From embracing data to adopting customer-facing tools, insurance brokers are largely changing with the times – but there are still a few areas where they’re reluctant to get on board
Now that A.M. Best has begun taking insurers’ ability to innovate into account in its rating methodology, the message is clear: Technology is part and parcel of the insurance industry. And it’s no different for brokers.
A recent report from Argo Group delved into the minds of brokers and small businesses to uncover their expectations around topics like climate change, cryptocurrency and autonomous vehicles. The survey found that 77% of brokers expect autonomous vehicle usage to reduce the number and severity of accidents, while 59% expect it to help decrease insurance premiums.
However, other technologies aren’t as high on brokers’ radar. Thirty-nine percent said they’re only somewhat familiar with the Internet of Things, although 91% named the IoT as the dominant technology threat over the next 12 months.
“The results tell us that, at the very least, they’re thinking about the various parts of technology that will impact their business,” says Jeff Canfield, head of innovation for Argo Group. “There were a few surprising results where the concern is actually less this year than it was last year. I don’t have a good answer for why that is, other than my suspicion that for things like autonomous vehicles and climate change, they probably view it as much more of a long-term threat and not an immediate threat, whereas in the past, I think there was an assumption that these were both going to impact us sooner rather than later.”
While technological innovation is bringing benefits to customers both inside and outside of insurance, many brokers are concerned about the pace of change and what it will mean for insurance roles in the future.
“One of the threats that’s not outlined in the survey, but that we hear often, is the fear of being left behind in terms of automation,” Canfield says. “If others are automating tasks and using RPA [robotic process automation] to do things without adding to headcount and you’re not, there’s a fear that you’re going to have an expense issue that others are not, and ultimately that’s going to impact your financial results.”
Nonetheless, brokers are already reaping the rewards of technology in their day-to-day processes. Many are using data and analytics, for example, to apply more predictive modeling in their work.
“You can predict when a claim might happen, you can predict the severity of a claim, and you can predict losses based on location or weather,” Canfield says. “There’s a number of applications around predictive analytics. What’s interesting is that there was originally a fear around whether it would replace the underwriting role, but the reality is that these tools are going to supplement what brokers and underwriters do on a daily basis.”
Michael Howe, senior vice president of product management at Applied Systems, sees the pace of change and innovation in the broker channel as a good thing.
“Their willingness to experiment and invest in technology, to try to make their businesses better and serve their customers in different ways, is great for the channel,” he says. “I am encouraged that people are willing to experiment with new technologies, not just for the sake of technology, but because they’re trying to make their business better, and that’s good for everyone.”
The most interesting and encouraging part of this digital evolution, from Howe’s perspective, is the focus around customerfacing digital tools. This marks a change from the traditional ways brokers communicated with clients in the not-so-distant past.
“[Brokers] traditionally come from the ‘I’d rather have a human connection; I’d rather go meet the person at the local Starbucks and build a relationship that way’ mentality, so it’s encouraging to see them augment that with all kinds of online tools and technologies,” Howe says. “It’s about building that online relationship with customers, and I think that’s great because the nature of the customer is changing.
“We’re seeing lots of interest in tools that allow them to extend their services in electronic ways, online ways and mobile ways. That’s good because [brokerages] are letting go of that belief that the relationship always has to be human. That human connection still matters, but it can also be these other things, because it allows the customer to interact with them in the way the customer wants, not necessarily the way the [broker] wants.”
