Tag Archives: Mark Breading

Insurtech: Where’s the Beef?

In 1984, Wendy’s introduced an ad campaign with the tag line “Where’s the beef?” The campaign was so successful that the phrase “Where’s the beef” made it into the vernacular as a way to question whether there was any substance or any tangible result from an activity. The insurtech movement is enjoying enormous success in terms of new startups, venture capital, partnerships, and pilot projects. But it is fair at this stage to ask, Where’s the beef?

Let me be clear that this is not a putdown or dismissal of insurtech. In fact, I am somewhat of a cheerleader for the movement. There is a great deal of innovation generated by insurtech, in the form of new business models, new products, new distribution platforms, new ways to revolutionize the customer experience and many new options for leveraging emerging technologies. Insurers, venture capitalists and others are enthusiastic about the potential of insurtech to transform the insurance industry. And 2017 was a banner year for insurtech, with the number of startups around the world roughly doubling to more than 1,300 (by SMA’s count), with a raft of insurers setting up venture arms and allocating billions to invest and with new partnerships and projects being announced daily.

However, if insurtech is to truly transform insurance, it must ultimately affect the key financial metrics of the industry. Premium volumes and policy counts should rise. Expense and loss ratios should decrease. Life/annuity companies should finally gain traction in the middle market. Overall industry profitability should increase.

There are individual projects at specific insurers where insurtech partnerships have begun to move the needle. There are also some individual insurtech companies that have been quite successful, securing large investments, multiple insurance customers and positive results. But in the context of the roughly $5 trillion global insurance industry, insurtech has not perceptibly changed any metrics.

See also: 10 Insurtech Trends at the Crossroads  

So, what is likely to happen in 2018 (and beyond)? My prediction is that we will start to see “the beef.” This is not exactly a prediction that is going out on a limb. Investors and insurers have a sense that there is a lot of “beef” coming in the future. And not just as a junior hamburger but a double or triple cheeseburger. The hundreds of partnerships, POCS and pilot projects that were begun in 2017 and prior years are likely to begin paying off.

To be sure, there are many insurtechs that will probably fail. It will not be a surprise to see quite a few shut down in 2018. But with 1,300-plus and growing, there is a lot of room for market rationalization and for hundreds of winners to emerge. The proof in the pudding will be if many more use cases start to become visible and have quantitative results associated with their success (sorry for mixing the food metaphors).

But any way you slice it, 2018 is likely to be an eventful year for insurtech. The momentum should continue and begin to translate into solid business results.

P&C: Back-End Systems Unite!

Property and casualty insurers understand that technology is continuously reshaping consumer expectations and exerting pressure to change the way they do business. In our research, 73% of insurers are seeing demand for digital distribution, but delivering online buying is only the tip of the iceberg when it comes to meeting consumer experience standards.

The most complicated task for insurers comes in connecting the multitude of back-end systems required to run existing operations, into a connected web that facilitates the lightning fast exchange of information necessary for today’s digital age.

Standardizing the Customer Experience

When it comes to creating a consistent customer experience, insurers face new and evolving challenges. In the old world order, before consumers demanded digital engagement, customer relationship management was simpler.

“The insurance industry was once dominated by policy-centric, inside-out thinking,” wrote Mark Breading, partner at Strategy Meets Action (SMA). “Relationships were simple – a policyholder was matched with a policy and perhaps an agent/producer. Much of the executive focus and corresponding technology investment was designed to improve operational efficiencies and manage the portfolio of risks.”

To that end, insurers implemented complex technology solutions to manage customer relationships and insurance policies. CRM systems stored information related to the customer’s contact information, coverages, product information, recent transactions and account balances. With little visibility between CRM systems and policy administration systems, they did nothing to help agents when it came time to quote and issue policies.

As agents spoke with consumers about coverage such as auto, information was entered into a policy administration system related to that product. A year later, when the customer phoned the agent to get a quote on coverage for a newly purchased property, the agent could view customer data from within the CRM system related to auto insurance, including the policies already in effect, but the information wasn’t visible through the policy admin system related to homeowners coverage.

To make matters worse, data from the auto policy administration system was also inaccessible to the homeowners’ system, so agents had no way to use existing data to facilitate a faster response to the customer’s request. Instead, the agent had to gather and re-enter customer data into the policy silo to quote, bind and issue the homeowners coverage.

