The InsurTech revolution is enabling — not disrupting — agent channels
Partnering with entrants is imperative to staying relevant in the modern landscape.
Although historically slow to embrace digitalization and adapt to advancements in technology, the insurance industry is finally undergoing a massive evolution. Keeping up with innovation and remaining relevant in today’s on-demand world is more challenging than ever.
For independent agents, forming strategic and advantageous partnerships with top InsurTech companies is crucial to laying the groundwork for sustainable long-term success. But first, emerging technology companies must work to solve agent pain points and earn their trust.
A mutually beneficial partnership
The insurance industry has long resisted change, and while everyone talks about the rise of Insurtechs, independent agents have a tough choice ahead. They can continue on the current path, preparing paperwork and handling customer renewals manually while having to turn away customers looking for specialty products. Or, they can work with willing InsurTechs, using tech advances to capture underserved parts of the market that have traditionally taken too much time and paperwork with low profit.
The pain points are clear: Brokers today spend a significant amount of time quoting and binding policies for their clients, in addition to generating and updating certificates of insurance. They are in need of a solution to streamline workflows, lower costs, and accelerate the time it takes to deliver products and services. Meanwhile, InsurTech companies — with products designed to fit the dynamic needs of digital-age customers and simplify the process of buying insurance — are equipped to address those issues while helping brokers make commission with virtually no hassle.
Many InsurTechs refuse to embrace agents — let them be. However, some do want to work with agents to help them focus on their own individual growth and reap financial benefits without increasing administrative time. This is the position we’ve embraced at Thimble. Our thought is that forward-thinking agents and technology-first insurance companies can form strong, mutually beneficial relationships.
The impact of those relationships can extend far beyond the individual broker and InsurTech company. Technology, when implemented correctly, can actually expand the insurance market more broadly. For instance, 40% of sole proprietors in the U.S. currently do not have business insurance, while 75% are under-insured. Tailoring affordable, innovative offerings to this un- and underinsured population — and making those offerings available through broker channels — can spread access to coverage and ultimately protect more business owners from risk.
Myth-busting: Agents aren’t going anywhere
InsurTech companies raised more than $8.5 billion globally between 2014 and 2018. The explosion of insurance startups in recent years has given rise to important industry-wide progress; however, these strides towards modernization have also been accompanied by a great deal of misinformation and fear. Many conversations have centered on the possibility that InsurTechs will render brokers obsolete; that transactions will soon all take place directly via digital channels, removing the trusted independent agent role from the equation.
This false narrative that pits InsurTechs against agents must shift. While it might be true that some InsurTech companies view the broker channel as outdated, this is far from a realistic or widely-held sentiment. According to McKinsey & Company, a majority (61%) of InsurTech companies aim to enable the existing value chain — not disrupt it. And, with over 80% of small commercial policies being sold by brokers, these individuals continue to make up an essential component of the industry that cannot be erased.
Agents’ concerns echo those of workers across numerous industries: that tech will take their jobs. In reality, the workforce will always need human hands. Mobile apps can improve access to healthcare resources, but patients will always rely on practitioners and pharmacists to talk through diagnosis and treatment. For personal finance and protection against risk, customers will always rely on agents for insight and advice to help them navigate the confusing and complex world of insurance. Technology just streamlines this process, and affords brokers more time to help their clients.
Strategy: Recognizing innovation vs. digitization
It’s imperative that agents are thoughtful and strategic about the InsurTechs they partner with, recognizing the difference between genuine innovation and a technology veneer. Some insurance startups have built an app based simply on undercutting rates at the expense of tailored policies or customer service — what they are offering in terms of products is not fundamentally new, nor is it set up for lasting success. Others are simply offering digital forms to bring in new clients but are not assisting brokers in reducing the admin and risk assessments that take up so much time when creating quotes and policies.
Brokers considering a partnership should expect that the tech will better serve their own business needs, and above all, help them better serve their customers.
Moreover, tech should help independent agents expand their business and serve more customers with less overhead. The small commercial market, in particular, has traditionally meant vast amounts of paperwork with little return. Agents in this segment tend to make 10% on these policies, where the average policy amount is $1,000. As a result, they spend an outsized percentage of their time binding small-dollar policies without making much money on them. Fortunately, InsurTechs are beginning to offer solutions to help grow agents’ small commercial portfolios, with a far greater return.
Different InsurTechs can approach this relationship in different ways — and brokers should make sure the relationship is reciprocal and working for them as well.
At Thimble, we help brokers expand their portfolio by making flexible, short-term business insurance available to their customers, allowing brokers to stop saying no to customers looking to cover short-term risk. At the same time, it opens up a large — and growing — new customer demographic that they did not previously have access to, essentially future-proofing their business. Perhaps most importantly, we also offer a 10% referral fee for life and other incentives that allow independent agents to see profits from additional customers, with no-touch service.
Names like Bold Penguin, Ask Kodiak, and Corvus Insurance are all options as well — these companies specialize in providing tools that enable insurance agents to work online and with InsurTechs in a mutually beneficial relationship.
Looking ahead
In a period of unprecedented change, the insurance industry is at a crossroads: Do we continue forward with a siloed approach, keeping a wall between brokers and InsurTechs that barely scratch the surface on true innovation? Or, do we forge a new path — together?
The fact of the matter is, we’re better together. There’s room for brokers and InsurTechs in the next generation of insurance — and both will play an essential role in updating the antiquated industry and paving the way for a more efficient, tech-driven, and customer-centric future.
Related: