Jason Keck, CEO of Broker Buddha, says the company’s software solution helps commercial insurance agents simplify the application process, saving time and boosting customer satisfaction.
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It’s the nature of our industry that commercial insurance carrier appetites are constantly evolving. As business landscapes shift to accommodate emerging risks, insurers must continuously refine their specialties, products and services. It’s a necessary part of risk transfer; yet it can be confusing for a carrier’s distribution partners.
Because commercial insurance agents and brokers deal with dozens–and sometimes hundreds–of different carriers, they often find themselves struggling to stay abreast of shifting appetites. Brokerages of all sizes struggle to overcome the hurdle posed by “appetite clarity,” and carriers and managing general agencies (MGAs) struggle to find a simple method to demystify the situation.
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Carriers and MGAs need to evaluate opportunities to leverage online search tools that can integrate into an agent’s daily workflow and enable insurers to communicate appetite. Such tools, like IVANS Market Appetite, operate similar to current search engines. At the start of the search process for a market for new and renewal business, the tools provide agents with an instant list of carriers, MGAs and wholesalers with appetite for the specific risk. These tools can help underwriters overcome the “three major hurdles of underwriting”:
Hurdle #1: Changing Appetites
The carrier or MGA says: “We made substantial changes to our appetite more than a year ago to move away from an industry segment that wasn’t in our specialty wheelhouse. Yet I’m still seeing a high volume of submissions in that category that I’m having to decline. It’s hurting my conversion ratio and confusing my brokers.”
It takes significant time for changes in appetite to be effectively communicated through a carrier’s network. This requires changing every piece of collateral, market guides and online postings and redistributing the updated assets. Many times, appetites change again in the time it takes to update these assets, exacerbating the issue.
Carriers and MGAs need to leverage online tools that instantly communicate their latest appetite, ensuring products are visible to agents when they begin to search for a market where they can submit their risk. Consistent appetite visibility through online tools also improves carrier and MGA staff’s productivity by increasing the number of in-appetite inquiries and reducing time spent reviewing submissions of no interest, while enabling carriers and MGAs to focus more time on returning quotes and building relationships.
Hurdle #2: Limited Relationships
“I am worried that my competition has a broader network of brokers than I do. I truly value the partners I do have, but I would like to grow my book, and I wish I were seeing more new risks.”
Even with formidable communications and relationship strategies, carriers can be complex to navigate from the outside, and brokers who have strong relationships with one division may overlook the opportunity to bring an alternative submission type to another business unit. Online market search tools enable underwriters to get in front of brokers and agents that they haven’t interacted with before.
Hurdle #3: Unwanted Submissions
The carrier or MGA says: “I wish I had more time for new business. I spend hours reviewing submissions that ultimately need to be declined. On top of that, I have a thick stack of renewals to get through. There has to be a less time-consuming way to get more profitable new business into my book.”
Carriers’ and MGAs’ time, and brokers’ time, is exceedingly valuable. IVANS found that 60% of submissions in commercial insurance go unquoted – resulting in significant time wasted on non-revenue-generating activities. Online market search tools increase in-appetite submissions to drive better submissions in the pipeline, allowing carriers and MGAs to focus on the most profitable lines of business and industries. As the market changes, these tools ensure consistent representation of carriers’ and MGAs’ latest appetite, so submission mix remains strong as agents are continuously kept informed.
If you sit down with just about any college administrators and ask about the vision of their university, you may witness a dramatic change as their voices fill with passion, reserve disappears and the entire tone of the conversation shifts away from being transactional. As an insurance broker specializing in higher education, I have witnessed this transformative moment many times. Unfortunately, the passion for the institution, its vision and its future does not always translate into the insurance submission and renewal process.
Many people, including some insurance brokers, view buying and selling insurance as a passionless transaction. Information about the college—such as financial statements, property values and loss experience—is gathered, tabulated into Excel spreadsheets and forwarded on to the underwriting arm of seemingly interchangeable insurance carriers. Underwriters review volumes of data about the college to decide whether the insurance company can comfortably provide a college with a certain level of insurance coverage in exchange for a fixed annual premium.
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The information provided to an underwriter creates a story about the college. Depending on how the information is received and presented, the story can be positive or negative. To the underwriter, sometimes the insurance submission can be as horror-filled as a Stephen King epic or as romantic as a Nicholas Sparks novel. Of course, the insurance submission is not a work of fiction.
