Tag Archives: small business insurance

Science of Insurance Being Put to the Test

I started out in the industry in the dawn of Black Monday. Fast forward 30 plus years, and we’re now in the aftermath of the biggest event to shake the industry in decades.

This last pandemic year has brought into focus the digital constraints of the insurance sector, but more so the importance of being able to identify and adapt rapidly to changing customer needs. 

For the U.K., there are new pricing rules looming, too, which will make understanding the complexities and behaviors of customer segments more important. It means traditional insurance models are feeling the test of time again, and insurance providers can no longer fixate on price alone as a differentiator for new customers.

Price is right?

The regulator is clamping down on the practice of ‘price walking’ in the U.K., which has been prevalent in motor and home insurance market. Under the smog of a lack of transparency, the market adopted a practice of quietly creeping prices up, year after year. If there had been clearer communication about introductory pricing for new customers, the story might be different, but change will now be forced on parts of the industry from 2022. The change is set to affect the way insurance companies attract and retain their customers, as well as the role of price comparison websites.

Across the sector, the balance of power in the 4Ps of marketing (product, place, price, promotion) is already shifting, and the skill of building long-term relationships with customers is in demand. Price is still important, but simply being the cheapest is a potential pitfall. If you don’t understand why you are the cheapest and how your price aligns with your customer landscape, you run the risk of creating something that is commercially unviable.

Data-rich companies have the vantage point here, and the role for data analysts and data scientists is growing rapidly as the industry gears up for future models that will rely more on machine-led pricing and optimization and less on human interventions.

Getting closer to the customer

Today, we need to have in-depth understanding of our customers and design products to deliver what they need, at an attractive price – quickly. 

The late ’80s — during the start of my career — were very different than today, but the sector hasn’t kept up with the pace of change. Back then, it would be common for prospective customers to wade through pages of confusing paper proposal forms — filled with jargon that even insurance executives struggled to understand. While this complexity has largely (but not completely) been eradicated, insurance is still known to breed poorly designed products with difficult, one-size-fits-all questions. 

Behavior of consumers is constantly changing, and as an industry we need to keep up. Treating the market like a homogeneous mass doesn’t work anymore. Think, for instance, about small business insurance. Asking a hairdresser about their work at height or a personal trainer about whether they need tools cover, can leave these customers feeling unrecognized and unengaged by an insurance brand.

People want to be able to find and buy what they need quickly, and being reliant on an endless series of profiling questions immediately diverts from the fast digital purchasing journey that people crave. Whether people are buying the latest fashions or a financial services product, they expect a slick, tailored online journey, delivered in the minimum time possible.

The pandemic heightened the pressure for the insurance industry to respond faster. Following Boris Johnson’s announcement of the U.K.’s first nationwide lockdown in March 2020, for example, we saw bike sales rocket, an overnight switch to virtual fitness sessions and a move toward more domestic caravan holidays. Help for customers needed to immediately follow.

It was testing for an industry still hugely reliant on legacy technology and restrictive processes of the past – where product development can take months and changes to existing products are entrenched by digital limitations. 

See also: The Intersection of IoT and Ecosystems

The digital tide

There are signs of the digital tides turning. The latest briefing from CB Insights and Willis Towers Watson suggests investment in insurtech reached an all-time high in Q1 2021, with $2.55 billion across 146 deals. 

Despite the drive for change, poor-quality data can hinder digital initiatives for organizations. For the insurance sector, rapid visibility and interpretation of data is needed to understand why a product is performing as it does – so we can respond to what it is telling us. 

The success of insurance deployment is at a virtual crossroads. AI and machine learning will play an important role in getting the price and positioning right – and getting into the mind of the customer or ‘community’ you service has become more crucial.

The science of our industry is changing, and we need to move with it.

How to Successfully Insure Small Firms

It can be challenging for commercial insurers to gain a competitive edge in today’s insurance market while still maintaining profitability. However, small business continues to grow, with 30 million small businesses currently employing 48% of U.S. workers. This creates an opportunity for commercial insurers to increase the volume of small businesses in their book of business. So the question becomes, how can insurers best service their current small business customers to ensure strong retention while furthering the growth of that revenue stream?

