Tag Archives: shefi ben hutta

Why the Agent Will NOT Be Disrupted

“Google Compare kaput” – Shefi Ben Hutta

A few weeks ago, I published an article here on ITL saying that the insurance industry, in general, would not be “disrupted.” I received both a lot of positive and (politely) negative feedback, including a rebuttal by Nigel Walsh. And then just this week, Google, the single-most-often-pointed-to culprit for the probable insurance disruption, dropped a bombshell: that it is shutting its Google Compare insurance service.

That whisking sound you hear is me taking my victory lap.

All kidding aside, although the urge to take a victory lap is strong, my calmer, rational side realizes that this news does not mean what some might think it means. While my beliefs are that disruption, as has occurred in other industries, will not happen in insurance, Google’s exit from this space is NOT evidence that I am correct. What I believe has transpired is the following:

  1. The insurance business overall is complex. Software cannot eat this elephant whole.
  2. Google underestimated how difficult the business is, especially in the segment Google Compare was fighting for, which is distribution. Getting new customers in insurance is quite challenging. Customers want value in their insurance transactions, which a website and a rater cannot imitate.
  3. Google’s opportunity cost of capital is high, and Google Compare couldn’t meet an acceptable threshold because of its inability to get traction. Brian Sullivan of Risk Information recently said that Google Compare got 10% of the business it forecasted. Ouch!

Those on the disruption side of things promise that, much like the Terminator, Google will “be back.” I actually think that is possible, after some of the issues are ironed out, such as expectations. Once upon a time, I would have been an eager Google Compare customer. So I have no doubt that there is a market for its offering.

But there is a bigger market for insurance customers who want someone else to do the un-thrilling work of getting their insurance in place because those customers either don’t have the expertise or don’t wish to be bothered by the process at all. Consider a recent example in my own timeline.

My current auto and property policies were purchased online several years ago. I didn’t need an agent because I was more than happy to do the work myself to save a few dollars. No longer.

I recently moved across the country, back to the East Coast. The last thing I wanted to do was deal with address and other changes that are required when you move across state lines. I also didn’t want to research all of the licensing and car registration procedures I’d have to go through in the weeks following my move. So I found an agent. Within a couple of days, that burden had been lifted from me. I am less likely to personally do the insurance buying going forward. I would rather be doing something else altogether than researching and buying insurance. The whole experience was well worth the commission paid.

And then there are customers who don’t know much about insurance at all: teen drivers, new homeowners and new parents, to name just a few potential insurance customers where the guidance of a trusted adviser will save a lot of time and future headaches. Can we really expect teen drivers to understand anything more than getting the cheapest policy possible so that they can drive? My newly minted teen driver spent days trying to get her car on the road because she chose the Cockney-accented spokes-lizard insurance, which provided nearly zero support for her real problem, which was the DMV. My response: ”You should have gone to an agent. He would have done all that work for you.” A lesson learned, I hope.

How about a new homeowner trying to get insurance to cover the property and family? An insurance agent will help with issues around replacement values, limits of liability, deductible options and coverage differences between carriers. Can machine learning get to the point where it can replace all of that? Perhaps. But add to this, additional complexities such as how should a family put together auto, property, umbrella and other insurance policies (such as flood, earthquake, jewelry, non-admitted products) together to optimize effectiveness, and I think the technologists looking to disrupt are a long, long way away from being able to effectively deliver the value that an agent/broker is already providing. As the stakes are raised, the human touch will remain invaluable.

This is not to say that the state of the current agency system is acceptable. Agents need to step up their game. Agents have been one of the biggest offenders in not using technology to further their significance. Agents have chiefly been great sales people. They have to be. They are selling an imperfect product whose value is difficult to quantify. In today’s environment, agents need to scale their sales presence outside of the face-to-face transaction toward a digital world. The agent might be able to overcome my objections when we are looking at each other, but, today, I am communicating via digital means, and I can simply ignore the agent. Agents need to use technology to better market to, communicate with an educate customers. They also need to take a page from insurers and use data to understand and quantify risk so that they can recommend the best solutions and not just a policy with the lowest price. Agents are used to providing multiple options to customers; now they need to use data to get an information advantage. Does this mean that agents need to become part underwriter, part adjuster, part actuary while remaining part salesperson to survive? I think so.

For the modern agent or broker, Google Compare was not seen as a serious threat. Top agents know the value they bring and are not easily substituted for with technology. Twenty years from now, the landscape for buying insurance will look very different from today but I wager that, for many of the reasons I have outlined here, the insurance agent will still have a significant role for consumers who value their time and possessions.

Is ‘Direct’ a Dirty Word for Insurers?

The second-worst-kept secret of the year, after the launch of Google Compare in the U.S., is Berkshire Hathaway announcing its plans to sell insurance directly to business owners over the web. Quelle surprise.

I recently spoke with a C-suite exec who told me that “direct” is a dirty word.

Perception is reality.

In reality, though, “direct” is a lousy term that doesn’t do justice to the implementations that today’s technology has to offer that are often in direct alignment with an insurance company’s business model.

The conversation becomes uncomfortable to some once the word “middlemen” is introduced. It doesn’t have to be.

There are two primary outcomes to direct selling: (1) eliminating the middlemen or (2) empowering them. For visualization purposes, consider the following three brands:

Quotemehappy.com occupies the left extreme of selling directly to consumers. A spin-off of Aviva since 2011, the online insurer only provides phone support if a customer has a claim. For all other inquiries, there is browsing. Then there are the Geicos of the world, where insurers offer the convenience of buying on the web with the assurance of speaking to an agent, when needed. To the right extreme, Plymouth Rock provides an example of an insurer that has a patent-pending technology that matches online quotes to agents either pre- or post-purchase. There are several other players occupying the comfortable middle with direct-to-consumer models that offer varying degrees of human interaction.

Typically the outcome is determined by the company’s original distribution channel: whether offline, web or mobile. The table below further illustrates how versatile “going direct” can be:

  • Geico, Policy Genius and Cuvva are examples of insurance companies that implemented a direct-to-consumer strategy from the get-go; here, direct is a no-brainer.
  • Plymouth Rock and Quotemehappy.com via Aviva signal companies that implemented a direct-to-consumer strategy in an attempt to address a change in the market.
  • Allstate acquired Esurance to buy its way into the direct market, and so did AmFam with the acquisition of Homesite.
  • Also, AmFam invested in insurance comparison site CoverHound.

When all is said and done, direct selling is first and foremost a marketing channel that empowers the consumer. Sans proper marketing and messaging, the online insurance journey is transactional at best, and players risk commoditizing their product.

“Commodity.” Now there’s a dirty word for you.

A Word With Shefi: David Stegall

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with David Stegall, principal consultant with Risk Consulting & Expert Services, who often serves as an expert witness in insurance litigation.

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

Risk Consulting & Expert Services is an insurance and risk management consulting firm providing services and counsel to commerce, industry and government on insurance, reinsurance and alternative risk transfer matters. I have more than 37 years of experience and often act as an expert witness in litigation.

What made you decide to start Risk Consulting & Expert Services?

After 30 years, I no longer had an interest in continuing to work within the industry as a purveyor of insurance.

And if it weren’t for the appeal of working in insurance, what profession would you be in today?

Film and/or music production. I like the creative process.

Describe your typical client:

A litigation attorney with the need for an insurance or risk management professional who can offer a professional opinion on the usual and customary practices of the insurance industry or the required standard of care used within the industry and can explain that opinion to a judge and jury in plain, simple English.

Memorable court trial:

Very few cases go to trial, yet I recall the irony of testifying on a case regarding flood insurance at the Cameron Parish Court House in Louisiana, which is about a stone’s throw away from the Gulf of Mexico.

Is there a carrier you would love to testify in court against?

I cannot answer that because I do not think of insurance companies as being either good or bad. They are only as good (or bad) as those individuals who are making decisions for them in a given instance, and even then the good (or bad) decision may be specific to that instant.

You have a talent for explaining complicated risk terms. In your experience, which P&C coverage is most baffling to consumers?

Water damage and flood. Flood is excluded in practically every insurance policy (except flood policies), and water damage may or may not be covered. Most people think of the terms synonymously, but they aren’t. The simplest way to think of it is: If the water comes from above (without hitting the ground) it is covered (note that pipes are considered as being above). If the water comes from below (lake, river, stream, ocean), it is not covered. But please read your policy and ask questions of your insurance representative or call a consultant!

You have more than a few designations, one of which is the Chartered Property & Casualty Underwriter. Has the role of underwriting changed much from when you last practiced it?

There are fewer underwriters now, but they are extending specific yet limited underwriting authority to more general agents (or some form or position of limited underwriting authority) that specialize in a particular industry or product offering.

What emerging technology keeps you up at night from a litigation standpoint?

The same as everybody else: cyber risk. The risks are emerging at the same rate as the technologies.

Speaking of cyber, you recently published a whitepaper on “Cyber Risk & Insurance.” The Ashley Madison hack is now correlated to at least two suicides; where do you think insurers should draw the line?

The same place they draw the line with the idea that, if you attend a baseball game, you might get hit by a foul ball. A person does take some risk by subscribing to any service or website – yes, there is an implicit, if not explicit, responsibility (in the form of statutes) to protect people’s privacy but some activities carry innate risk that insurance can only partially address.

Favorite quote/s:

“Everything’s Gonna Be Alright” (Muddy Waters and others) and “It is always getting too late and then it is.” I hope I made that one up, but I’m sure I’ve heard it somewhere, and it resonated.

When you are not working, you are most likely…

Playing with my seven grandchildren or playing the harmonica.

What are you most excited about at the moment?

That I feel happy, healthy and terrific! A phrase made famous by a former insurance professional and fellow lover of Chicago, W. Clement Stone.

A Word With Shefi: Applebaum at ISG

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Stephen Applebaum, managing partner, Insurance Solutions Group, and senior adviser at StoneRidge Advisors, who describes the implications of the “torrents of data that will flow from connected cars, homes, buildings and people.”