One of the first things that statistics students learn is that the same information (data set) can be used to draw multiple and sometimes competing conclusions. Where one person may see positive potential, another may see an organization in decline. The conclusions drawn from the data set by different insurers and underwriters reviewing the same information may vary significantly.
Though the information contained in a submission or application may be objective—meaning the information has not been altered or manipulated—the conclusions drawn from the information are less so. The underwriting process involves both subjective and objective analysis. And how the data is interpreted may have a significant impact on the underwriting decision and, ultimately, on the total premium an organization pays.
According to a Harvard Business Review article, data can be used as a visual mechanism to direct the narrative surrounding a particular situation. The key is to:
There are many different methods for presenting the narrative of an institution in the most positive light possible while still providing objective information. The first step to understand both the positive and negative elements. This allows the institution to showcase itself in the best light possible. A failure to fully engage in this process may leave the narrative open to misinterpretation, create questions about unexamined negatives and result in overlooking one or more positive elements.
Communicating the story of an institution involves a deep understanding of the goals and vision of the institution, and there is no one better to communicate that story than a passionate college administrator. However, understanding what drives your institution is not enough—and that is where administrators need to leverage key professional relationships. Selecting the right broker is a key step in driving the narrative forward. A professional partner brings market knowledge and the ability to help transform the narrative from numbers into a story that honors the vision of the administration.
Developing Key Relationships
The majority of colleges and universities work with one or more insurance brokers to engage with the insurance marketplace. At minimum, a broker working with an institutional client assists in (1) identifying insurable exposures, (2) preparing recommendations for coverage types and limits, (3) identifying potential insurers to approach, (4) developing the insurance submission, (5) negotiating pricing and coverage terms and conditions with the markets and (6) presenting the carrier quotes to the institution.
Institutions at every level can rely quite heavily on the services and recommendations of their insurance brokers. The broker can play a critical role between having a well-structured insurance program and having a potential mess of overlapping coverage, gaps in coverage, inconsistent coverage terms, out-of-balance limits and potential claims issues. The broker can also act as a key resource in communicating the organizational narrative to the underwriters.
There are four key elements a broker adds to narrative development:
Tips for constructing and delivering your narrative
Start early. Waiting until a couple of months before program renewal does not provide a great deal of time to develop a cohesive narrative or to allow underwriters the time needed to develop a real understanding of the institution. In fact, it can be beneficial to begin the conversation with a prospective insurer years before moving coverage from a current insurer. This is important even if there is a comfort level with the current program structure and insurance providers. Organizational risks are not static, and insurance programs change over time. Engaging in regular dialogue with underwriters at different insurance companies allows multiple carriers to develop an understanding of the college/university’s operations and risks. Developing alternative carrier relationships provides a backup plan.
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Know and understand your institutional risks and objectives. This includes both the positive and negative aspects. It can be easy to focus on the positives, but, as with an ostrich hiding its head in the sand, that may result in overlooking key dangers to the continuity of the college itself. You should:
Use the data as a guide. As much as insurance brokers may wish otherwise, underwriters are pretty savvy people and will usually catch on to most omissions. It is very hard to recover from a situation where the underwriter feels misled about the organization—there is a loss of trust, respect and partnership that is impossible to get back. Be open and objective about the current position of the college/university. But do not allow the negative information to be all the underwriter sees—provide mitigating information such as steps the college is taking to: (1) improve loss experience, (2) attract higher enrollments or (3) renovate aging infrastructures. Underwriters want to write business, and most of them are looking for a reason to say “yes.”
Do not rely solely on the insurance application. The application gathers the minimum amount of information that an insurance company needs to underwrite a risk. If the institution is working with an insurance broker (as most do), it is important to collaborate with the broker rather than just cede the submission development process entirely to the broker. A broker (regardless of how good she is) is never going to be as passionate about your institution as you are. Get to know your underwriters—go to lunch, meet them at conferences, attend a carrier networking event or even schedule periodic conference calls. If all your organization is to an underwriter is a few sheets of paper submitted 90, 60 or even 30 days prior to a renewal, you will not get the underwriter’s full attention or consideration. Engage your underwriters.
The group insurance market shows real promise, but most carriers are still trying to determine the best path forward. Moving from being in a quiet sector to the front lines of new ways of doing business has shaken the industry and confronted it with challenges – and opportunities – that many could not have foreseen even a decade ago.
