Tag Archives: commercial lines

Tech Pulse Quickens for Commercial Lines

The past 18 months have been interesting (to say the least) for anyone involved in technology strategy, planning or implementation. Ideally, a road map with prioritized projects and defined resource allocations directs the activity, and the company stays relatively true to its path. Unfortunately, the pandemic, with all its implications, has wreaked havoc on tech plans. Project priorities have often shifted, sometimes virtually overnight. Digital gaps have been exposed. Customer expectations have dramatically changed. And executives wonder what the new normal will look like.

SMA has conducted a series of market pulse polls throughout the pandemic, starting in April 2020 as the initial economic lockdowns and work-from-home mandates began to take hold. Our latest survey, conducted this May, assessed how plans are being reshaped as commercial lines insurers move forward in the second half of 2021 and formulate plans for early 2022. Whether we are moving toward a post-pandemic era in the U.S. is debatable, but what seems clear from the plans of commercial lines insurers is that tech-related plans are moving ahead full steam.

So, what does the big picture look like?

The commercial lines insurance industry has gone through three distinct phases over the last year and a half. In the early days of the pandemic, there was a tactical response to the lockdowns that affected employees, customers and partners alike. New virtual, digital capabilities became a priority to enable remote work and remote customer interactions. Then, as 2020 proceeded, phase two began. As it became evident that the pandemic would continue for some time, there was some deceleration of some activities or a pause in projects, and some of the more innovative initiatives were tabled until 2021. The third phase began in 2021 with an explosion of activity. It was almost as if someone flipped a switch on Jan. 1. Commercial lines companies began accelerating plans, launching a frenzy of tech-based strategy and implementation activity in the first half of the year.

SMA’s most recently completed survey shows that hardly any companies plan to retrench or pause project activity in the second half. There is a significant amount of rethinking for road maps and project reprioritizations. One exception to the reshuffling of priorities is in core systems. Any companies that had policy, billing or claims systems modernization projects in flight have continued to push forward. These projects are so foundational and have so much urgency and momentum that it would be unwise to pause or reprioritize them.

See also: The Digital Journey in Commercial Lines

So, the stage is set to be very active for the rest of the year as companies double down on technology initiatives. Although 2022 plans have not come into sharp focus just yet, strategy and budget planning are underway at many companies, and the early glimpse indicates that this accelerated digital transformation will not be just a one-year phenomenon. It may just represent the new normal. I personally can’t wait until 2022 to see what is in store for the industry!

For more information on commercial lines plans for technology, see our recent research report, “Commercial Lines Digital Plans and the Post-Pandemic World: SMA Market Pulse Insights.” The report also includes a view for insurers’ expectations for the workforce come January 2022.

Gaining an Edge in Commercial Insurance

Sometimes it’s difficult to see the trees of opportunity amid the forest of competition. This is especially true for carriers looking at commercial markets as the U.S. emerges from the grip of the COVID-19 pandemic.

Despite the insurance industry’s overall surge toward digital transformation, technology also has the ability to substantially influence the competitive landscape. Carriers have huge opportunities to harness the power of data, optimize distribution management and advance the agent experience in commercial lines. Those firms that do will likely open a gap that will last months, if not years, and potentially create a significant boost in share-of-market.

Comparative rating

The biggest immediate insurtech opportunity lies in comparative rating for commercial insurance. On the consumer side, comparative rating has revolutionized insurance by enabling agents to generate rates from multiple carriers in minutes, with a few clicks of a mouse. This game-changing capability, however, is only beginning to reach the commercial segment. 

For independent agents, no third-party rating platform has yet scaled to provide the broad carrier access needed. As a result, most agents are forced to visit multiple carrier websites individually to generate competitive quotes. Each time an agent is presented with a policy opportunity, data must be entered and re-entered into each carrier’s quoting system. This one-by-one, manual data entry not only is inefficient and repetitive but also circumvents the agency’s internal Agency Management System (AMS). Agents can spend hours, even days, preparing customer quotes for coverage.

See also: State of Commercial Insurance Market

These inefficiencies affect carriers, as well. Industry research shows that, due to time constraints, agents typically present just three to four quotes to customers. Many carriers lose out. Some don’t enjoy top-of-mind awareness among agents for a particular risk; in other cases, agents consider a particular carrier’s website too difficult to navigate or, conversely, prefer other sites offering tools that make quoting easier. Where carriers land amid these issues can make the difference in millions of dollars in aggregate business each year.