The problem for many insurers is that these disparate and disconnected systems still exist today, with the addition of digital channels of engagement to further complicate the matter of meeting consumer experience standards.

Digital Demands Require United Systems

According to Breading, insurers are placing a high priority on gaining digital capabilities.

“One of the key findings of our recent research on strategic initiatives for 2017 is that digital is gaining more momentum than any of the 16 initiatives we have been tracking,” Breading wrote in a recent blog. “Strategies to become a digital insurer have now reached a high penetration in the industry, with 72% of insurers now claiming that they have this initiative underway.”

See also: 3 Ways AI Improves P&C Economics  

Digital channels create another layer for insurers to address in the customer-centric movement. Lack of visibility between CRM, policy admin and agency management systems creates roadblocks and bottlenecks in the consumer experience.

Insurers will have one record on a customer as a homeowners lead, and this will live in a separate silo than a lead on the same customer seeking auto coverage. To make matters worse, these databases often disagree.

Currently, many insurers have no way of combining data across operational silos or of tying information from third-party vendors, such as credit agencies, into the real-time actionable insights necessary for digital engagement.

Agency Management Suffers Too

While 74% of consumers start an insurance buying transaction online, J.D. Power reports that 22% will move to a consumer-facing call center to finish the purchase. Consumer-facing call center agents are responsible for assisting consumers with questions generated during web-based engagements and for reaching out to consumers who start quotes online without completing the transaction, but agency management systems often provide little visibility into activity initiated through digital channels.

Agents are required to re-enter information already provided by consumers online and to move from one policy admin system to another to quote, bind and issue multiple policies. The opportunities for error increases as information is re-entered, and customer dissatisfaction rises.

Without clear insight into digital activity, agents lack information that could guide measurable follow-up, such as when a consumer abandons an application or leaves the online storefront after receiving a quote. Agent productivity suffers as well without tools to track web-based activity and prioritize leads and follow up.

According to Breading, insurers are limited by a customer view that delivers only “an awareness of the current and former products owned by the customer, the performance of those products, information related to product needs of the customer and perhaps some relationship information like the agent involved.”

To deliver streamlined interactions and facilitate engagement, as well as the instant insights required to meet consumer expectations for immediacy, insurers need a single view of the customer. Breading calls this the ultimate 360-degree view, where every employee and system has the information necessary to engage in informed interactions with the customer in real time.

Gaining a Single View of the Customer

To gain this 360-degree view of the customer, insurers need visibility across all back-end systems from a central vantage point. According to Novarica’s research, 70% of carriers are in the midst of implementing new core systems to unite these operational silos.

Rick Huckstep, industry influencer and chairman of the Digital Insurer, sees a problem with this approach. Core systems are expensive, take years to implement and are difficult to adapt to a changing environment.

“Often, by the time these large IT implementations are finished, they are already a legacy system,” Huckstep said.

Instead of investing in core systems replacements, Huckstep recommends a two-speed approach. Employing insurtech platforms, insurers can capitalize on investments made in IT legacy systems by building the agility and responsiveness necessary for online distribution into the digital front end.

“Insurtech’s core systems are like the latest generation of robotic armed patrol boats — they are agile, automated and cheaper, have a shorter cycle time to commission and are task-specific,” Huckstep said.

By breaking insurer operations into simplified layers, we can gain a better understanding for the role of Insurtech digital distribution platforms. The top layer is customer-facing. This is where agents reside as well as the online storefront offering digital engagement. On the bottom layer are the core systems that make it possible for the insurer to buy and sell policies and manage customer or agent relationships. In between, we have the digital distribution platform.

As customers enter the online storefront and provide personal information, it’s the platform capabilities that enable application prefill by pulling data from third-party resources, depositing it automatically into policy administration, agency management and CRM systems. Because the platform has a single, cross-system view, appetite is determined and quotes are provided in seconds. Platform analytics even use carrier data in conjunction with customer information to provide real-time product recommendations.

It’s a similar situation when consumers phone the call center during an online transaction. Because the platform provides a single vantage point to all customer and system information, the agent can see not only the customer data that has been entered into the policy admin system, but where the consumer is in the application process.

Agents are able to pick up exactly where the consumer left off and realize the same benefits of automation when determining policy eligibility, providing quotes and binding and issuing coverage. Transaction speed and efficiency are maximized, giving consumers a seamless cross-channel experience.

