to focus. Selecting the right platform essentially comes down to assessing an organization’s current and future information needs and matching them to today’s technology offerings.

To put this in a wider context, let’s take a closer look at some of the dynamics currently facing the commercial insurance marketplace.

Broker and Agent Challenges

Competition

Brokers are moving aggressively to build their business across all market segments, industries and geographies.

Consolidation

The pace of M&A is accelerating among mid-sized and smaller broker/agents. This affects all players – whether you are an acquirer, likely to be acquired or face direct competitors with added capabilities or resources through M&A transactions.

Focus on Maintaining or Improving Margins

All players are driving not only for market share but for growth that will deliver higher margins. Accordingly, competition among brokers and agents is intensifying for the most profitable business segments.

Drive for Efficiency

With the sustained soft commercial insurance market, brokers and agents face an imperative for greater efficiency and improvement in workflow structure.

Rising Client Expectations

Despite generally lower rates for insurance coverage, clients continue to have higher service expectations of all their providers.

Reconciling Old and New Technology

Brokers and agents must balance the need to incorporate technology against the cost of development, implementation and integration of any new system with legacy systems.

Insurer Challenges

Strengthening Distribution Network

Many insurers are working to develop and expand business with national, regional and local brokers and agents.

Navigating Competition

Insurers face intensifying competition for all types of business, especially in profitable coverage lines and with high-margin client segments.

Emerging Risks and Opportunities

Evolving risks provide opportunities for innovation both in terms of creating products and improving existing coverage lines.

Maintaining Individual Producer Relationships

Insurers want ways to address a lack of visibility of accounts and account owners at national, regional and local brokers; to remain effective, they must keep up with contact changes at brokers, shifting responsibilities of client managers.

Growth vs. Retention

With each renewal, insurers must balance need for client retention with a drive for new business.

Better Data and Feedback

To meet aggressive growth goals, insurers need improved market intelligence and feedback on product offerings and potential solutions for improving both retention and capturing new business. They also can gain from formal feedback mechanisms to track reasons for lost business. 

Building solutions: Meeting the industrywide need for tech-based analytics

In recent years, global brokers have developed and implemented proprietary systems that enable them to capture details of individual placement transactions on a global basis and gain insights on pricing trends, terms and conditions, market penetration, client and carrier characteristics and success rates.

This information also yields substantial benchmarking data for senior management, individual brokers and marketing executives. For insurers, these analytical capabilities have proved invaluable in developing and refining insurance products and services, targeting industry segments more effectively and operating more profitably.

Within the U.S., however, the largest global brokers still account for only about 20% of the overall commercial insurance marketplace. As insurers strive to expand their business with national, regional and local brokers and agents, they need similar robust analytical capabilities to achieve efficiencies.

Today, most insurers have access to a variety of technology-based solutions for tracking and analyzing various types of claims. However, beyond what’s currently available from the largest brokerages for their own business, insurers generally lack similar solutions for identifying and managing their incoming business and continuing clients across the spectrum of their broker and agency relationships.

The next generation of analytical platforms will enable insurers to track, manage, understand and evaluate business obtained from each of their brokerage and agency relationships. Insurers will be able to pinpoint producers at each broker directly responsible for placing business by geography, client size, industry sector and other delineators.

With a clear line of sight across their entire portfolio, insurers will have enhanced abilities to develop and roll out new products and policy features, especially those targeted to specific industry sectors or client types. They will be able to get rapid feedback on why they lost business or failed to win new clients.

Meanwhile, as mentioned, brokers and agents face similar challenges with respect to their accounts and underwriter relationships. Given the number and spread of clients in their books, brokers want solutions that enhance their efficiency and ability to service and grow their business.

New platforms also will offer brokers and agents the ability to track and monitor their business, as well as to strengthen and expand their relationships with insurers. Individual producers will be able to view their own accounts and benchmark them against those of the same size, geography, industry and other factors.

This, in turn, will help brokers and agents identify and address gaps in client programs, expand the insurers providing quotes for individual clients and specific coverage lines, negotiate pricing terms and conditions more effectively and elevate overall service delivery and performance.

The same platforms will offer views for broker/agency senior leadership that will detail account profitability; help assess performance by producer, office or region; and make informed decisions about resource allocation, sales, marketing and planning. After a merger or acquisition, the systems will help accelerate business integration, including the development of consistent service delivery across the combined book.

Major advancements in technology, including dramatic decreases in data storage costs afforded by the cloud, will make new analytics platforms more affordable and accessible to insurance companies, brokers and agencies of all sizes. Ultimately, the widespread availability, real-time information, feedback and robust capabilities of the next generation of analytics platforms will propel the insurance distribution system into the 21st century.

Stay tuned.

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About the Author

Kabir Syed is founder and CEO of RiskMatch, a business intelligence and analytics firm that provides insurance portfolio management and placement solutions to insurance brokers and insurers. During the course of his 20-year insurance industry career he has held leadership positions in marketing, strategic planning, operations and analytics.

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