Efficiency through automation

Solutions, however, are emerging from insurtech providers. Real-time, automated quoting platforms are simplifying the submissions process with systems that enable agents to auto-populate forms in seconds, directly from their AMS. Up to 80% of the typical commercial submission form is pre-filled, allowing agents to quickly generate quotes from multiple carriers.

Commercial quoting solutions can reduce the time needed to prepare small commercial submissions by up to 60%, with similar reductions in errors. Quoting time for mid-to-large commercial submissions are typically reduced by 25%, with overall quote times that are 50% faster—a major improvement in efficiency for agents and carriers alike.

Carriers can position themselves for success in this environment by engaging with comparative rating solutions from multiple insurtech providers and by investing in appetite, quote and bind APIs. This will position them for success when a market leader emerges because agents will no longer have to visit multiple carrier websites for a quote, and the probability that more carriers will get a look at every submission will increase.

Quoting solutions also offer new opportunities for wholesale business among managing general agents (MGAs). The world is changing, and lines of business are opening up for new risks, such as data loss and privacy. Carriers often turn to MGA wholesalers for these niche markets, and adding connectivity via rating platforms will create a more complete, self-contained, digital ecosystem that supports more lines of business while delivering greater value to all stakeholders.

Comparative rating for specialty lines will likely follow the initial success of rating for standard lines. Insurtech leaders will likely be the ones to drive this emerging opportunity between carriers and MGAs, especially in the early stages of development. Carriers that solidify partnerships with distribution insurtechs now will have a leg up as the industry slowly but surely evolves. 

Leveraging data

Distribution is another prime area of competitive opportunity. Especially in commercial lines, carriers can use distribution data to benchmark their pricing and commissions, be more strategic about selecting distribution partners and identify new markets and products. 

Through data analytics, for example, a carrier may find it can price up and still be competitive. Of course, the success of data analytics depends on multiple factors, including applying data in the right cases and creating an infrastructure that properly collects, stores, analyzes and applies digital information.

It’s time to evolve

To take advantage of the power of competitive technology, carriers should accelerate their investments in APIs for automated quoting. They should also solidify their partnership with insurtech providers that offer distribution solutions. 

The primary goal of insurtech is to improve efficiency in all its forms, from reducing time-consuming manual tasks to increasing knowledge of the customer and anticipating change. A major benefit for carriers, however, is the ability to get a leg up on the competition. Marketplace changes demand that the industry become increasingly nimble and flexible. Agility is a key competitive advantage.

Few, if any, carriers have pulled ahead of the pack in easing the process of quoting and selling commercial insurance. It’s time to seize the moment. A few trees may be obscuring the business view, but a good, insightful look will reveal a profitable path through the woods.

6 Questions for Stephen Applebaum

As part of this month’s ITL FOCUS on commercial insurance, we spoke with Stephen Applebaum, managing partner, Insurance Solutions Group, about the future impacts of technology in commercial lines.

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.

In the next five years?

Distribution channels will change and multiply dramatically. Changing customer expectations and behavior will drive insurers to develop more robust multi-channel distribution. New and increasing competition will push insurers to develop new digital models and partnerships designed to make the insurance selection and purchase process fully seamless. While agency writers still hold a ~70% commercial P&C market share, the number of independent agencies will continue to decline as new direct distribution channels and channel consolidation grows, both fueled by expanding private equity and venture capital investment. Many exclusive and captive agencies will convert to independent agencies. Also, carriers and brokers will pursue more cross-border and geographic expansion through M&A and partnerships to drive scale.

An increasing percentage of work will be performed by artificial intelligence technologies, including machine learning and robotics process automation. Consequently, concern and public debate will ensue concerning the issues of bias and ethics in the design and use of AI, and governing standards will begin to emerge.

The demand for commercial cyber risk and liability insurance will continue to grow as digitization and mobility further penetrate communications. Insurers will adopt a variety of  growth strategies, including innovative partnerships, alliances and collaborations, new products and enhancements, as well as M&A to achieve growth and presence in the cyber insurance market. The global cyber insurance market size is projected by industry experts to grow by at least 20% annually from $8 billion in 2020 to well over $20 billion by 2025.

