Tag Archives: The institutes

Rethinking Risk Management in a COVID-19 World

If there was ever a moment for risk managers to shine, this is it. In many companies, risk managers have won kudos because backup plans have made the transition to telework smoother than it easily could have been (though I feel awful for those working in restaurants, hotels and other businesses who have been furloughed or fired because their jobs simply can’t be done at a distance.) Even when there have been unanticipated problems–and so very many companies face problems that go well beyond any telework issues–no one can play down the importance of risk management in a world turned upside-side so suddenly by the COVID-19 health crisis and the economic chaos that has followed.

Last week’s “Future of Risk” conference, held by The Institutes, hit some risk-management themes that I think will be key as we all prepare for the new normal, and I’ll highlight the boldest one I heard. It came during the opening session, a panel moderated by The Institutes’ CEO Peter Miller.

Markham McKnight, CEO of BXS Insurance, said the U.S. needs a national risk strategy, rather than the current piecemeal approach–one bit of legislation providing flood insurance, one addressing terrorism, etc., with much of the work being done through emergency legislation crafted in the middle of the crisis that a virus, a hurricane or a wave of wildfires produces. A robust national strategy would provide an overarching framework for assessing all the risks and for funding ways to reduce those risks, as well as to pay for redress when the inevitable occurs.

“The absence of a national program leaves us just kicking the can down the road,” McKnight said. “Legislation gets renewed, but only so we can keep doing business.”

He said there should be a national risk pool in the U.S. that would take a comprehensive look at exposures and suggested the insurance industry could provide leadership on how to quantify and mitigate the risks.

Tony Kuczinski, CEO of Munich Re America, agreed with the need for industry involvement, saying he had signed a letter encouraging such a plan. “It’s four or five times as expensive to fix a problem after the fact than it is to be proactive,” Kuczinski said. “You just have to have the stomach to tackle the problem up front.”

Joan Lamm-Tennant, CEO of Blue Marble Microinsurance, which operates in the developing world, said she’d “globalize those thoughts.” She said she’s “experiencing a real call to action on behalf of governments and quasi-governments and a willingness to work more with the private sector.”

She recommended a model along the lines of the Terrorism Risk Insurance Act (TRIA), enacted in the U.S. in 2002, following the 9/11 attacks. Under TRIA, insurance is provided via the private sector, but government acts as a backstop. That backstop “gradually recedes as the private markets get more data and get stronger,” Lamm-Tennant said. Such a public-private approach, she said, would let us avoid setting up “some new government agency”–a goal that I’m sure we all applaud.

Perhaps I’m jaded from decades of watching inaction in Washington, but I doubt Congress will get as far as a national risk plan. I imagine most risks will still be treated piecemeal. I do think that, as long as people are throwing trillions of dollars around, considerable resources could be brought to bear. Legislators, like generals, tend to fight the last war, so the focus will surely start with public health, but other risks could win attention if a compelling enough argument is made.

I like this one: The U.S. spends north of $700 billion a year on the military as a sort of insurance policy against the chance that Russia will lob a bunch of missiles on New York City; maybe it’s time to mitigate some other risks, too.

And I hope the insurance industry can lend its expertise in identifying, quantifying and managing those risks.

In the meantime, I dearly hope you all stay safe.


Paul Carroll


P.S. I was delighted to see that more insurance companies are staking a claim to the moral high ground in the pandemic. Following reports two weeks ago that some health insurers were waiving out-of-pocket costs for coronavirus patients, two auto insurers said Monday that they are rebating premiums to customers, as long as driving has dropped so much. Allstate said it is rebating $600 million, and American Family Insurance, $200 million. As I wrote a week ago, I hope the entire industry will do whatever it can for customers during what will surely be a defining stretch. So far, so good.

Blockchain, Privacy and Regulation

The past several months have seen increased activity and focus on the promising technology of blockchain and its potential in the insurance industry. Blockchain has also reemerged as an important issue in the European Union (EU) following the go-live date of the General Data Protection Regulation (GDPR) on May 25 of this year.

