Missed the earlier posts in this series? Start from the beginning here.

Let’s get right into this: My initial assessment is that the independent-agent channel component of the insurance industry is currently living in phase-two of the “industry technology transformation” model we discussed in part 3 of this series. Other components of the industry may be further along, but I’m pretty confident that’s where the IA channel is.

Let’s first talk about why I think this, and then we’ll dip our toes into how it can inform us as independent agencies. Observing the IA channel, I see three primary indicators that we are, indeed, in the midst of phase-two

    1. “Business networks” are maturing, but there is a lack of unifying interoperability standards
    2. The software solution space is massive, but we see it consolidating
    3. Independent agencies are using technology, but we’re still working on it being “cultural”

To the first point: The insurance space is ripe for new standardization – specifically around its data objects and the exchange thereof. What data & metadata is important? How do we ethically use data to generate insights while respecting our clients’ personally identifiable information (PII)? What standard ways should we be storing and tagging data for business intelligence purposes. Who owns which data pieces? How do we share data among the channel players (agencies, carriers, solution vendors)? By what protocols, in what formats and through what interfaces?

The insurance space is no stranger to standardization. I believe conversations tackling the above questions, and more, are currently happening – but only in certain circles. This is a good thing – but we need to be careful. “Defacto standards” which are “defined” by everyone snapping to what the guy with the biggest market-share does are, in my opinion, destined to fail. We need to get the right stakeholders to the table to discuss the above and define open standards, much in the way IEEE does for the “hard” engineering sciences.

Open protocols, democratized data, equal-opportunity for revenue… that’s where we need to be driving. The fact that we’re not here yet isn’t bad, it just helps us determine that we are, indeed, in that second phase of the “industry technology transformation” model from our previous post.

To the second point: The insurtech space is still overcrowded, but we see it beginning to consolidate. This consolidation is sometimes happening through natural selection, with crappy offerings dying (as they should) because they are inferior or due to a lack of demand. It’s also sometimes happening via buyout or merger and acquisition, perhaps a less “natural” type of selection but still a valid way to consolidate the space (for good or ill).

Based on what I’ve seen happen before, we’ll see continued consolidation until we hit the “initial set” of best-in-class products. We’ll know we’re there when we observe a more finite and defined set of solution categories, with one to three product offerings to choose from in each. Think about your PC – you have an email program, a web browser, a productivity suite, etc. There are multiple players in each category, but I bet you can easily name the top-three in each. That’s your “initial set” of best-in-class products. Innovation doesn’t stop at this point – but it does look different than that first distillation from the wild-west phase.

I feel like the insurtech space has not yet fully distilled into its “initial set” of best-in-class products. Another sign, to me, that we are indeed in phase two of the transformation model.

And to our last point, and perhaps the hardest to peg with “hard” data. As I mentioned in the first post in this series, independent agency owners are barraged with technology pitches on the daily. There’s a solid general awareness that technology can improve operations, and there exists good pieces of technology which deliver real ROI. It’s not that IAs are ignorant or opposed to technology (well, for the most part, that is) – but I’m going to posit that technology usage is not yet a “cultural thing.”

OK why do I say that? Through what I’ve observed at our own independent agency and conversations I’ve had with other IA owners – our relationship with technology still feels a little less than something “cultural.” Like I said, this is hard to peg down with data – but I still sense a lack of certainty from IA owners re: what they should be using and what they should expect in return from using it. If we’re using software because we feel we have no other choice or we’re afraid we’ll somehow fall behind, I’d argue we’re in more of a compulsion state vs. a cultural one.

AirPods usage is cultural, EZLynx and IVANS usage is because there’s nothing better yet.

Hope I’m continuing to make sense here… thanks for sticking with me. In the next, and I think last, article I hope to offer some ideas about what independent agencies can do now to best position themselves as the industry moves into the its third phase of technology transformation.

Until then, happy insurancing!