Missed the earlier posts in this series? Start from the beginning here.
Before we consult our crystal ball and try to get all Nostradamus, attempting to divine just where the insurance industry may be in its technology transformation, let’s maybe a take a minute to pop our head above the din and take stock of what’s going on. Orienting like this is always a good precursor to prognostication, and when done by a newbie to an industry, someone not beholden to the preconceived notions of a lifer, it can sometimes be additionally informative. Without (much) editorial, then, here’s what I, a complete newbie to the world of insurance, have observed about the industry’s current relationship with technology:
- When it comes to the pantheon of insurtech that’s pitched at them, independent agency (IA) owners are overwhelmed. “Everything’s changing!,” they’re told; “Oh, you’re not using XYZ solution yet?! I see…” This FOMO (fear of missing out) creates uncertainty, doubt, nervousness. What happens when people face uncertainty? The hesitate, they exercise a slow caution, they watch and wait, and they may even dig in their heels. These are folks who sell insurance, and that’s what they want to do. Talk of drones and geofencing and Watson or Einstein don’t get them hyped in the least.
- Taking a closer look at that same smorgasbord of products and solutions – it’s clear that insurtech has a way to go yet to reach maturity. For instance, at ITC in 2019 I counted no less five different start-ups staking their claim to being “the best AI-driven data sources for underwriting.” Spoiler alert, there’s only one best… and it’s likely it doesn’t even exist yet. There is much consolidation, acquisition, and series-B shortfall to come in this space… not to mention the continual flow of new entrants. Can you really blame IA owners for being conservative with their investments?
- The “must have” tools of today’s independent agencies are woefully lacking. Sure, you’ll hear IAs rave about certain software they use, but I find that nine times out of ten they’re not talking about a tool that is designed specifically to do insurance. Instead, they’re talking about existing, proven offerings in the sales, marketing, and customer relationship categories – hardened heavyweights used in other industries for years. The stuff that’s built to specifically do insurance, however, is still hobbled. Clunky legacy AMSes with faux “cloud capability,” spaghetti-code back-ends and hyper-specialized, low-ROI features/customization? Multi-raters that are just MS Access (LOL) front-ends for batched scripting and scraping? These are stone tools, people, stone tools. But, we shouldn’t blame the tool providers here – they are simply doing the best they can with what’s available to them. We’re stuck with this duct tape and superglue until carriers find motivation to better enable the distribution channel. Which leads us to our next observation…
- Most carriers appear disinterested in altruistic enabling of the insurtech solution space, particularly for the benefit of the IA distribution channel (vs. their own underwriting departments). There are likely several reasons for this lack of motivation, so let’s speculate a little: (1) Carriers are unsure how the IA and direct-to-consumer channels will ultimately co-exist and therefore opt to split their bets, (2) carriers lack a clear “what’s in it for us” ROI for better enabling IAs, and (3) there is no clear “one ring to rule them all” standard which carriers can adopt.
While not exhaustive and by no means in-depth, the above is a broad-brush picture of what “technology in insurance” looks like from the independent agent’s seat. IAs are not idle by nature… they want to act, they want to do. To wrap this up, then, and build a bridge to part 3 in our series, what options to IAs have given the above environment?
I’d say the choice before IAs is fairly binary: (1) Wait for the insurtech space to mature a point where there are clear winners and leaders in a manageable number of business-critical categories, then invest. Or, (2) Seek the best information and guidance possible now, using it to define a technology investment strategy and timeline. This series aims to help those who’ve chosen the 2nd path – those who want to invest but not burn R&D dollars all willy-nilly on every new shiny object.
In the following articles I hope to offer guidance that will help IAs place smart bets. Stay tuned.