As a side note to U.S. policymakers, including the California legislature, the GDPR was adopted two years before its effective date. There was a reason for that. There will be a considerable amount of scrambling in Sacramento this year as efforts are made to clarify the scope and limit the unintended consequences of the hastily enacted California Consumer Protection Act 0f 2018 (CCPA). Virtually everyone in the insurance environment – including startup and established insurtechs – need to keep a very close eye on what emerges during this effort in 2019.

Regardless, it is important for all those dealing with technology to understand how the E.U. is dealing with issues such as blockchain. Businesses in California should be paying particularly close attention to how the E.U. is attempting to reconcile GDPR and emerging technologies while the CCPA is moving inexorably to its effective date of Jan. 1, 2020. Multinational companies are already dealing with GDPR compliance given its long extraterritorial reach. Inevitably, how the E.U. is dealing with privacy will serve as at least a partial template for how privacy issues will be dealt with in the U.S.

E.U. commissioners are currently attempting to sort out the interaction between GDPR and blockchain technology. It is not a nice fit. To foster a dialogue on this issue, the E.U. Blockchain Observatory and Forum was created as a European Parliament pilot project. Per its website, the observatory’s mission is to monitor blockchain initiatives in Europe, produce a comprehensive source of blockchain knowledge, create an attractive and transparent forum for sharing information and opinion and make recommendations on the role the E.U. could play in blockchain.

On Oct. 16 of this year, the E.U. Blockchain Observatory and Forum published a thematic report, “Blockchain and the GDPR.” As noted in the report regarding blockchain and GDPR compliance:

“The issue of compliance of blockchain with GDPR is an important one. By specifying how personal data is to be protected, the GDPR will play a fundamental role in shaping digital markets in the Union. Considering its strong support of this nascent technology, the European Union clearly believes that blockchain technology has an equally important role in these markets, too, offering new paradigms for the ways we transact and interact with each other.” (Report, p.8)

See also: Blockchain’s Future in Insurance  

What is not clear at this point in time is how blockchain can flourish while remaining compliant with GDPR. There are those who think the fundamental structure of blockchain is irreconcilable with GDPR. That opinion is not prevailing at this time. As noted repeatedly in the report, GDPR compliance is not about the technology, it is about how the technology is used. There are clearly issues, even with private consortium blockchains, that need to be fully understood. The issue isn’t just where the data are housed, the issues also include who controls the data and, as the report repeatedly emphasizes, how that data are used.

The E.U. is ahead of the U.S. in efforts to balance the rights of natural persons regarding their own personal information and the improvements that can come from technological innovation. While various sectors of the economy, including insurance, seem to be gushing about the possibilities of blockchain, there is a singular silence about how this environment will comply with the host of state and federal requirements placed on all the participants in this distributed ledger technology. This isn’t just about privacy in general and the CCPA in particular, although the CCPA could disrupt blockchain even in the commercial context if there is no further clarification during the 2019 California legislative session.

The observatory’s report, however, serves as a reminder that the GDPR deals with personally identifiable information belonging to natural persons and not information that is shared with other business forms provided to businesses. That is an important distinction but not entirely dispositive. In the world of commercial insurance, there are sole proprietors who must have not only liability coverage but also workers’ compensation insurance. These are “natural persons” who under GDPR and currently under the CCPA could ask their personal data to be removed from a database. This is not consistent with the blockchain’s promise of immutable records. (See: Civil Code Sec. 1798.105)

Earlier this year, industry giants Marsh and IBM, working with Acord, teamed up to develop a commercial blockchain for proof of insurance. Acord is the Association for Cooperative Operations Research and Development, an industry-supported organization that, among many other functions, makes many of the forms used in the property and casualty insurance industry for the transaction of insurance (applications, certificates, etc.). The pilot participant for this is ISN, a global contractor and supplier information management business. Per Marsh’s announcement earlier this year, “A distributed ledger technology, blockchain is ideally suited to large networks of partners. It establishes a shared, immutable record of all the transactions that take place within a network and then enables permissioned parties access to trusted data in real-time.”

IBM and Marsh also recently announced that they are working on making the proof of coverage blockchain accessible to Marsh clients through Salesforce.

Recently, The Institutes, best known for its professional designation programs in the insurance industry, has launched its RiskBlock Alliance. Per its Sept. 23, 2018 announcement, “…a blockchain consortium representing 31 risk management and insurance companies, has launched Canopy, the industry’s first end-to-end reusable blockchain framework, using the Corda blockchain platform.” One of the use cases currently being developed for Canopy is proof of insurance.

In remarks on the National Association of Insurance Commissioners (NAIC) Innovation and Technology (EX) Task Force Oct. 15, 2018, conference call, Christopher McDaniel, president of RiskBlock Alliance, said, in response to an inquiry from Oregon Division of Financial Regulation Deputy Administrator TK Keen: “…if regulators have their own node on the blockchain, they could push a button and create a report, as long as the appropriate agreements were in place to share the information.” [NAIC Innovation and Technology (EX) Task Force conference call Oct. 15, 2018, draft minutes dated Oct. 26, 2018]

In a July 12, 2018, blog titled “Ultimate Guide to Blockchain in Insurance” from management consulting firm Accenture, it was noted that blockchain would facilitate “using shared loss histories to obtain data-driven insights on prospective customers for more sophisticated pricing.” I suspect that state insurance regulators would have a keen interest in how that would be accomplished. Workers’ compensation rating organizations such as the National Council on Compensation Insurance, Inc. (NCCI) or the Workers’ Compensation Insurance Rating Bureau of California (WCIRB), operating under license from state insurance regulators and serving as a critical part of the active regulation of insurance required under the McCarran-Ferguson Act, would most likely have a few questions as well.

In other words, while there has been much discussion about the promise of blockchain, that discussion needs to be fully integrated into the discussion of how all that data are going to be secured, shared, and stored within the context of existing and anticipated regulatory compliance requirements. This goes beyond insurance regulation and, as is the case with the EU, directly implicates the emerging and complex privacy environment as evidenced by the CCPA.

Take, for example, the issue of proof of coverage and the issuance of certificates of coverage within the workers’ compensation environment. These are two separate issues that require separate solutions. States maintain coverage verification portals for any person to verify workers’ compensation coverage. These are managed by rating organizations pursuant to statutory mandate and generally by self-insurance regulatory authorities. In some instances, such as with California’s Contractors State Licensing Board (CSLB), there are separate coverage disclosure requirements that are also accessible by the general public. This is not a testament to the accuracy of these systems, but rather only to their accessibility.

For blockchain to be effective in the workers’ compensation environment, therefore, it needs to have some degree of integration with public databases. That isn’t as easy as it may seem. For example, Labor Code Sec. 3715 states, “The nonexistence of a record of the employer’s insurance with the Workers’ Compensation Insurance Rating Bureau shall constitute in itself sufficient evidence for a prima facie case that the employer failed to secure the payment of compensation.” Does this mean that rating organizations should have a node on the proof of coverage blockchain, as should the Division of Labor Standards Enforcement (DLSE) and the Department of Insurance (CDI)?

If that is the case, then what does that mean for purposes of public records laws and whether the blocks in the blockchain are public records? In other words, if the blockchain is to serve a public purpose then it must take into account access issues that may not be present when the ledger is entirely for private transactions.

See also: How Insurance and Blockchain Fit  

A certificate of insurance is issued, arguably, by either an agent or broker or an insurance company. For most transactions, this is currently done through a writable .pdf document or done manually. This process is an open invitation for fraud. The work Acord is doing with Marsh and The Institutes underscores a technology solution may help make the certification of insurance coverage – both as to existence and to limits (for liability lines of insurance) more reliable and transparent. This is not an inconsequential matter, especially in California and considering the particular issue of whether some staffing companies are very much part of the problem.

The latter issue regarding staffing firms is a critical one for California. Given the Golden State’s broad regulation of employment relationships, it is at best vexatiously ironic that when it comes to staffing agencies, with some very limited exceptions, there is virtually no regulatory framework to verify the legitimacy of staffing firms and the way they do business. This is a problem – and a problem that needs to be resolved before applying a technology solution to the issue of bogus certificates of insurance.

And that finally leads us back to what the observatory noted in its thematic report: “… start with the big picture: how is user value created, how is data used and do you really need blockchain?”

