InsurTech spurs redefinition of insurance distribution
Entrepreneurs and investors are developing new ways to win insurance customers by applying technology, process, data, and yes, even human beings, more efficiently.
Ask any designer or engineer about the most fun professional challenges and the “really big ones” are the first to come to mind. Building something once thought impossible (or at least very difficult) is satisfying no doubt, but the icing on the cake for those obsessed with process, flow, and overall functionality is making it look simple at the same time.
The insurance industry has a growing reputation of being ripe for disruption, and many are looking at the industry’s traditional distribution channels as the place to disrupt it. In fact, analyst estimates agree that almost 30% of all InsurTech startups are targeting the distribution channel. Disruption of insurance distribution channels is not a new story, however. The Internet was probably the first advance that pundits, pointing to travel agencies as an adjacent, predicted would kill the independent agent with new direct-to-consumer opportunities.
The thing is…
Booking a flight or hotel reservation is vastly simpler than buying the right insurance policy. Big design and engineering challenges come with bringing complex, highly-variable, insurance products to market, and historically, this has been an inhibitor to “cool” stuff on the distribution side. Until recently, that is.
The modern insurance agency
The ‘death of the agent’ has been greatly exaggerated. In fact, the industry is in the midst of redefining the role of intermediaries. At current count, Coverager’s company finder lists more than 230 that have been founded between 2015 and today. Collectively, that represents hundreds of million dollars invested in new ways of selling insurance.
Consequently, an insurance brokerage born in 2017 looks significantly different than one founded in 2007. Entrepreneurs and investors are developing new ways to win insurance customers by applying technology, process, data, and yes, even human beings, more efficiently and relevantly than in the past. Across a broad spectrum of products in life, health and property and casualty (P&C), these new players are inventing new ways of doing things, and the lingering effects of this new class, be it inspiring new models, pushing incumbents, or developing new tech, benefits even those that came before. That said, traditional agencies aren’t vanishing, but must instead morph to look like modern businesses.
Static on the channel
Independent agents have long been the sole distribution channel for the industry. However, with little influence up into the larger insurance enterprise, it’s easy to see why a model that delegates more control to agencies is not only desirable, but potentially profitable as well.
Today, new hybrid business models are assuming more control over product definitions and pricing and eliminating complexity with tighter underwriting guidelines and verified third-party data administered in the application process itself. Traditional insurance products often require an astronomical quantity of underwriting questionnaires be answered during the application process.
These underwriting questionnaires make risk bearers too dependent on truthful input from policyholders and constrain distribution partners’ ability to innovate. With access to more publicly-available data sets and analytics, digital distributors not only now tailor products for niche markets, but also position such products to be sold in spades. Digital distribution can mean many things, but it shouldn’t mean “fill out 128 yes/no questions in a browser” to anyone.
Technology transformation
Today, technology is more than a shiny object being dangled in front of the insurance industry. It is the catalyst for meaningful change in insurance distribution, and it is driving transformation, in part because it’s easier to build new tech than ever. Cloud services have become the modern, low-level programming layer for mobile and web apps. In the next layer up, a bevy of non-insurance specific services to manage customers, track prospects, crunch analytics, or integrate third-party data, are available free, or at low monthly cost. Basically, all the non-insurance “stuff” that a digital distributor needs is available for use without insurance organizations ever having to build a thing.
New tools, new products
Now, thanks in part to the needs of the modern brokerage, insurance-feature-as-a-service platforms are beginning to emerge. The best are applications are platforms which don’t disrupt business, but which instead transform traditionally time-consuming, cumbersome processes. Some of these provide, for example, commercial insurance appetite as a service, matching distributors quickly and easily with the right insurance products, automating lead routing, or building text message bots for staff to understand available insurance markets.
The industry must quickly adjust to the evolving roles of players in the distribution game, find new ways of working with modern agencies or MGAs, and incorporate new technology into existing distribution processes to foster collaboration, faster service and better bottom lines.
Mike Albert is the co-founder of Ask Kodiak. He can be reached for further information or comment via email at mike@askkodiak.com or on twitter at @askkodiak.
These opinions are the author’s own.