These innovations are changing the carrier competitive landscape
Several commercial P&C insurance carriers have invested in new APIs, data analytics and product lines to gain an edge.
Carriers have worked to become more digital, automated and data-driven in recent years, but it seems that progress has stalled momentarily. To observers, it looks like a footrace has officially begun, but relatively few participants have lined up at the starting blocks and even fewer have begun sprinting. What if one takes off running?
Carriers have the opportunity to do just that by evolving their distribution strategy. Already, a number of commercial P&C insurance carriers have begun to invest in new APIs, data analytics, and product lines to gain an edge.
Independent agents appreciate these new offerings. Most have embraced e-signatures, digital payments and marketing automation to better serve customers amidst social distancing. They are eager to see carriers simplify and automate day-to-day workflows and compete more aggressively on pricing and commissions. Innovations in carrier distribution can have a substantial impact on their day-to-day experience and business success.
Although carriers may not feel intense pressure to dash from the starting line just yet, it is time. The following three areas of innovation are becoming competitive and will redefine the carrier landscape within five years.
No. 1: Commercial comparative rating
Today, agents must visit multiple carrier websites, one by one, to generate quotes for commercial insurance. The process is repetitive and inefficient. Agents want the ability to submit the data once and generate real-time quotes from multiple carriers — something that is already the norm for personal lines. With a more automated process that does not require them to leave their management system, agents could be more responsive to customers and preserve more time for nurturing relationships and advising clients.
To date, there is no industry-wide, comparative rating platform with enough scale on both the agency and carrier side to serve this unmet need. This gap comes at a cost to carriers. As one executive said recently, “We’re not getting our fair share of at-bats,” meaning agents aren’t even bothering to request quotes from this carrier. Either agents don’t have the carrier top-of-mind when placing certain types of business, or they opt-out because they have to go through the carrier’s online application process.
Now that several carriers have begun to invest in APIs for automated quoting (and even binding), there is hope for agents. However, the commercial comparative rating market is yet to shake out. In order to navigate the interim uncertainty and be in a position five years from now where they have the right technology and partnerships, carriers must line up at the starting blocks and start engaging with multiple rating vendors. By the time there is a proven market leader in comparative ratings, catching up will be difficult for carriers that haven’t already developed APIs and piloted solutions.
No. 2: Modern data analytics
Although claims and underwriting have benefited from digitization, most carrier distribution data remains untapped. Carriers that make use of this data have an opportunity to right-size pricing and commissions, select optimal distribution partners, and identify new market and product opportunities. Particularly for commercial lines pricing and commissions, most carriers don’t know where they stand at any given moment. Modern data analytics can change that.
For example, based on preliminary testing, one carrier said they could price up to 10% more competitively in certain risk classes and lines of business by conducting data analyses. That edge, combined with automated quoting workflows, could help data-savvy carriers outperform their competitors.
To be competitive in data analytics, however, carriers need more than data scientists. They need an organizational structure that articulates use cases and defines the data required to solve them. Furthermore, they must invest in the infrastructure to properly collect, store, analyze, and apply data. Lastly, they must partner with providers of data to deliver insights that speak to the identified use cases.
No. 3: New products and wholesale partnerships
Changes in the global economy and environment are presenting new risks that need protection, including data privacy, cybersecurity, and exposure to climate change. Cautious to enter these new markets, carriers often turn to managing general agency (MGA) wholesalers that write niche business. This has led to unprecedented growth in the MGA market.
Increasingly, MGAs are important both to innovation and the distribution ecosystem. However, connectivity is even further behind for MGAs than it is for retail agency-carrier connectivity. An MGA executive recently said, “Agents don’t know to send us the quote because they don’t know who we are or that we have an appetite for the business.”
The industry has an opportunity to connect MGAs as both wholesalers and underwriters into emerging platforms, like commercial lines rating, to create a more complete digital ecosystem that supports more lines of business and ultimately delivers more value to retail agencies and insureds. The challenge is to ensure that MGA management systems are modernizing on pace with rapid advances in connectivity on both the retail and carrier fronts so that eventually, all stakeholders can be connected and open for business in a digital marketplace.
First to the block
Two questions remain: Which carriers will leave the starting blocks first, and when will others notice? Carriers that are investing in connectivity and APIs and engaging with digital innovators for rate-quote-bind now will get ahead of the competition. For the rest, closing the gap will not be easy. The potential impact is hard to overstate.
Innovation in insurance distribution will widen the performance gap among carriers within three to five years. The competition to remove friction and manual steps from workflows may seem trite compared to big data insights, but it isn’t. Customer experience, speed and margins are at stake for independent agents. These factors ultimately determine which carriers agents will give a chance “at bat,” and more turns at the plate ultimately lead to faster growth, which is the promise of comparative rating applications. When used in combination with new data insights for distribution that sharpen carriers’ market focus and value proposition to agencies and insureds, therein lies the promise of superior overall performance.
Customer experience: The competitive edge
Remember that a decade ago, no one worried about whether a pizza restaurant took orders by phone or over the internet. Now, a pizza restaurant that only takes phone orders (and puts everyone on hold) loses customers to those that save payment information and deliver hot pizza with a few taps on a smartphone.
In the insurance world, a small handful of carriers have responded to the starting gun — the call of agents and insureds alike for a better experience. They have been investing over the past several months and are actively engaging with distribution InsurTechs to build and refine their API strategy. While some are not yet at the starting blocks, they’d best get their trainers on. The race has officially begun.
Sharmila Ray (sray@vertafore.com) is head of Carrier Strategy, Solutions and Go To Market at Vertafore.
See also: