There’s been reams written about how digital is impacting every industry and every business. Many have been disrupted and yet more are undergoing disruption. Even the property/casualty insurance industry is undergoing a huge transformation and is on anvil of disruption! Think you’ve heard it before and you remain skeptical?
Before you begin to roll your eyes, read on! In this article, written for MGAs and Program Administrators, I have shared:
- Exactly how Digital “IS” impacting your space
- How you are uniquely positioned to take advantage of this trend
- What you can do right away to transform your business.
Well capitalized Insurtechs want a large bite of the pie!
Let’s follow the money! According to AON’s “Global Insurance Marketplace Opportunities, 2017 Insurance Risk Study”, since 2012, a cumulative $14B has been invested into over 550 Insurtech startups. And the pace has only been accelerating with around $9B invested in 2016-17. Disruption is occurring across different dimensions, ranging from product innovation (Metromile, trov, Slice, Bunker), distribution (thezebra, Lemonade, Coverhound, the zebra), underwriting & claims using Internet of Things (Lowes, ADT, Leakbot), drones, telematics and other “smart” assets.
Digital technologies are the core of the disruptions being led by these startups. They are using:
- Location data to provide you a contextual experience
- API based integration with third party data sources to reduce the number of questions they ask the customer and reduce the amount of time spent in issuing quotes or settling claims
- Demographic data to target the audience that would be a good fit for their products, among other similar digital technologies
Specialization is critical to compete in the digital age
So how are you going to handle all this competition – from technology-based innovators with serious capital backing them? I believe MGAs and Program Administrators are uniquely positioned to survive and thrive in light of this potential disruption. Specialization – both with underwriting niche segments and marketing to those niche segments – is invaluable today. It is no surprise that in its 2017 State of Program Business Study presentation, Target Markets highlighted yet again that the MGA/Program Administrator segment has been growing faster than the property/casualty industry in general.
Demographics favor Specialists
Demographic shifts are also in favor of specialization. Millennials and their younger Gen Z siblings expect that you provide them an easy to use experience as they insure their cars, homes and businesses. They expect personalized guidance. They are willing to allow those they choose to do business with, access to their vast troves of personal data – as long as it is utilized for their own benefit – and responsibly. Which means, prefilling information publicly available on their homes, their cars, their traffic violations, their businesses, their properties, and so on.
The keys to success in the digital age are:
- Specialization in the specific nice in which your customers exist, personalized guidance to explain what coverages they need and why
- Giving your customers and agents control throughout their buying and service journey, and
- Making yourself available to them anytime, anywhere, and on whichever channel they prefer (phone, web, mobile, social) – are all keys to succeed in the digital age.
But the rules of competition are changing
Harnessing the powerful forces that are impacting virtually every industry - data, analytics, mobility, Internet of Things, Social – is key to competing in the digital age. It is not sufficient to have a well-capitalized market, strong underwriting discipline and effective distribution. While those are fundamental, companies who survive and thrive digital disruption will have to learn how to harness these digital forces in their value chain spanning product development, distribution, underwriting, pricing and claims.
Democratization of technology access
You may ask, how you can harness these powerful digital forces and compete with those who have deep pockets and are starting off with a technology first approach? Technology today, is abundantly available to those who wish to harness these digital forces. In retail, Etsy, Shopify, Amazon and eBay are enabling small businesses to compete effectively in their specialty niches.
The gig economy is thriving where folks with specialized skills are able to offer their services on a variety of platforms like Uber, Fiverr, eLance and many others! Even in insurance, savvy technology vendors are providing access to rate-quote-issue, policy administration, billing and claims on the cloud powered by mega-vendors such as Microsoft, Amazon and Salesforce.com. And these mega-vendors are investing billions to enrich their platforms by harnessing the digital forces making machine learning, analytics, Internet of Things, social and mobility accessible to all!
How can MGAs and Program Administrators harness these digital forces?
Electronic access to rates, rules & forms from bureaus
Let’s start with basics. Rates, rules, forms from bureaus such as ISO, NCCI and AAIS are available today, electronically and you can leverage these to rapidly design and develop products and tailor them to your niche segments. Or, if you have a proprietary rate plan, have them rapidly configured and extended not only to your underwriters, but also for your agents and in cases, where it makes sense, to your insureds!
Policy processing and servicing along with such rate-quote-bind solutions are available today in the cloud. Of course, you must choose your vendors carefully and avoid those that are locked into proprietary technologies that will not be able to take advantage of the breakneck speed of technology innovation. In other words, be sure to select those vendors who have a roadmap to harness these digital forces.
Ready for current generation technologies
Be sure to have them showcase how you can – for instance – help prefill data from 3rd party data providers to reduce keystrokes by your agents. Or those who can electronically make available advisory loss costs, rates and rules from bureaus. And those who can enable your agents and insureds buy and service their insurance policies online – through web based rate-quote-bind applications that are also mobile and tablet friendly.
… And new technology innovations
You must ensure that you can easily access data – marketing, distribution, underwriting, pricing and loss data – for easy manipulation to derive new insights. You can evaluate how your vendor can help you distribute your products through new distribution channels, such as digital agencies or even new technology channels, such as Alexa or chat bots.
Let’s take stock
While we envision a digital future and sharpen our pencils to effectively compete, let’s take stock of where we are. Sadly, many programs administrators and MGAs do not even have an online presence. They may be locked in with vendors who have failed to continue investing in their applications. Is it meaningfully viable to continue staying the course? Is it not already an imperative that you start investing today in technologies that will help you harness these digital forces? There is a spectrum of approaches being used today – from the big bang approach (requires capital and can be disruptive) to a phased approach (start with a program or line that can benefit from online rate-quote-bind, measure results and then add more programs and lines onto your new platform) or plain opportunistic.
Regardless of how impervious you believe your business is today to these digital forces, you can be sure that there is someone tinkering in a garage or in an incubator, contemplating how they can change the status quo. And over time, you can be sure that change will happen. But you can take charge of your destiny and take the first step in the direction of embracing digital – by making your program or line of business available online. With the right vendor, you can cross the proverbial chasm and join the tremendous opportunities ahead – waiting to be harnessed – with digital.
Click below to download the white paper Digital Transformation in Insurance: The Industry Gains Momentum by SMA based on SMA research and insights from insurer engagements, to learn about the scope of digital initiatives and transformation at insurance companies, state of digital maturity of insurance companies, challenges and lessons learned through digital transformation journeys, and opportunities of differentiation for insurers and solution providers.