To gain a competitive advantage, it is crucial that insurers provide elite service, efficiency and innovation that meets the high expectations of their small business customers, especially given how technologically advanced today’s small businesses are. According to a new study by LexisNexis Risk Solutions, there are five key areas identified as opportunities to do so:

Expand and implement more automation

For small businesses, automation is an efficiency driver in all aspects of their daily operations, including those with their insurer. Likewise, embracing automation can increase the speed and efficiency of insurers’ workflows, reduce human error and help address changing business needs and demands. As is, the level of automation used in small commercial underwriting has not improved over the past two years.

See also: Why Start-Ups Win on Small Business  

The underutilization of automation remains a great pain point for small commercial insurers. 89% of those small commercial insurers who participated in the study reported the need to manually re-evaluate insurance applications. However, for insurers looking to set themselves apart, it is important to take advantage of these automation opportunities to reduce the risk of incomplete or error-ridden applications, alleviate labor-intensive busywork for underwriters and improve the overall customer experience. Without these efforts, carriers risk losing money and weakening their competitive position.

Identify the best data assets and leverage them to their full potential

Commercial insurers, like most small businesses today, are no strangers to using data for more informed business decisions. However, the majority of commercial insurers surveyed reported that they relied mostly on public records data, and data retrieved from internet search results. These insurers also cited consumer credit data and commercial credit data as providing the most valuable competitive advantage.

Data assets are not being used consistently across the insurance workflow, but insurers that reset their workflow and spend their time analyzing the right data and utilizing credit and other data sources to their full potential will most likely see improved profitability in their small commercial book of business.

Use predictive modeling consistently

The majority of carriers (81%) believe predictive modeling is important for commercial underwriting, pricing and rating, and it has proven to help insurers evaluate loss propensity and make more informed decisions based on their risk appetite. Carriers that use predictive modeling also report at least moderate success.

However, only one-third of respondents said they use predictive modeling consistently. Small predictive modeling can help insurers new to modeling gain a better understanding of how score-based decision-making can benefit their business, and how to build on that knowledge to adopt it as a consistent business practice.

Put customer experience first

The study found that the three most important factors to the customer experience were faster turnaround times, improved accuracy of customer data and playing a consultative role. However, these three areas were also reported as needing the most improvement.

In the era of instant gratification, commercial carriers should focus on enhancing their online digital platforms by deploying new automation technologies – such as data prefill – to improve accuracy and make the turnaround time and overall process faster. As a result, agents will be able to spend more time being consultative with new and existing customers rather than having to spend it filling out basic information.

Embrace market trends

Seventy percent of the insurance professionals surveyed for the study believe that emerging market trends are important to their business strategy, but less than half are actively making strategic changes in response to them. To stay ahead of the competition, commercial insurers will need to prove that they’re cutting-edge by identifying new trends early and responding quickly.

The current key market trends identified, in the study, as having the biggest opportunities for business strategy include telematics, Internet of Things and direct-to-consumer. On the flip side, data breaches, artificial intelligence (AI) and direct-to-consumer are seen as bringing the biggest threats to business. As these emerging market trends continue to become mainstream, embracing the changes will be the only way to keep from being left behind.

See also: Taking Care of Small-Medium Business  

Find the gap, make the opportunity

While insurers are well aware of these trends and their importance to business performance, few are taking the appropriate actions needed to keep up. For every missed opportunity, the insurer risks falling further behind changing market demands and evolving customer expectations and is less likely to appeal to current and prospective small business customers. Commercial carriers who remain complacent will not only risk losing their current small business clients but could also miss out on the opportunity to optimize and grow their small commercial business.

It’s still anyone’s game to become the go-to insurer for small businesses, so even those that take small steps to better target and service this market can yield big results. The small business community does business via relationships and recommendations, so those who provide best-in-class service to their current small business customers are sure to gain market validation and perhaps even recommendations that can help them organically grow their business.

7 Things I Learned at Bold Penguin

This is my first week at Bold Penguin… marking the true beginning of my insurtech life.

