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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.

The Need for Speed in Underwriting

From delay born of pandemic to decisiveness borne by leaders with a plan, from anger born of isolation to action borne by people’s refusal to isolate themselves from the world, the authors of the first chapter of post-pandemic life—the writers of this history—are the underwriters of life insurance. The men and women responsible for the expansion of accelerated underwriting deserve their place in history. 

The public has a right to know, and the insurance industry has a duty to promote, what accelerated underwriting is: that new technologies make it fast and affordable to review life insurance applications; that insurers can check prescriptions, driving records and all relevant records in minutes; that this process is safe and noninvasive, free of undergoing a physical or having someone enter a physical premise.

Because of a combination of timing and technology, accelerated underwriting is no longer an option for the few. Because of the times in which we live, accelerated underwriting may become a preference of the many. Because of these things and more, including the need to slow or stop the spread of COVID-19, accelerated underwriting may save lives while increasing sales of life insurance. But people cannot buy what they do not know exists.

People need to know that eligibility does not depend on electability, that they do not have to elect to put themselves at risk so as to have insurers assess the risks of issuing life insurance. What is available online avails insurers the opportunity to earn the trust of consumers. What sustains this trust is what accelerates the means by which consumers can create trusts or tax-free income, thanks to owning life insurance. What makes this trust possible in the first place is accelerated underwriting.

The terms may differ, the terms do differ, but the conditions are the same; that is to say, accelerated underwriting is not conditioned on strangers visiting applicants’ homes. 

Matters of personal health are a matter of public health, such that people of a certain age or condition do not want to increase their vulnerability or lower their immunity to illness. Put another way, no one wants to die from life insurance, though many want to die with life insurance.

Accelerated underwriting is true to its name, using technology to collect and analyze data. From there, insurers can determine specific costs for specific consumers. The process is efficient and economical for everyone, allowing insurers to write more policies while enabling consumers to compare prices. But again, the information that furthers accelerated underwriting begins with the information insurers give consumers.

See also: Digital Revolution Reaches Underwriting

Accelerated underwriting is a universal good, based on the good of intelligence, for the purchase of goods in the form of life insurance. The result serves the common good, strengthening individuals and families. For this good to flourish, acts of goodness demand swift and secure action. 

Now is the time to accelerate the use of accelerated underwriting, so we may speed up the day when all who want life insurance can have it.

A Changing Vision for Driverless Vehicles

As plans for fully autonomous vehicles continue to get pushed back, the near future is beginning to look like it will revolve around a different acronym: more ADAS, less AV.

Autonomous vehicles, or AVs, will provide many of the technology breakthroughs that allow for advances in ADAS, or advanced driver-assistance systems, which will use a host of new sensors and AI to reduce accidents. But the vision of driverless robotaxis carrying us everywhere and making deliveries looks like it will have to wait a bit, except in carefully circumscribed areas — and maybe even there for a while yet.

The shift to ADAS from full AVs should soften the near-term effects on auto insurers, which have feared a loss of business in a world where individuals aren’t responsible for driving. At the same time, the shift may increase the cost of repairing expensive electronics when accidents occur.

The new focus on ADAS is by no means a statement that the full AV revolution won’t happen. The progress by AVs has been nothing short of astounding since DARPA, a research arm of the Department of Defense, offered a $1 million prize in 2004 in a contest among autonomous vehicles on a 150-mile course in the Mojave Desert. Most of the 15 vehicles chosen to participate were basically golf carts with sensors and computers strapped on to them, and more than half didn’t even make it out of sight of the starting line. The farthest any vehicle went was 7.4 miles. Just 17 years later, we have fleets of sleek-looking vehicles traveling city streets using AI and sensors — albeit still with a safety driver behind the wheel in just about all of them.

Progress will continue, too. A Brookings Institution study found that $80 billion flowed into AV technology investments between 2014 and 2017. That’s just the investments announced publicly and, of course, doesn’t count the prior investments or the money that has flooded into the field since 2017.

The issue hasn’t been that the AV technology doesn’t work — in any given situation, an AV will perform better than the vast majority of human drivers. It’s just that the world around AVs has turned out to be more complex than initial plans allowed for. In particular, we humans do lots of unpredictable things as pedestrians and as drivers — and AVs aren’t allowed to make mistakes.

While we wait for full autonomy, though, plenty of opportunities have opened up to make driving safer, a notion underscored by some recent multibillion-dollar price tags on acquisitions of ADAS companies.

Lidar sensors, governed by always-learning AI, can enhance automatic braking systems — and studies have found that cars are already more than 50% less likely to have a rear-end collision if equipped with such a system. Systems that keep cars centered in lanes will also improve as technology designed for full autonomy is deployed.

Increased communications capabilities designed for AVs will allow for better connections with roads and other infrastructure. When I rented a car last week while on vacation at the Jersey shore, I wasn’t sure what the speed limit was at one point, then realized that it was displayed on my dashboard based on some sort of radio signal from a speed limit sign I’d missed. Cars will also be able to better communicate with each other. If a car slams on its brakes, it will be able to alert the stream of cars behind it so they can instantaneously begin braking, too. Further out, AV technology will even let cars communicate with each other in ways that let them essentially see around corners — even if you can’t see that a car is speeding through a red light and might broadside you, many other cars on the road can, and they’ll be able to alert yours to brake and avoid the danger.

Technology developed for autonomous cars may also find earlier uses in autonomous trucks. Many are looking at having them operate in fully driverless mode on freeways, where vehicle traffic is far more predictable than on city roads and where pedestrians aren’t an issue. Human drivers would be staged at freeway exits, to ferry trucks to and from their final destinations and within cities. Makers of self-driving trucks say they can cut freight costs in half by removing the need for drivers on the freeway portion of long-haul routes.

I remain as optimistic as ever about the outlook for AVs. Since Chunka Mui and I wrote a book on driverless cars in 2013, progress was faster than we expected for a time and now is somewhat slower. As often happens with fundamental innovations like AVs, the development isn’t happening in a straight line. We’re winding up with hybrid forms of the technology in both cars and trucks before we get to the full effects. But we’ll get there.



Personal Lines Channel Plans

When insurance industry observers think of the channel strategies for personal lines, the picture can appear to be fairly simple. More of the business is moving to direct distribution, whether that is through call centers or the web. Furthermore, there is a clear movement to digital, straight-through processing. Comparative raters continue to exert significant influence on submissions flow. And, finally, the rich get richer – with tier one direct carriers continuing to gain share. These have been the trends for the last few years. But a closer look reveals that the evolution of distribution in personal lines is more complicated.

New research by SMA reveals several developments that must be added into the channel evolution picture.

  1. Relationships with affinity groups are a growing distribution choice: A significant percentage of personal lines insurers plan to increase their emphasis on business with affinity groups or establish partnerships with new affinity groups or companies outside of insurance.
  2. Insurtech distribution partnerships are vital: There is already substantial partnership activity underway between carriers and insurtech digital agents or distribution platforms. The new distribution platforms are more than comparative raters, providing increased capabilities to support fully digital, straight-through processing operations. 
  3. MGAs are a growing part of the landscape: MGAs play a major role for commercial lines distribution but are not always considered to be a significant channel for personal lines. That may be changing as insurers create more new/customized products for consumers and seek access to preferred segments.

Last, but definitely not least, independent agent distribution continues to flourish. The IA market landscape is shifting dramatically through M&A and the role of platform agencies. Insurers are adjusting to the new realities of partnering with sophisticated distribution partners that have scale and advanced tech. At the same time, many insurers are deploying very focused appointment strategies. Rather than scaling back on appointing new IA partners, in many cases, the opposite is occurring. Couple that with the enhanced tech capabilities being provided to distribution partners and the increased connections with intermediary distribution platforms, and it is clear that the independent channel will still be a critical part of personal lines distribution for years to come.

See also: The Digital Journey in Personal Lines

The result of all this activity in channel strategies is a move toward more omni-channel capabilities, with carriers offering prospects, producers and policyholders a variety of ways to interact. And in five years, the channel environment is likely to be even more complicated than it is today. But it is unlikely that any one channel will dominate.

For more information on commercial lines distribution expansion strategies, see our recent research report, “Channel Strategies and Plans for P&C Personal Lines: A View of Today’s Environment and What’s to Come.”

Digital Is the Assistant We Always Wanted

From the 1980s through the early 2000s, many advisers and brokers dreamed of having more help with critical yet time-consuming tasks like proof of insurance and minor claims processing. We mused, “If only I had help with those tasks, I could spend more time focusing on high-touch customer service and sales.”

Today, digital innovations are streamlining much of the way carriers and their representatives conduct and generate business. These innovations are precisely the help we wished for.

So, why do many in our industry resist digital advances like customer self-service and apps?

Digital enables us to create deeper customer relationships

Digital technology is not going to replace us. The tech advances we have access to today are simply encouraging us to reposition our No. 1 asset—our people—to do the high-dollar, deeper-dive work with clients that we only dreamed about years ago.

Our industry is gaining exponential efficiency from the digitization of many of its processes and systems. Greater efficiency in other areas enables advisers to spend more time focusing on high-return activities like conducting annual reviews, offering comprehensive financial advice, handling complex service issues and increasing product sales and density.

Technology enables us to serve our customers more fully. It has created model distribution—an ecosystem of connected offerings from a variety of participating providers that makes it easier to fulfill multiple needs for our customers and provide an integrated user experience.

When we leverage this enhanced distribution model, we build deeper customer relationships, which, in turn, lead to increased product density and customer and adviser retention.

Technology is facilitating the evolution of distribution at all levels

The COVID-19 pandemic accelerated many carriers’ tech efforts. Unable to serve customers face to face, they found other ways to reach out to prospects and customers. But there is so much more we can do. 

According to a May 2021 report by DAIS, a platform focused on making modern technological advances in the insurance industry, artificial intelligence (AI) is the future of insurance. AI enhances our ability to hyper-personalize the customer experience, drive product innovation and automate routine tasks.

