A Creative Renaissance in Insurance Distribution
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 percent 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 which pundits, pointing to travel agencies as an adjacent, predicted would kill the independent agent with new direct-to-consumer opportunities.
The thing is, a flight or hotel reservation is vastly simpler than an insurance policy. Big design and engineering challenges come with bringing complex, highly-variable, financial products to market, and historically, this has been an inhibitor to “cool” stuff on the distribution side. Until recently, that is.
The Modern Brokerage
The death of the agent has been greatly exaggerated. In fact, the industry is in the midst of a renaissance when it comes to intermediaries. At current count, Coverager’s company finder lists 285 of them 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 vastly 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, differently than in the past. Across a broad spectrum of products in life, health, and P&C, these new players are inventing new ways of doing things, and the lingering effects of this new generation, be it inspiring new models, pushing incumbents, or developing new tech, benefits even those that came before. The the traditional agency isn’t vanishing, it’s just morphing into a modern businesses.
Static on the Channel
Independent agents have long been the sole sales channel for the industry, but except in the cases of MGAs and MGUs have had little influence on the insurance product itself. 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 a large number of underwriting questions 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 more control, digital distributors not only tailor products for niche markets, but position them to be sold in spades. Digital distribution means a lot of different things to a lot of different people, but it shouldn’t mean “fill out 128 yes/no questions in your browser” to anyone.
Today, technology is more than a shiny object being dangled in front of the insurance industry. Technology is the catalyst for the creative renaissance in distribution, and it is driving transformation in part because it’s easier to build new tech than ever. Cloud services have become the modern day 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. And 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.
Insurers must adjust to the evolving roles of their partners in the distribution channel, find new ways of working with modern brokerages, and incorporate new technology into existing distribution processes to foster collaboration, provide faster service and generate better bottom lines.