Insurtech: Revolution, Evolution or Hype?

Artificial Intelligence (AI), machine learning, the Internet of Things (IoT), blockchain, robotics, quantum computing — the terminology of technology is staggering enough, let alone understanding what it is and how to use it. While some of the advances in technology are more noise than anything useful, many of these developments can be quite valuable for our industry — especially in claims management and risk control.

Fortunately, there are experts with a good understanding of insurtech and how we can make it meaningful for our companies and our injured workers. Three of them helped us break down the latest technological developments and provided insights into how they can benefit the workers’ compensation system during our most recent Out Front Ideas webinar:

  • Guy Fraker, chief innovation officer for Insurance Thought Leadership
  • Jason Landrum, global chief information officer for Sedgwick Claims Management Services
  • Peter Miller, CPCU, president and CEO of The Institutes/Risk and Insurance Knowledge Group.

What Is Insurtech?

Simply put, insurtech is using technology to improve efficiencies and provide a better customer experience in the insurance industry. Many startup companies have entered this space in the last few years, although the majority are not as helpful as they may first appear. Companies come out with apps or, as our speakers said, shiny new toys that drive user experience and seem really cool but do not add value. One speaker said many companies offer solutions to problems that do not exist.

The more mature, robust companies — those with an actual product that covers the life cycle of the value chain or a significant gap in it — are in the minority but have the most potential to make a difference. They offer strategic and comprehensive solutions. There are not too many organizations with this capability, so there are tremendous opportunities.

The right technology, when properly deployed, has the capability of making a significant impact. Two of the most meaningful advancements for our industry are machine learning and AI. So what are these terms and how do they differ?

Machine learning is actually an application of AI. Where AI is basically computer-based logic, machine learning uses statistical techniques to allow computer systems to learn from data without being explicitly programmed. From the data, it defines a formula to predict an outcome, thereby making it meaningful.

See also: Insurtech Ecosystem: Who Will Eat Whom?  

Some TPAs and carriers are using this technology to quickly flag claims that could be in danger of adverse development. The computer takes a claim, runs it against data on other claims and can determine if it is likely to become severe. As soon as the machine learning model detects something different about a claim — something a human would not be able to identify as a potentially huge loss — it alerts the claims manager to intervene and manage it more carefully. The effect is to drive the outcomes of claims in a more positive way.

For injured workers, technology is being leveraged to provide apps that provide easy access to claim information. Injured workers can find out where they are in each step of the process without having to call the adjuster.

In the consumer market, AI and machine learning are being used to apply natural language processing and determine what the person is actually saying or asking a computer. Think Alexa or Google Home. Our speakers predict it will soon become commonplace for humans to interact easily with machines.

Implementing this technology may seem overwhelming to organizations, especially if they try to adopt it on a large-scale basis. Instead, companies should have a narrowly defined plan and seek real solutions.

Industry Initiative and Blockchain

One of the exciting potential uses of newer technology in our industry is something called the RiskBlock Alliance. This not-for-profit industry consortium is meant to provide a framework that the industry owns: a standardized way of looking at data. It is based on three technologies:

  1. The Internet of Things
  2. Blockchain
  3. Data analytics

The confluence of these technologies is profound. In a nutshell, the IoT is the network of electronic devices that can digitally capture and exchange data. Blockchain enables the storage of this data along with rule sets. It can execute automated instructions based on the data and the rules applied to it. It also allows for data sharing among organizations in a secure way. A couple of examples demonstrate the significant savings and benefits to the industry:

  1. Proof of coverage. For example, a short-haul trucking company must provide proof of insurance for every load each driver takes; approximately eight hauls per day, per driver. It adds up to about 200,000 times each day that proof of coverage must be executed. There are different insurers involved with each load. It takes the company about 30 minutes to get a proof of insurance for each load. However, using the sharable platform of blockchain means the proof of insurance per load can be available in a matter of milliseconds.
  2. Sharing policy information when subrogation comes into the equation. Say there is an auto accident between two vehicles, each with a different insurance carrier. Initially, both insurers start paying the insureds while they sort through the details to see who is at fault. Once fault is established, payment between the two carriers must be settled. Right now, this is done manually at an estimated annual cost of $300 million to the industry. Using blockchain, the policy information could be housed in a secure environment and the settlement done instantly. Putting policy information in an automated process on an aggregate basis could save tremendous amounts of money and time.