Agency management takes a step forward in the platform economy as well, flagging consumers who fail to make it through the quote-to-issue lifecycle, prioritizing work flows and supporting more frequent customer communications by tracking activity across product and operational silos.

Entering the Era of “Platformification”

Accenture says that 76% of executives see partnerships as critical to their competitive advantage. Platform-based business models are the goal of 94%, creating ecosystems where insurers and outside digital resources join forces in synergistic relationships that promote asymmetric growth.

“The ‘Platformification’ trend is about leveraging the power of platforms and APIs in open environments, to create new marketplaces and new ecosystems,” said Sebastien Meunier, insurance industry influencer.

Platformification is a growing part of insurance. As insurers embrace relationships with insurtech providers on digital distribution platforms that unite back-end systems and provide a single vantage point to the information contained therein, a more customer-centric environment is rapidly created.

A top 10 insurer that offers products direct-to-consumer through digital and agent channels recently partnered with an insurtech digital distribution platform provider. The platform united silos and allowed internal agents to quote, bind and issue home and auto products from a single application.

See also: Possibilities for AI in P&C Insurance  

Three years into the agreement, the platform was managing as many as 4,000 quotes a day, and the number of policies sold had more than tripled through agency channels. Considering the success, the insurer made the decision to start a pilot program, offering the same advantages of seamless product bundling directly to consumers in select states.

Within the first three months, the insurer recognized 50% growth in bundled business over the same quarter the prior year. The insurer could have continued the trial, but given the benefits to consumers and the bottom-line, moved quickly to a full rollout, offering the advantages to customers nationwide.

Uniting back-end systems to provide a single view of the customer is critical to revenue growth and customer retention in the digital age. How is your organization tackling the challenge of siloed operations?

Possibilities for AI in P&C Insurance

Artificial intelligence (AI) is a term for a very broad array of technologies that mimic human cognition and activities; They can also discover patterns and relationships that go beyond anything humans are capable of. Depending on your view, AI will either be a great boon to human society and business or an existential threat to humanity. Or you may believe that the whole area is hyped and won’t have these dramatic implications. Whatever you believe, it is important to understand how AI applies to the property/casualty industry and where the greatest potential lies for harnessing the technology.

See also: Strategist’s Guide to Artificial Intelligence  

A new research brief by SMA, based on a survey of insurance executives, provides some insights into these areas. AI in P&C Insurance: Potential and Progress covers personal and commercial lines, revealing significant differences between the sectors. AI has potential in P&C to address many business issues across the enterprise for every sector of P&C. Today it appears in use cases here and there. Over time, AI will contribute to solutions everywhere in P&C.

Insurers are experimenting with and implementing AI technologies such as robotic process automation (RPA), chatbots, data and text mining and machine learning. Underwriting rules engines and solutions for claims fraud are being enhanced with newer AI capabilities. Underwriting and claims are two areas that have been using earlier forms of AI (case-based reasoning, rules engines) for some time. These areas still offer great promise for using AI in the future, but now AI is being applied to customer-facing areas as well as other operational areas (e.g., marketing, distribution, policy servicing). For example, insurers are now using AI technologies to improve the customer experience – in fact, personal lines insurers see that as the area to reap the most value from AI overall. Commercial lines insurers tend to expect more value from a better understanding of risk and more efficient operations.

It is important for insurers to actively investigate AI technologies and how they might apply to strategic or operational business needs. What makes AI so important and applicable to many insurance use cases is the range of technologies that are part of the AI family. Depending on how you group and count them, there are at least a dozen different AI technologies. In addition to those already mentioned, there is image recognition and visioning systems, natural language processing (NLP), cognitive computing, artificial neural networks and others.

See also: Seriously? Artificial Intelligence?  

Over time, various AI technologies will become embedded in many different solutions and be used across the enterprise. Now is the time to explore, experiment and look for alignment to business strategy where advantage can be gained.

How to Augment Agent Channels

At the beginning of this year, Deloitte released its predictions for the insurance industry. Topping the list of priorities was the need to “expand digital distribution and virtual service to cut costs and gain competitive advantages.”

For insurers who have relied exclusively on independent or captive agent workforces, the way forward is unclear. How do they establish a digitally based, direct-to-consumer presence when many haven’t yet stepped onto the digital stage?

The Current State of Digital Readiness in Insurance

According to Aite Group, only 20% of auto insurers and 7% of homeowners carriers are currently selling products online, despite the growing number of consumers that are choosing to use these channels.

“Many insurers are tied to core policy admin systems that originated in the last century,” said Rick Huckstep, industry influencer and thought leader at The Digital Insurer. “They remain constrained by the legacy of a pre-internet, analogue way of working.”

These systems, built with a 20-year life expectancy, were entering their twilight years before the current digital revolution, so it’s no surprise that they account for up to 80% of insurer costs. Even more troubling, according to Huckstep, they represent a significant impediment to establishing a digitally-based direct-to-consumer strategy.

For insurers who have focused exclusively on external agent channels for distribution, the situation is more severe. While they usually have a basic one-dimensional web presence, many of these insurers haven’t begun to think about how they are going to establish an attractive online storefront, let alone how they will tie legacy systems into the web frontend.

See also: Why More Don’t Go Direct-to-Consumer  

Implementing a Direct-to-Consumer Strategy

In our recent research, 73% of insurers reported consumer demand for D2C channels of engagement, but only 23% were satisfied with the results of their digital efforts. To be effective, a comprehensive digital strategy needs to tie together all of the key elements related to the customer experience.

For insurers relying exclusively on independent or captive agent forces to sell their products, the three principles below provide a starting point to add D2C channels of engagement into the mix.

Focus on Customer-Centricity

When Amazon came on the scene in 1994 selling books and records, it already had a vision of becoming an international seller of almost everything. Since then, the retailer has evolved into the premier online merchant, setting the standard for customer engagement in the digital world.

Looking closely at Amazon’s example, insurers can learn a lot about developing a D2C strategy. First, even if it seems beyond imagination in the beginning, plan for the end result.

Setting up an online storefront may seem like your biggest challenge today, but where are the technology trends going? Robotics and artificial intelligence are already improving workflows, and blockchain is waiting on the horizon.

Incorporating the digital basics that are available into your distribution strategy provides a base to integrate future advancements as the market changes.

Next, make it interactive. Amazon does more than sell everything under the sun. It interacts with shoppers, offering product recommendations that make it easy for consumers to find what they want at a price they are willing to pay.

Insurers can do the same, gearing their web-storefront to provide product recommendations, alert consumers to gaps in coverage and advise on deductibles and policy limits.

The message here is simple: Think of everything a target customer needs and then create the most efficient and customer-friendly way to deliver it.

Plan for Better Data Handling and Access

When it comes to data, insures have a lot of it, but, according to Aite Group, they aren’t making good use of it.

Currently, insurers use a complicated mix of lead generation techniques, including purchasing leads from outside vendors. As leads come in, data is filed in its own repository according to coverage type, causing product siloes and often resulting in data inaccuracies across systems.

As a result, insurers lack a single view of the consumer where every employee and system has the information necessary to engage in informed interactions with the customer in real time. Mark Breading of Strategy Meets Action calls this the ultimate view, and it’s essential to an effective D2C strategy because customers expect to interact with lightning-fast efficiency.

Imagine you sign into your online banking site, but, instead of being provided a single account overview, you’re required to login separately to see each account. This is the type of engagement insurance systems are set up to provide today, and the experience that many customers receive when purchasing coverage online.

They enter the site, input their personal information and are provided a quote for a single type of coverage. To inquire about other policies they may need, the customer is required to go through the application process again. If they need to make an inquiry with an agent, they have to provide the same information once again.

Direct-to-consumer distribution requires the web frontend to be connected to backend systems in a way that unites product siloes and delivers a 360-degree view of the customer and related products.

Establishing a Customer-Facing Call Center

In the non-digital world, consumers and business owners look to agents and brokers for guidance on obtaining the appropriate coverage. In the digital realm, the best D2C platforms use consumer-entered data, as well as information from third-party sources, to speed the application process, minimize errors, identify coverage gaps and recommend options.

So, what happens when a consumer needs to speak to someone? Even with direct-to-consumer engagement, insurers will need a customer-facing call center to answer questions and help with routine policy inquiries.

Accenture recently surveyed over 32,000 consumers to get their thoughts on the insurance industry. When it comes to getting advice and answers to questions, as many as 86% of these respondents are open to receiving automated support but up to 62% still prefer to receive guidance from an actual person when they have a question or need advice.

Insurers who rely exclusively on independents or captives will need to establish a separate customer-facing call center to support D2C channels of engagement. That call center will also need a cross-channel view to pick up the customer transaction right where they left off during their online interaction.

Planning ahead could net big advantages; Bain reports an increase in customer loyalty when insurers provide multiple channels of engagement. Consumers also report higher levels of trust with omni-channel insurers because consumers feel that the company will work to resolve any issues, an important aspect of a happy customer-insurer relationship.

The Importance of Partnerships

Huckstep, Breading and other industry influencers agree: When adding D2C channels of engagement, insurtech partnerships are the way to go.

Breading feels that the industry will be greatly transformed in 10 years — making it barely recognizable from what it is today _ and a large part of the change will come from insurtech innovation, particularly where distribution is concerned.

See also: The Agent of the (Digital) Future  

Distribution is a hot area for insurtechs in personal lines and is already having an important impact,” Breading said. “Insurtech has been a major trigger for new insurer strategies and will be an important part of the transformation of insurance over the next five to 10 years.”

According to Huckstep, insurtech platforms that build on the significant investment already made in legacy IT put insurers in the “fast lane” toward D2C distribution and outperform attempts at overhauling or moving to new policy admin systems.

“The insurtech digital implementation can be measured in months and thousands of dollars (instead of years and millions),” Huckstep said. “Speed-to-market is the defining characteristic for these tech-enabled platforms.”

At the end of the day, speed-to-market is what it’s all about. Accenture’s study revealed that as many as 51% of consumers are purchasing coverage online, but, according to Aite Group, less than one-quarter of insurers are selling direct to consumer through digital channels. That means a small number of insurers are reaping all of the rewards of digital distribution, while others, particularly carriers that sell exclusively through independent or captive agent forces, lose revenue and market share.

I’d like to hear from carriers with independent or captive agent forces. Are you feeling the push from consumers to offer D2C channels of engagement, and what approaches are you taking to ensure that you have a presence in the new digital insurance economy?

What’s Wrong With Life Policy Claims

Recently, I assisted a relative after the passing of her spouse. There were four life insurance policies from three different companies — all with claims to file and distribution options to evaluate. Understanding the terms of the policies and the possible distribution choices were challenging and required advice from a financial advisor, but that’s what I expected. There were tax implications to consider and occasionally the complexities of estate planning to take into account, but I expected that, too. What I did not expect was how difficult it was to connect with the insurers to ask questions on how to submit the claim and get clarification about the options. It seems that the industry still has lots room for improvement when it comes to the customer experience.

When a beneficiary calls to ask policy questions regarding a spouse who has recently died, it is an emotional and extremely important touch point. I was surprised — no, shocked, really — at the responses we got. First, an email with specific questions for one of the agents was answered two days later, and the response was that we should call the insurer’s customer service number. Then, we spent an afternoon calling insurers — only to be sent to voicemail or put on hold for long periods of time. We finally got to a live person, only to be transferred to another person and put on another long hold. From the customer’s perspective, they have been paying premiums for decades, and rarely, if ever, have asked anything of the insurer — at most making a loan request or changing a beneficiary. Now, in their time of need, they are finding it difficult to get to a human who will assist them in a timely, compassionate manner.

See also: Thought Experiment on Life Insurance  

Granted, this is a sample size of one, but my sense, after working with several companies, is that this is not uncommon in the industry. Also, I do understand that most of the emphasis and funding for projects goes into customer acquisition. But, remember, this is the true time of need for life insurance. And there are solutions available to help provide a better experience. There are three suggestions I offer to improve the situation. The first is simply to have the staffing levels to support call volumes so that a customer always gets to a real person when they need it. This is not the place to cut costs. Second, leverage more self-service capabilities that allow claimants to easily get answers to the basic questions. These self-service capabilities should have click-to-chat and click-to-call options so the individual can get more help if needed. Finally, move toward a more omni-channel environment so that information and conversations can be easily transferred between channels, eliminating the need for people to repeat information or start the process all over again every time they talk to someone new.

It’s terrible to make a person who is grieving the death of a loved one have to go through more difficulties or make them wish they had never done business with a company in the first place. In our case, we dealt with three different companies, and all of them gave us an experience that left a lot to be desired.

See also: This Is Not Your Father’s Life Insurance  

Life insurers, take notice. Remember that we are in a new era — one in which customer expectations are higher. Failing to deliver a good customer experience after the loss of a loved one may not seem like one that will ultimately affect financial results, but the ones left behind will share their experiences with others. You may find that you have a lot to lose, too.