In the next decade?

Consolidation of the North American agent and broker channel, will continue unabated as private equity investors seek attractive returns through deployment of historically high levels of “dry powder” as investment fund sizes continue to break records.

Technology will continue to enable innovation and process transformation through 2030, including;

  • completely digital quoting processes for retail agents and brokers
  • deployment of e-signature solutions that will satisfy all compliance concerns and create a standardized process across all lines of business
  • connected vehicle technologies that will alter the commercial auto insurance landscape and give auto makers an important role in insurance sales, distribution and claims
  • connected home and business technologies that will similarly transform the commercial property landscape
  • the commercial insurance claims process will evolve much as did personal lines claims; claims ecosystems and platforms will form that enable much shorter claims cycle times, better outcomes for carriers and customers and greater visibility into claims vendor performance. 

What are the three technologies you think will play the biggest role in driving change — perhaps one for each of the three time periods?

Technologies driving change over the pre-defined time periods:


  • Cross-enterprise digitization
  • AI-enabled process automation
  • Emergence of platforms and open ecosystems



  • Cross-enterprise digitization
  • AI-enabled process automation
  • Emergence of platforms and open ecosystems
  • Connected sensors/devices in workplaces and buildings enabling risk management and ultimately risk avoidance



  • AI-enabled process automation
  • Emergence of platforms and open ecosystems
  • Connected sensors/devices in workplaces and buildings enabling risk management and ultimately risk avoidance
  • Virtualization of everything; workforce, external/internal communications, healthcare, claims reporting and claims management


Please pick a technology mentioned and describe in a bit of detail how that will play out.

Digitization will fuel virtualization much like the conversion of data from analog to digital form enabled all of the many information management solutions. As digitization continues to expand across each operating segment of the insurance enterprise, it will spawn innovation of virtual processes to improve upon and replace formerly manual, stubbornly long, costly, complex and inefficient ones. Ultimately, the commercial insurance industry will sell more profitable, lower-cost, innovative protection products and services such as hyper-personal, parametric and variable interval insurance through seamless, direct-to-customer distribution channels. 

Through these technologies, the industry’s primary selling proposition will pivot from insurance products, risk and claims management to protection services, risk and claims avoidance.

What is the one trend you see people talking about today that you think WON’T pan out, at least within a reasonable period?

Expectations for 100% automated and touchless processes without any human involvement will go unrealized well into the future. A subset of non-routine and catastrophic claims will continue to call for expert human, empathetic handling. However, numerous repetitive processes not requiring human support or judgment will be automated using AI technologies, eliminating a significant number of industry positions – but many of the individuals impacted will be offered retraining and upskilling by their employers –  thereby improving their job satisfaction and compensation levels.

We would like to thank Stephen Applebaum for participating in our ITL FOCUS interview series. To learn more about Stephen and read more of his articles, click here.

This interview is a part of the January 2021 ITL FOCUS: Commercial Insurance article. View the full piece here.

Who Will Buy Direct and Why?

Just as personal lines have become commoditized and moved to a world of digital distribution, the online sales of small business and workers’ compensation insurance is fast increasing. There has been an explosion in online offerings — from online agents, to managing general agents (MGAs) to insurers. Because we were curious about whether direct-to-consumer would increase, we conducted a survey of small business insurance buyers.

We surveyed 190 small business owners about their practices, attitudes and preferences when it comes to purchasing insurance.

The rich data set from this research can guide insurers as they think through how to approach the acceleration of digital direct for small commercial. The key lessons drawn from the data are:

  • No respondents currently purchase online. This was not by design; it was simply that, in the random solicitation, no respondents happen to buy direct. The direct-to-consumer market is still relatively nascent, and that was reflected in the response rate.
  • Eighty-one percent use an independent agency that represents multiple insurers.
  • More than half of small businesses are delighted with the process of insurance buying but wish that there were more comparison options available, that the coverage was less confusing and that the process was simpler and faster.
  • Half of small businesses are not likely to buy commercial insurance online, with the biggest barriers being the lack of familiarity with insurance and the desire for an agent. But 33% say they would be likely to make their next purchase of commercial insurance online.
  • Those who want an agent are looking for a personal relationship. They want advice on what coverages to purchase, someone who can answer their questions and someone who will intervene with the insurer, if needed.
  • No surprise: Low price is the most important factor in the insurance buying process. By contrast, the least important factors — which include fast claims payment and fair claims payment — likely aren’t priorities because small customers generally do not have many claims and do not expect to. Without other sources of value, price becomes the dominant feature.
  • When presented with two value propositions, Concept One with a lower price and no agent and Concept Two with a stated higher price that includes an agent, we found that 61% chose the more expensive, agent-assisted option. However, one-third of small businesses preferred an online buying experience at a lower price even though none of them use that option today.
  • The question for insurers is how they want to address this growing desire for purchasing commercial online. It is a potentially $20 billion market, by our calculation. Insurers can look at going after the online buyer — through a digital agency, by involving the agent or by selling direct themselves. Or they can focus their investments by supporting independent agents who want to keep buyers satisfied with the traditional process and avoid digital disintermediation.
  • Regardless of the option chosen, we have identified a variety of strategic questions insurers should answer about the role of the agent and priorities to address in the online market. Depending on the approach, insurers may need to invest not only in new technologies but also in new internal processes to provide services for online buyers or to support agents in retaining those customers.

You can find the full report here.

AI Investment in Commercial Lines

Artificial intelligence (AI) has been in almost every technology-based headline over the past 24 months. If an incumbent technology provider or a newly emerging insurtech organization wants to grab attention – well, just insert AI in the first few lines of the description. Better yet, insert AI in the product or organization name.

In fact, AI holds exceptional business promise, and there are numerous proven use cases. But AI is a complicated topic.

There are many sub-categories of AI, and one of the first steps in choosing the appropriate technology is to break down AI into consumable bites. SMA finds that there are six primary AI technologies in play within commercial lines organizations: machine learning (ML), computer vision, natural language processing (NLP), user interaction technology, voice technology and robotic process automation (RPA). The big question is – which AI technologies drive the most value for commercial lines?

Not surprisingly, there is a tug-of-war between AI for transformational purposes and AI for tactical purposes. According to commercial lines executives and managers, ML, RPA, computer vision and NLP (in that order) will transform commercial lines the most. Given the general need for transformation across the insurance industry, one could conclude that the previously stated order of technologies would be where the industry is heading in terms of investment. But that is not the case.

The actual investment order is new user interaction tech, machine learning, RPA and NLP, with the remaining technologies following. Does this mean commercial lines insurers have gotten it wrong? The answer to that question is “no,” with possible shadings of “could be.” Much of the framing for this answer lies in the product mix.

For the small business and workers’ comp segments, new user interaction technologies such as chatbots and text messaging have been invaluable in contact centers. This affects underwriting and claims by clearing tasks from work queues, thus freeing up technical expertise for more complex interactions. Billing benefits, as well. Collaboration platforms and real-time videos proved highly valuable during the pandemic’s height and continue to be highly worthwhile.

Machine learning has universal value across product lines. Whether it be ML to improve straight-through processing for less complex lines, such as small business and workers’ comp, or to provide decision support for complicated product lines, ML can contribute in all areas. The great thing about this is that investment in adopting ML skills pays off across the enterprise.

RPA is a technology that not only improves operational efficiency and expense management – important internal goals – but also enhances customer and distributor satisfaction through rapid request fulfillment. Policy service, underwriting and claims all gain value through RPA adoption. Because almost all commercial lines segments have repetitive processes, RPA skills are used universally.

See also: COVID-19 Sparks Revolution in Claims

The “could be” warning comes in terms of computer vision and NLP. Both technologies have significant transformational value in commercial lines, ranging from turning aerial images into information to digitizing paper-based information sources. Prioritizing these technologies sooner rather than later is critical across all product segments.

More than almost any other technology, AI technologies work best in combination — for example, NLP with RPA to increase process penetration. The industry is in its early days when it comes to AI usage, and skill sets are still advancing. The “getting it right” discussion is frequently dependent on product segments. But, over time, value will be universal regardless of product complexity, albeit for different reasons.

For additional information on all six AI technologies and survey results, see SMA’s new research report, AI in P&C Commercial Lines: Insurer Progress, Plans, and Predictions.