A 2021 Deloitte study echoes that claim. The study predicts that AI will evolve underwriters into customer portfolio managers and strategic analysts, advisers into specialized customer experts and ecosystem integrators, actuaries into strategic planners and cross-functional collaborators and claims officers into customer loyalty drivers and customer liability experts.

This is nirvana, isn’t it?

See also: Building Your Digital Sales Arsenal

Savvy companies use digital to drive leads and grow faster

A Liberty Mutual/Safeco Insurance study conducted in October 2020 introduced the inaugural Agent for the Future Index—a quantitative assessment of the state of digital transformation in the independent agent channel. Researchers divided the survey respondents into three groups: low, medium and high digital adopters.

The study revealed that high digital adopters improve the digital tools they have in place and use those tools to drive leads. Their top priorities are educating their customers about new ways of working with them and extending their online presence for marketing. 

The study finds that 47% of high digital adopters invested in digital capabilities in the past year, while only 18% of low adopters did so. And high digital adopters had a 60% greater increase in revenue than their less digitally savvy peers.

During the pandemic, all levels of the distribution chain were tasked with finding innovative ways to connect with their communities online. Leveraging digital technology simply requires expanding those efforts.

Digital enhancements don’t have to be complex

The concept of AI can seem complex and intimidating. Most of us have no idea how to implement machine learning or data cleansing into our systems. That’s OK; plenty of experts out there specialize in AI implementation. We can hire them once we make digital enhancement a priority for our companies.

Making your company easier to find online and easier to do business with doesn’t have to be complicated. During the pandemic, many carriers and agencies increased their outreach and customer engagement simply by enhancing their websites and stepping up their social media activity.

Three strategies to begin leveraging technology

A technology CEO and member of the Forbes Technology Council says that delivering an excellent experience is now a matter of survival. He writes, “From your website and your mobile app to your social media profiles and your email campaigns, insurers must always deliver the best customer experience. To build deeper relationships with customers throughout the entire customer journey from application to cross-selling, insurers must build engaging, personalized journeys at every step of the way. We are entering a new era of innovation and giant technological leaps in the insurance industry. These are the exciting times we are living in.”

So how can carriers and their advisers boost their digital capabilities? Here are three simple strategies to begin implementing immediately.

1. Leverage technology to gain new prospects and retain current customers

For decades, customers have remained loyal to their carriers and their advisers. Today, that loyalty is at risk of being replaced by a thirst for more options, faster access and better experiences. Customers are in complete control, and that’s the way it should be. The silver lining is that, when we differentiate ourselves by providing an exceptional customer experience, we can get prospects to at least consider us. Providing an exceptional experience will also strengthen our current customers’ loyalty.

How do we accomplish that? By changing the distribution model. This means allowing technology—an app, for example—to handle the low-return tasks like making ID cards available and processing transactions such as tow claims.

Don’t fight it; embrace it. Free of doing those routine tasks, your company and your advisers can focus on deepening customer relationships and personalizing solutions. They can discover novel ways to exceed their clients’ expectations and focus more on providing advice and guidance.

2. Make it easy for customers to find you, then engage them in other ways

Today’s consumers are accustomed to exploring their options online. Make your company easy to find and your offerings appealing, and people will seek more information. For example, we know that auto insurance is the product that will get most customers to consider us. Creating an engaging, easy-to-access auto insurance page on your website will draw customers in. Once they engage with you, then you can differentiate your company and your service.

Although many customers initially approach companies by seeking quotes for their basic protection needs, most also want expert advice on their overall financial health. Make it easy for them to discover that you offer a full array of insurance and financial services solutions.

For example, an advice relationship might begin with guidance about liability coverage. Customers might not realize that $500,000 limit in liability coverage isn’t sufficient if they cause an auto accident that results in several million dollars worth of injuries to a family. Advisers deliver exceptional value when they educate their customers about critical issues like this.

3. Continually improve your products and delivery mechanisms 

As commoditization in our industry continues to be the norm, carriers must continually improve their products and delivery mechanisms. Make sure your offerings provide not just perceived value but real value.

Product pricing is one example of the difference between perceived and real value. Years ago, advisers perceived some carriers as “the cheap companies.” Over time, as those companies attracted and retained more clients, advisers realized the companies aren’t cheap. They are serving the segment of the population shopping for affordable insurance. These companies offer good-quality products, make it easy to do business and deliver their products seamlessly. 

Avoid focusing only on price, but recognize that some clients are sensitive to pricing on certain types of insurance. Provide options for all price points and levels of service desired.

See also: Digital Future of Insurance Emerges

Build digital innovation into your budget

Remember when the internet first came on the scene? Many resisted the innovation, thinking it was just a fad. When they realized it was the way of the future, they had to prioritize establishing a presence on the web.

Our customers demand ease of use through digital and online technology. We must prioritize it, budget for it and implement it. Our survival depends on it, and our customers expect it.