McKinsey reports that insurtech investments grew from $140 million in 2011 to $2.7 billion in 2015. That’s a nearly 1829% increase in four years! As a result, technology is rapidly bringing ingenuity, innovation and disruption to an industry known for control, caution and stability. With drones conducting inspections to artificial intelligence aiding underwriting and internet-enabled devices collecting pricing data, insurance has entered a new era. Agents clinging to “we’ve always done it this way” will be left behind. Those embracing insurtech will survive and succeed.
Changing Roles and Relationships
Insurtech opened the door for new competitors in an industry once controlled primarily by large players. As a result, profitability from positive underwriting has given way to distribution. According to University of Chicago’s Dennis Chookaszian in a 2019 Insurance Journal article, “If you look at the profitability of an insurance transaction today, maybe 40-50% goes to distribution while the underwriter gets 30-40% and service has come up from 5% to 10-15%.”
In this changing profitability model, agents must deliver a higher return on equity by constantly generating new business. Insurtech offers systems and software to get agents closer to potential customers faster. This includes expediting the purchase, presenting better pricing by connecting to multiple carrier markets in minutes, or offering real-time agent access.
Competing through Cost and Customization
Various insurtech platforms target costs associated with the industry. Off-the-shelf management platforms allow agents to spend more time selling and servicing clients and less on administrative and back-office functions. Other insurtechs offer underwriting automation to decrease product costs. Perhaps one of the biggest changes comes from data collected through new technologies, which allows insurers to target niche demographics more affordably with customized options. These specialized offerings target pet owners, gig workers, health conditions, cargo, travel, and sharing services, with more being released every day. Insurtech helps agents deliver and cross-sell these tailored insurance options for the unique characteristics of their customer base.
Accelerating the Need for Speed
According to EY, adoption cycles and technology timelines will continually shorten. Consider the historic benchmark of 50 million users. It took one of the world’s largest automakers 20 years to reach that mark. For a retail giant it was about 7 years. Social media surpassed it in just 18 months! Customers now expect technology as part of most service offerings, which means insurers and agents need advanced digital capabilities to stay relevant. Insurtech keeps pace with industry and consumer demands through constant development and invention. As a result, agents no longer need to rely solely on the legacy software or proprietary systems of large insurance companies. Partnering with insurtech providers allows agents to deploy technology quickly with innovative software solutions best for their business.
Customer Experience is King
Consumers want things faster, cheaper, easier, with more choices, and great service. Seem like a lot? It is, but today’s customers won’t settle for less. According to Salesforce, 74% of customers are likely to switch brands following a bad purchasing process. However, American Express found they’ll pay 17% more for great service. Despite this data, EY reports that only 14% of consumers are satisfied with the communication they receive from insurers and nearly half have had no interaction with their insurers in the last 18 months. Old insurance thinking would be “no news is good news.” New insurance thinking should be “if I’m not talking to them, my competitor is.”
Insurtech offers new avenues for servicing customers better. This includes things like 24/7 omni-channel access, intuitive self-service functionality, and knowledge bases to educate consumers. Other savvy agents leverage insurtech to edge out the competition by delivering unique value propositions beyond the insurance purchase. Consider the benefits agents deliver by offering insurtech myCOI’s certificate of insurance tracking software to clients:
- They address a pain point for customers manually managing third-party compliance.
- The white-labeled system markets the agent’s brand every time the client logs in.
- The agent becomes more rooted in the client’s daily operations, increasing retention probability.
- They help clients mitigate risk, which improves premium costs at renewal.
Leveraging insurtech like myCOI to improve the customer’s experience delivers on profitability, risk mitigation, and retention. According to Forrester, a 5% improvement in customer retention could equal as much as 25% in increased profits. Agents take note: turns out you can put a price on happiness.
Insurtech is changing the insurance landscape in new and exciting ways. Agents should see this technology revolution as less of a disruptor and more of an enabler for helping them reach new levels of success.