Challenges and Opportunities

While there are some challenges in implementing new technologies, there are also many opportunities. Many of the more rote tasks of handling claims can be done faster by technology, freeing claims managers to provide the human touch that is so necessary in so many workers’ compensation claims. Spending more time with injured workers, showing them concern and empathy, results in better outcomes for them and lower costs for payers.

One challenge is the need for data standardization, something RiskBlock is targeting. This could level the playing field and provide opportunities for smaller insurers to grow more quickly.
Incorporating aspects of insurtech into the daily workflow can be challenging, especially because there are so many innovations and ideas at play. It is important to try to harness that enthusiasm and apply it to a framework that captures the best ideas and develops them into solutions.

Another potential challenge is that our industry is so heavily regulated, and regulated differently in each jurisdiction. That means that some insurtech solutions may work in one area but not another. Caution is required before jumping on something that may not be workable.

One challenge that can be easily overcome is changing the mindset that implementing new technology requires many people. It does not. Moving into the insurtech space is best done in a constrained way, with just two or three people involved. As one speaker said, “It’s not about thinking outside the box. It’s about building the box.” Every game-changing organization like Microsoft and Facebook started with a team of just three or four people.

See also: Key Challenges on AI, Machine Learning  

From a healthcare standpoint, one of the best opportunities from insurtech is the ability to get in front of pain, which can also be referred to as pre-pain or pre-hab. As healthcare technology advances, we will be able to help workers and their families understand what to expect in terms of pain before they undergo surgery, for example. We can help them be better prepared, facilitating better and shorter recoveries.

The Future

With the maturation of insurtech companies, our experts expect the number of startups will slow in the next couple of years. Instead, existing companies will return with innovations.

The tremendous amount of data available in the future will help level the playing field between larger and smaller carriers. This is because the smaller carriers will be able to participate in data sharing initiatives to have access to analytics way beyond what their own data could provide. Data aggregation insurtech companies are going directly to the source for data, such as partnering with auto manufacturers to access data from their onboard computer systems.

Insurtech will also allow pharmacists to match DNA to prescriptions to determine if they are feasible. Also, robotics can be used to handle riskier or repetitive tasks. Rather than replacing workers, the technology allows them to engage in more meaningful responsibilities. Using AI to process routine, medical-only claims may even result in eliminating some steps. We may find straight-through processing can be done quickly and efficiently.

One of the most exciting uses of new technology is to eliminate losses by removing risks. Insurtech can be used to detect when and how certain actions will likely lead to injuries, allowing humans to set up systems to prevent those conditions. The ability to avoid losses would truly transform our industry.

Gradually and Then Suddenly…

Excerpted from MSA’s Q1-2018 Outlook Report (June 2018)

The insurance industry has been compared to the proverbial frog in the pot of ever hotter water. While things appear on the surface comparable to what they were like 10 years ago, perhaps with some nuanced variations, there appears to be little in the way of differences. Yes, mergers continue happening at the carrier level, and direct insurers are slowly gaining market share, but the band plays on. Industry associations continue holding conventions, insurers, reinsurers and brokers continue their traditions and year-end pilgrimages to London, Monte Carlo, Baden-Baden, NICC and the Aon Rendezvous, and the various other stations still welcome a familiar crowd. But signs that fundamental changes are afoot are becoming ever harder to ignore.

In Ernest Hemingway’s 1926 novel, “The Sun Also Rises,” there’s a snippet of dialogue that seems apropos:

How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

The primary driver of the change is technology. The less noticeable catalyst, but no less important, is changes in regulatory mindsets. Let’s tackle both.

The two most influential market conduct regulators in Canada are readying themselves for technological disruption of the industries they oversee.

Quebec’s regulator, the AMF, has publicly expressed that it is “open for business” in terms of insurtech/ fintech under CEO Louis Morisset and Superintendent of Solvency Patrick Déry.

FSCO has recently moved to be more flexible within the tight bounds of its mandate, and its successor, FSRA, will be a modern independent agency purposely built for adaptability; it emerges from its cocoon under the guidance of a professional board and the stewardship of its CEO, Mark White, in April 2019.

FSRA and the AMF are positioning themselves to allow experimentation via regulatory sandboxes, whereby players can test initiatives in the field. This sandbox methodology is modeled after the Ontario Security Commission’s LaunchPad initiative.

See also: Global Trend Map No. 19: N. America (Part 1)  

You may not have noticed it, but the regulatory ground in two of Canada’s largest provinces has shifted, and the stage is being set for ever-faster innovation in the Canadian insurtech space. In fact, in conversations with Guy Fraker, chief innovation officer at California-based Insurance Thought Leadership and emcee for the InsurTech North Conference in Gatineau in October, he advises that Canada is being looked at as a regulatory innovation hub by the global insurtech community.

Even under the old FSCO regime, Canada’s largest insurer, Intact, pulled off what might be a master stroke in July 2016 when it issued a fleet policy to Uber, providing coverage to tens of thousands of Uber drivers when engaged in Uber activities. So, in one fell swoop, a single insurer swept up tens of thousands of drivers. Intact pulled another coup by partnering with Turo in Canada. Turo is a peer-to-peer car-sharing marketplace that is busy disrupting the sleepy and sloppy car rental industry. This again gives Intact access to thousands of drivers with the stroke of a pen. Further, Intact may be able to leverage the access it has to those drivers to provide full auto coverage and even residential coverages. When these risks are gone, they’re lost to the rest of the market. Striking deals with the likes of Uber and Turo changes the game. In the U.S., Turo partners with Liberty Mutual, and with Allianz in Germany. Uber partners with Allstate, Farmers, James River and Progressive in the U.S. Aviva has pulled off a similar deal in Canada with Uber’s nemesis, Lyft.

Further afield, B3i, the industry blockchain initiative has been established with the support of 15 large insurers/reinsurers. It is just starting up, but its mission is to remove friction from insurer/reinsurer transactions and risk transfer. When friction goes, so will costs. It is starting out slowly, but things may change suddenly – reshaping whole segments of the market. In addition to the original 15, the initiative has been joined by 23 industry testers.

In the U.S., The Institutes (the educational body behind the CPCU designation) launched a similar blockchain consortium called RiskBlock, which currently counts 18 members:

  • American Agricultural Insurance
  • American Family Insurance
  • Chubb
  • Erie Insurance
  • Farmers Insurance
  • The Hanover Insurance Group
  • Horace Mann Educators
  • Liberty Mutual Insurance
  • Marsh
  • Munich Reinsurance America
  • Nationwide Insurance
  • Ohio Mutual Insurance Group
  • Penn National Insurance
  • RCM&D
  • RenaissanceRe
  • State Automobile Mutual Insurance
  • United Educators
  • USAA

There is talk of establishing a Canadian insurance blockchain consortium, as well. You can hear from leaders of B3i, RiskBlock and parties involved in the Canadian initiative at the NICC in October.

Even further afield, if one was to look for an industry that makes the insurance sector look futuristic, one need not look further than the global supply chain shipping industry, with antiquated bills of lading, layers of intermediation and massive administrative overheads. Well, that industry is getting a serious wakeup call thanks to determination and drive of the world’s largest shipping company, Maersk. The company is taking its industry by the scruff of the neck and pulling it into the future whether it likes it or not – long-standing tradition, relationships and methods notwithstanding.

First, in March 2017, Maersk teamed up with IBM to utilize blockchain technology for cross-border supply chain management. Using blockchain to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities, the intent is to digitize (read automate/disintermediate) global trade.

More recently (May 28, 2018) and closer to home, Maersk announced that it has deployed the first blockchain platform for marine insurance called insurwave in a joint venture between Guardtime, a software security provider, and EY. The platform is being used by Willis Towers Watson, MS Amlin and XL Catlin (got your attention?). Microsoft Azure is providing the blockchain technology using ACORD standards. Inefficiencies, beware! Microsoft and Guardtime intend to extend insurwave to the global logistics, marine cargo, energy and aviation sectors.

See also: How Insurance and Blockchain Fit  

Insurers that find themselves locked out of these types of large-scale initiatives will be left out in the cold.

We’re witnessing “SUDDENLY,” and we’d better get used to it.

4 Ways to Help New Producers

To say that most new producers don’t hit the ground running is an understatement. Between learning about the specific products and coverages the firm offers, beginning to prospect leads and acclimating to a new job, it’s common for new producers to feel overwhelmed from day one.

The issue isn’t exclusive to insurance. New hires struggle in every industry—nearly a quarter of all workers turn over before their one-year anniversary. A third of new hires may never give their new gig a fair chance—they admit to looking for a new job less than six months into a new position. But research suggests that new producers have an especially difficult time finding their footing. Only 56% of new producer hires have been successful over the past five years, according to a Reagan Consulting report.

These findings confirm what many in the industry have known for a long time and experienced first-hand: it’s tough to get your start as a new producer. But it’s not impossible—and it’s up to leadership to help.

Who’s getting hired?

Nearly two of every three new producers hired in the past five years have a background in the insurance field. Ten percent are insurance industry professionals with no sales background, while 55% are experienced producers. Only 35% of new producer hires are from outside the insurance industry. Reagan points out that while luring producers with experience (and established books) from other firms is a good way to ensure a successful new hire, agencies and brokerages, and the industry at large, will have more long-term success by developing a robust recruiting and development process to nurture in-house talent.

Julie Donn, a senior development consultant for The Institutes Producer Accelerator Program, featuring Polestar, has seen the impact these programs can have on a new hire. She says that, with the right onboarding process and mentor, becoming a successful producer doesn’t have to be difficult. But a little charisma still goes a long way.

“It all boils down to being able to build relationships,” Julie says. “People buy from whom they like. Understanding the technical aspects of insurance is extremely important, of course, and is a lifelong learning process. But you have a team of people behind you to help with that as you’re learning. You have to be personable.”

See also: How New Producers Can Get Fast Start  

What’s working?

The Reagan study looked at technical and sales training strategies and their effectiveness. Providing external training resources was generally the most valuable method.

This external training must be curated and adjusted to meet the specific needs of new producers, according to the authors of the report. “We repeatedly heard from top performers that a haphazard, make-it-up-as-you-go approach needs to be replaced by coordinated programs that are intentional and proactively managed. Several firms attributed their recent advancements in producer recruiting and development to the significant investment they have made in their development programs,” Julie says. Reagan dug even deeper into how firm structures and procedures affect producer success, focusing on specific practices such as these:

  • Specialization — 29% of producers are required by their firms to specialize, and these producers had a 7% higher rate of success. Individuals with experience in the insurance industry but no sales experience were most likely to specialize, Reagan found.
  • Team-based selling — Team selling was less popular among agencies but did lead to increased new producer success. Reagan notes that team selling may be increasing as firms seek to capture institutional knowledge from seasoned producers approaching retirement. Among producers hired in their 20s, 71% who practiced team-based selling were successful.
  • Assigning accounts — Assigning specific accounts to new producers also increased success, but authors were quick to note that each firm must balance helping new producers learn the ropes by working on assigned accounts (and potentially increasing referrals) and letting producers find and earn their own business.

Mentoring — a key component

Mentoring resulted in more successful producers across all categories and was particularly effective among new producers hired in their 20s or 30s who were from outside the industry or had no sales experience. If you’re looking to recruit mentors from within your ranks, start by asking senior producers and sales leaders. However, not all mentor relationships are created equal — 60% of mentors are not paid to help bring new producers up to speed.

See also: Why You Need Happy Producers (Part 2)  

Donn says that these mentor relationships are crucial early in a producer’s career and that, whatever tactics firms use to help new producers succeed, it’s crucial that new hires feel supported and see a clear career path.

“Knowing they have someone who is talking with and addressing concerns is crucial to getting new producers started more quickly,” she says. “There’s a structure and a plan, and someone is in constant communication with them to make sure it’s happening. It’s a huge benefit to firms.”

How do you get new producers up and running effectively? Share your tips in the comments below, or learn more about the The Institutes Producer Accelerator program, which offers a comprehensive onboarding solution.