I’ve followed insurtech for more than three years, writing and speaking on the movement, but my vantage point has always been one of the intrigued outside observer.

And while one week does not make you a qualified insurance technology startup guru, here are my first seven insights after diving headfirst into my new role as chief marketing officer at Bold Penguin.

1) Small Business Insurance Is the Holy Grail

McKinsey & Company has been referring to the SMB market as one of the “few bright spots” in the property/casualty insurance sector for years now.


Because no one owns the small business insurance space. The marketplace is fragmented, and generally speaking the commonly accepted customer experience is poor at best. Yet, done right, small business insurance is a growing and profitable market segment.

This is by no means breaking news.

That doesn’t diminish the fact that no one has small business insurance figured out, (except maybe…), making the SMB market the holy grail of meaningful organic growth for the foreseeable future.

2) There Is No Road Map

In case you’ve never worked for a startup before, there is no road map for success.

Insurtech startups are creating solutions that haven’t existed before. Look at the work that Chris Cheatham is doing in policy automation at RiskGenius or Mike Albert and Allan Egbert are doing in open APIs at AskKodiak.

Quite literally, they’re making things up as they go along.

…because they have to. The work lives in uncharted waters.

My point is, just as insurtech startups must mature into the greater insurance ecosystem that has existed for more than 400 years, the more traditionally oriented organizations (and individuals) must accept the slightly more haphazard nature of startup companies.

Insurance carriers with open-mindedness to the realities of trailblazing startups will position themselves out front as the partners of choice for insurtechs mapping solutions for our industry’s most challenging obstacles.

See also: An Insurtech Reality Check  

3) There Is a Race to Remove Friction

Research from a McKinsey & Company survey shows a 73% increase in customer satisfaction when customers reported they were pleased with the entire customer journey, not just specific touch points.

Winners and losers of the digital insurance revolution will be determined in the race to remove the most friction from the customer experience.

This doesn’t mean removing human agents or blowing up the traditional insurance carrier model. Rather, we must think of insurance as a service and create flow throughout the customer journey.

I joined Bold Penguin because it’s my belief that their solution will be the foundation upon which many winning agents, brokers and carriers build their unique customer journey.

Whether you partner with Bold Penguin or not, make no mistake, the race to remove friction is real and it’s happening right now.

If your organization is not having serious conversations about the customer journey, you’re already losing.

4) It’s Time to Ask “What if?”

It’s time for everyone to start asking “What if?” when it comes to the future of insurance.

  • What if APIs are the future?
  • What if customer experience is all that matters?
  • What if we can’t build it ourselves?
  • What if half our agency plant retires in the next five years?
  • What if our carrier partners demand digitization?

Whether you believe these scenarios will come true or not isn’t the point. The insurance marketplace is changing rapidly and being prepared for all the “What if?” scenarios possible is the only way to survive…

…because no knows what’s actually going to happen.

5) Disruption Is Dead

From now on, every time you hear the words “disruption” or “disruptor” come out of a startup’s mouth, your insurtech B.S. alarm should leap to life, the blaring sirens and seizure-inducing flashing lights overwhelming your senses while an impenetrable B.S. Protection Barrier envelops your entire body like some scifi force field.

Seriously though, disruption is not the answer.

Instead, insurtechs should focus on collaboration, facilitation and integration with traditional partners, building on the previous foundation as much as possible and alongside where it does not.

6) Culture, Culture, Culture

I’ve seen first-hand the impact a toxic culture can have on organizational success.

We live in a tumultuous time for workplace culture. According to the American Psychology Association, the workplace continues to be a leading cause of stress (with 61% of Americans listing work as a significant stress factor).

We’re under more pressure to spend more time, to get more done every single day. Work-life balance has become a cliche joke.

While I believe in hard work, giving more of yourself than is asked in the job description and just kicking ass in general, organizational culture must be a fit to achieve our goals of world domination.