For starters, let’s take a look at where the market is right now. Three recent trends, in particular, are having a profound impact:
Group players – which historically have been conservative in their market strategies – focus on aggressively driving profitable growth. To do this, they are concentrating on four key areas: 1) growing their voluntary business, 2) streamlining their operating models, 3) re-shaping their distribution strategies and 4) making significant investments in technology.
Group insurance is no longer a quiet sector of the industry but instead is in the front lines of developments in customer-centricity and technological innovation.
Growing the voluntary business – The voluntary market has been of interest to traditional group insurance carriers for more than two decades, but the success of the core employer paid group insurance business has resulted in a lack of robust voluntary capabilities. However, with employers shifting more costs to employees, voluntary products have become a key way to manage group benefit costs while expanding the portfolio of employee products.
Some carriers are expanding their voluntary businesses by offering a modified employer paid group product in which the employee “checks the box” to pay an incremental premium and receive additional group coverage (e.g., long term disability (LTD), life and dental). Other carriers are exploring models where employees can sign up for an individual policy at a special premium rate. The former example is a traditional voluntary product, while the latter example is a traditional worksite product. For most carriers, adding the traditional voluntary product is fairly straightforward because it is still a product that the group underwrites. However, more carriers are looking into the worksite product (which AFLAC and Colonial Life & Accident have executed particularly well) because, with the passage of the Affordable Care Act, some see a potential opportunity to reach small businesses that previously may not have been interested in group benefits.
Streamlining operating models – Group carriers also are trying to develop streamlined, cost-effective, customer-centric operating models. The traditional group insurance operating model has been built around product groups such as group LTD, short-term LTD, dental, etc. However, the product-based model is inefficient because it increases service costs, slows speed to market and fails to support the holistic views of the customer that enables carriers to serve customers in the ways they prefer.
Group insurers are now investing both time and capital to understand how to remove inefficient product-focused layers of their operations and streamline their processes to profitably grow. Many have focused on enrollment, which cuts across products and is a frequent source of frustration for everyone. Carriers are frustrated because they can spend days and weeks trying to ensure that everyone is properly enrolled in the right plan. Moreover, what should be a fairly straightforward, automated process often can require considerable manual intervention to ensure that employees are properly enrolled. In the meantime, employees are frustrated with recurring requests for information and the slowness of the enrollment process. Employers are frustrated by the additional time and effort that they have to expend and the poor enrollee experience. Producers become frustrated because the employer often holds them accountable for the recommended carriers’ performance.
Reshaping distribution strategies – In terms of distribution, private exchanges initially promised to connect group carriers with the right customers using extremely efficient exchange platforms. As a result, many group carriers joined multiple exchanges expecting that this model would put them on the cusp of the next wave of growth. However, success has proven more elusive than they expected, largely because they’ve spread themselves too thin across too many, often unproven exchanges. And, while private exchanges still offer great potential, many carriers have now begun to rethink their private exchange strategies with the realization that the channel is not yet a fully mature group insurance platform.
Investing in technology – Whether group carriers are focusing most on entering the voluntary market, streamlining operations or refining their private exchange strategies, successful in all these areas depends on technology. Group technology investments have lagged behind the rest of the industry. The reasons for this range from a lack of proven technology solutions that truly focus on the group market to downright stinginess and the resulting reliance on “heroic acts” and dedication of committed employees to drive growth, profits and customer satisfaction. However, viable technological solutions now exist – and they are probably the most critical element in the march toward effective data integration, efficient customer service and ultimately profitable growth. Every facet of the business –underwriting, marketing, claims, billing, policy administration, enrollment, renewal and more – is critically dependent upon technological solutions that have been designed to meet the unique needs of the group business and its customers. Prescient group carriers understand this and have been investing in developing their own solutions and partnering with on-shore and offshore solutions providers to fill gaps in non-core areas.
Whatever their primary focus – growth, operations or distribution – a necessary element for success is up-to-date and effective technology.
A market in flux
In conclusion, group insurance is in a time of transition. Major mergers and acquisitions have already started to reshape the market landscape, and existing players are likely to use acquisitions and divestitures as a way to refine their market focus. Moreover, new entrants are looking to exploit openings in the group space by providing the kind of focus, cutting-edge product offerings and service capabilities that many incumbents have not. These developments show group’s promise. The winners will be the companies that wisely refine their business models and effectively employ technology to meet the unique needs of new, consumer-driven markets.