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

I provide consulting and advisory services to participants across the North American auto and property insurance ecosystem, which leverage my experience, industry contacts and understanding of innovation and emerging technologies to drive meaningful, measurable improvement in revenue, market share, process, profitability and user and customer experience.

What led you to your career in insurance?

Serendipity, actually. An early management consulting engagement with a technology-based startup providing insurance claims solutions to P&C carriers led to a full-time operational and management role and ultimately a very exciting and rewarding 30-year career spanning several different companies that continues today.

What emerging technology will change how insurance is sold?

Prescriptive analytics applied to the torrents of data that will flow from connected cars, homes, buildings and people – enabled by mobile devices and embedded sensors – will transform virtually every aspect of how insurance products are developed, priced, packaged and sold, and how risk is managed in general.

A carrier you highly value for its innovative culture?

Among the many top-tier carriers that have invested in and developed innovative cultures, USAA stands out because of its highly focused and fierce dedication to pursuing constant improvement and technological innovation in the pursuit of providing superior service excellence to its “members” in insurance as well as the full range of its financial services.

You recently published an article on “Disruption in the Automotive Ecosystem.” What tip do you have for companies looking beyond their core value to offer innovative solutions in the auto ecosystem?

I suggest that auto insurance carriers focus on leapfrogging current incremental innovation around connected vehicle and data technologies and begin designing and developing the auto insurance products and services of the future. These will likely be very different than anything offered today and will be enabled by enormous amounts of data flowing from not just connected cars but the broader Internet of Things. They may include personalized, utilization-based micro auto insurance coverages, ride-and-car sharing insurance solutions for owners, drivers and passengers, risk management services from behavioral driving modification assistance to location-based and contextual alerts for commercial favorites as well as navigational, traffic, roadside assistance and weather conditions.

You’ve had more than 25 years of consulting experience in the P&C space. What piece of advice have you found to always be relevant regardless of the subject matter?

I regularly ask myself, “What am I doing, and why am I doing it, and is this the best possible use of my time and talents?” It sounds so simplistic, but if you do it honestly you will find it very valuable.

You are a frequent chairman in industry conferences. In fact, you are the chairman of a coming event on IoT in Miami in December. Who should be attending and why?

Anyone who plans to work, invest and succeed anywhere in the insurance ecosystem over the next decade and beyond should attend. This includes insurance C-level executives, heads of innovation, strategy, claims and innovation, underwriting, business development, product development, strategy, design and innovation, heads of IT, technology and digital, IoT technology companies and startups and regulators.

When you are not consulting on insurance or hosting insurance events, you are most likely…?

Reading, watching and listening to anything and everything that relates to my work – which is, in fact, also my hobby.

A Word With Shefi: Carbone at Bain

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Matteo Carbone, with Bain Financial Services in Italy, who says the Internet of Things “has introduced more changes than the sector has seen in the last 100 years.”

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

I advise financial services groups mainly on innovation within their business models. My field is insurance, and I’ve spent the last couple of years handling digitalization of traditional channels: inventing technology-based value propositions, generating customer experience strategies and bringing the omni-channel approach into the insurance business.

Name an emerging technology you are most excited about:

Internet of Things – it’s a game changer! From connected cars to “domotics,” to wearables to connected machines; all the things that are creating tremendous opportunities to price risk, handle claims differently and deliver new services. In the last couple of years, this technology has introduced more changes than the sector has seen in the last 100 years.

Name one similarity and one difference between American and Italian insurance shoppers:

The customer preference for human interaction at the purchase stage within the customer journey is the same in both countries, and so is the digitalization wave, which is obliging insurers to create an omni-channel customer journey around their traditional, physical point of sale.

One important difference is the role of banks in insurance distribution. In Italy, bancassurance accounts not only for more than 80% of the life market but also for 16% of the P&C personal lines market, excluding auto. Currently, banks are looking to play a more relevant role in the auto insurance distribution.

Name a challenge you have faced working in insurance:

You have to really know the intimacy of this strange industry to be able to innovate it. It’s a technical business, so you cannot advise an insurer without knowing the deep aspects of the industry.

A memorable consulting gig:

Without a doubt, it was two years ago advising Renova Group on the acquisition of Octo Telematics, a global leader in insurance telematics solutions. It was amazing to help Renova discover the value of telematics for the insurance business.

Your favorite news source:

As for me, LinkedIn is the primary source. Each day, I check five to 10 insurance news websites yet the best insights come from my LinkedIn network of insurance professionals around the world. I consider the daily sharing of ideas with them an incredible asset.

When you are not working for Bain & Company you are most likely…

My work is my hobby. I enjoy my work, and it is normal for me to think about work even when I am doing other things. However, if I have to identify my main hobby, it is fitness. I am definitely addicted to the gym.

If you weren’t working in insurance consulting, what profession would you be in?

I would probably be managing my family’s historical winery.

Prosecco or Champagne?

Champagne! I’m in love with Krug Clos Du Mesnil; their first vintage was produced the year I was born.

Favorite quote:

“Work hard, play harder.”

Which term best describes you…

  • Driverless or in control? In control
  • Elon Musk (dreamer) or Warren Buffett (doer)? Warren Buffett
  • Risk-averse or risk-taker? Risk-taker