Here are three aspects of insurtech culture vital to success:

  1. Always put staff satisfaction first. An inspired team believes, an uninspired team blames.
  2. Never blame the customer. Period. Own your outcomes. The customer may not always be right, but the customer is never wrong.
  3. Don’t take yourself too seriously. As an old mentor used to tell me, “Everybody ?s.”

I’m sure there are more. But these were the three most obvious to me after spending time at the Bold Penguin headquarters this week.

7) Your Story Matters

Your story matters as much as your product.

It doesn’t matter how amazing, revolutionary or game-changing your product or solution is, if your story doesn’t make sense, if people can’t connect the dots between your solution and how it benefits them and their organization, your product essentially doesn’t exist.

This is something we need to do better at Bold Penguin.

We’re not amazing at telling our story today.

We’re going to change that.

One of many reasons I joined Bold Penguin was that the whole story had yet to be told.

I feel like I’ve found a gigantic diamond just lying there on the sidewalk.

And while everyone else walks past, oblivious to the treasure they’ve just nonchalantly stepped over, to the trained eye all it takes is a craftsman-like approach to telling the story of what Bold Penguin can do for insurance agents, brokers and carriers to unlock industry defining value.

But Bold Penguin isn’t alone. Wait until you hear about what Joseph D’Souza is doing at ProNavigator, or Jason Keck at Broker Buddha, or Phil Edmundson at Corvus Insurance.

Having a great solution is the barrier to entry. For anyone to care about your company, you must to be able to tell your story.

See also: Innovation: ‘Where Do We Start?’  

The Rub

According to the most recent CIAB Market Study, “Driving organic growth, hiring and recruiting talent and enhancing the customer experience remain top organizational priorities” for the U.S.’s top insurance brokerages.

With 80% of CIAB’s responding agents and brokers listing “driving organic growth” as a top priority for 2018, it’s exciting to be part of a company working to solve organic growth concerns, not through disruption but through collaboration, facilitation and integration.

You can find the article originally published here on LinkedIn.

Click here to learn more about Bold Penguin.

New Era of Commercial Insurance

Despite a generally soft market for traditional P&C products, the fact that so many industries and the businesses within them are being reshaped by technology is creating opportunities (and more challenges). Consider insurers with personal and commercial auto. Pundits are predicting a rapid decline in personal auto premiums and questioning the viability of both personal and commercial auto due to the emergence of autonomous technologies and driverless vehicles, as well as the increasing use of alternative options (ride-sharing, public transportation, etc.).

Finding alternative growth strategies is “top of mind” for CEOs.  Opportunities can be captured from the change within commercial and specialty insurance. New risks, new markets, new customers and the demand for new products and services may fill the gaps for those who are prepared.

Our new research, A New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption, highlights how changing trends in demographics, customer behaviors, technology, data and market boundaries are creating a dramatic shift from traditional commercial and specialty products to the new, post-digital age products redefining the market of the future.

See also: Insurtechs Are Pushing for Transparency

Growth Opportunities

New technologies, demographics, behaviors and more will fuel the growth of new businesses and industries over the next 10 years. Commercial and specialty insurance provides a critical role to these businesses and the economy — protecting them from failure by assuming the risks inherent in their transformation.

Industry statistics for the “traditional” commercial marketplace don’t yet reflect the potential growth from these new markets. The Insurance Information Institute expects overall personal and commercial exposures to increase between 4% and 4.5% in 2017 but cautioned that continued soft rates in commercial lines could cause overall P&C premium growth to lag behind economic growth.

But a diverse group of customers will increasingly create narrow segments that will demand niche, personalized products and services. Many do not fit neatly within pre-defined categories of risk and products for insur­ance, creating opportunities for new products and services.

Small and medium businesses are at the forefront of this change and at the center of business creation, business transformation and growth in the economy.

  • By 2020, more than 60% of small businesses in the U.S. will be owned by millennials and Gen Xers — two groups that prefer to do as much as possible digitally. Furthermore, their views, behaviors and expectations are different than those of previous generations and will be influenced by their personal digital experiences.
  • The sharing/gig/on-demand economy is an example of the significant digitally enabled changes in people’s behaviors and expectations that are redefining the nature of work, business models and risk profiles.
  • The rapid emergence of technologies and the explosion of data are combining to create a magnified impact. Technology and data are making it easier and more profitable to reach, underwrite and service commercial and specialty market segments. In particular, insurers can narrow and specialize various segments into new niches. In addition, the combination of technology and data is disrupting other industries, changing existing business models and creating businesses and risks that need new types of insurance.
  • New products can be deployed on demand, and industry boundaries are blurring. Traditional insurance or new forms of insurance may be embedded in the purchase of products and services.

Insurtech is re-shaping this new digital world and disrupting the traditional insurance value chain for commercial and specialty insurance, leading to specialty protection for a new era of business. Consider insurtech startups like Embroker, Next Insurance, Ask Kodiak, CoverWallet, Splice and others. Not being left behind, traditional insurers are creating innovative business models for commercial and specialty insurance, like Berkshire Hathaway with biBERK for direct to small business owners; Hiscox, which offers small business insurance (SBI) products directly from its website; or American Family, which invested in AssureStart, now part of Homesite, a direct writer of SBI.

The Domino Effect

We all likely played with dominoes in our childhood, setting them up in a row and seeing how we could orchestrate a chain reaction. Now, as adults, we are seeing and playing with dominoes at a much higher level. Every business has been or likely will be affected by a domino effect.

What is different in today’s business era, as opposed to even a decade ago, is that disruption in one industry has a much broader ripple effect that disrupts the risk landscape of multiple other industries and creates additional risks. We are compelled to watch the chains created from inside and outside of insurance. Recognizing that this domino effect occurs is critical to developing appropriate new product plans that align to these shifts.

Just consider the following disrupted industries and then think about the disrupters and their casualties: taxis and ridesharing (Lyft, Uber), movie rentals (Blockbuster) and streaming video (NetFlix), traditional retail (Sears and Macy’s) and online retail, enterprise systems (Siebel, Oracle) and cloud platforms (Salesforce and Workday), and book stores (Borders) and Amazon. Consider the continuing impact of Amazon, with the announcement about acquiring Whole Foods and the significant drop in stock prices for traditional grocers. Many analysts noted that this is a game changer with massive innovative opportunities.

The transportation industry is at the front end of a massive domino-toppling event. A report from RethinkX, The Disruption of Transportation and the Collapse of the Internal-Combustion Vehicle and Oil Industries, says that by 2030 (within 10 years of regulatory approval of autonomous vehicles (AVs)), 95% of U.S. passenger miles traveled will be served by on-demand autonomous electric vehicles owned by fleets, not individuals, in a new business model called “transportation-as-a-service” (TaaS). The TaaS disruption will have enormous implications across the automotive industry, but also many other industries, including public transportation, oil, auto repair shops and gas stations. The result is that not just one industry could be disrupted … many could be affected by just one domino … autonomous vehicles. Auto insurance is in this chain of disruption.

See also: Leveraging AI in Commercial Insurance  

And commercial insurance, because it is used by all businesses to provide risk protection, is also in the chain of all those businesses affected – a decline in number of businesses, decline in risk products needed and decline in revenue. The domino effect will decimate traditional business, product and revenue models, while creating growth opportunities for those bold enough to begin preparing for it today with different risk products.

Transformation + Creativity = Opportunity

Opportunity in insurance starts with transformation. New technologies will be enablers on the path to innovative ideas. As the new age of insurance unfolds, insurers must recommit to their business transformation journey and avoid falling into an operational trap or resorting to traditional thinking. In this changing insurance market, new competitors don’t play by the rules of the past. Insurers need to be a part of rewriting the rules for the future, because there is less risk when you write the new rules. One of those rules is diversification. Diversification is about building new products, exploring new markets and taking new risks. The cost of ignoring this can be brutal. Insurers that can see the change and opportunity for commercial and specialty lines will set themselves apart from those that do not.

For a greater in-depth look at the implications of commercial insurance shifts, be sure to downloadA New Age of Insurance: Growth Opportunities for Commercial and Specialty Insurance at a Time of Market Disruption.