All Aboard the Digital Train
Insurtech firms — many with the financial backing of big name insurance groups — are fast making cheap, digital P&C procurement the norm.
By and large though, they don’t see themselves as disruptors. They prefer to be perceived as revolutionaries — transformers of the market.
Commercial brokers targeting the SME sector would do well to pay attention, and to commit to staying up to date with the rapid pace of changes to come.
“Existing brokerages aren’t built to serve the needs of smaller or medium-sized businesses. The big guys can’t service them efficiently, and the smaller brokerages don’t have the resources, market access or vertical expertise,” said Matt Miller, CEO of start-up Embroker, launched two-and-a-half years ago.
“Carriers are thinking hard about how to develop digital strategies without alienating and disrupting their existing distribution networks,” said Sofya Pogreb, COO of Next Insurance, which serves 6,000 small businesses through its platform with the backing of powerful investor-partner Munich Re.
“Companies like ours do pose a threat for the traditional distribution channels,” she said. “Insurtech will either replace the agent or provide them with better tools so they can focus on offering expertise to customers rather than moving paper applications around — I suspect a mix of both.”
Small local brokers for whom SMEs are their bread and butter may be particularly concerned, though Keith Moore, CEO of Coverhound, is keen to work in partnership.
“Rather than disrupting, we think we’re enabling market segments that have been underserved. We’re also giving small local brokers a better way to transact. We want to help facilitate the transaction, and are indifferent as to how the business is placed,” he explained.
“Anyone who said the traditional broker is dead is a fool,” said Insureon CEO Ted Devine. “However, agents and brokers are going to have to embrace some of the technologies we are leveraging to make their solutions more efficient and deliver more value for the customer.”
Many of those new technologoes will soon be essential for brokers to grow and sustain their business.
“We bid on 400,000 keywords every day and have massive models to make sure the return on every bid is right, and we’re doing some cool things with machine learning to deliver the best product to the customer.
“This is very hard for a broker to do, so they’re going to have to raise their game to be at our level,” said Devine, adding: “The best ones will.”
While Insureon, Embroker and Coverhound all pride themselves on providing human expertise to help buyers find the right solutions, their real competitive advantage will always be driven by their tech capabilities. Some, like Next, are happy to limit human interaction to a minimum.
“On certain larger or more complex risks, perhaps an engine can’t make all the decisions and human expertise is needed — at least in the near term,” said Pogreb, though others feel insurtech may have a role to play higher up the food chain fairly soon.
Miller believes Embroker’s model is “just as relevant” to large, complex commercial risks, though he admits that it will be a challenge overcoming “entrenched” buyer behavior, while Devine thinks big commercial risks could benefit from automated panels.
“Agents and brokers are going to have to embrace some of the technologies we are leveraging to make their solutions more efficient and deliver more value for the customer.” — Ted Devine, CEO, Insureon
“I’ve been surprised how much appetite there is for an alternative way of transacting among larger commercial accounts,” said Miller. “It shouldn’t cost so much to access insurance in a digital world, and companies are increasingly looking at their efficiency ratios.”
He believes the implications of the swathes of data captured through insurtech will be “profound” for the insurance industry, helping improve underwriting efficiency and risk modelling.
Next is planning to move beyond pure distribution into the development of proprietary products tied to the distribution engine and react to data in real time — essentially creating intelligent, ongoing optimization of coverage. “That’s not happening in the traditional market at all.”
This is one area where brokers could wrestle back some advantage by taking the lead in the development of wearables, telematics and other data sources to bolster risk modelling and real-time insurance cover.
Doug Turk, chief marketing officer at JLT Group, acknowledged that insurtech is a risk for brokers, who he said should already be investing in research and development and tech partnerships.
“The broker of the future will have to be incredibly information literate. They’ll have to understand all the different sources of information available about their clients’ operations and risks.
“They’ll have to be willing to separate themselves from the way things have been done in the past and accept that there may be better ways to do things, particularly when it comes to how risk is underwritten and rated,” he said.
Alternatively, some agents and brokers might choose to explore the other side. “We’re certainly hiring,” said Embroker’s Miller. &