Getting There Faster
It has been an uphill climb for the insurance industry to incorporate faster and more efficient technology into its systems. And perhaps no segment of the industry is under more pressure to get this challenge right than agents and brokers.
“What we are finding out is that brokers, agents, wholesalers and insurers are all in this race to utilize technology better,” said Kabir Syed, CEO of Greenwich, Conn.-based RiskMatch.
But Syed said the different sectors are too siloed.
“Our industry is not very efficient at integrating multiple systems together,” said Syed, who was managing director, strategy and operations for Marsh’s U.S. global risk management business prior to launching RiskMatch two years ago.
RiskMatch was founded as an analytics firm delivering a suite of web-based solutions for insurance brokers and underwriters throughout the United States.
The brokerages, as hard as they are working to get it right, agree that their industry in general is not a leader in the area of using technology to serve customers.
“At a high level, this industry has lagged behind other industries that are more data and information rich in realizing some of the technology opportunities,” said Patrick Donnelly, the Chicago-based chief broking officer of the Financial Services and Professional Group at Aon Risk Solutions.
Certain sectors of the industry have found it easier to keep pace with technology. Many small businesses are now able to buy their commercial insurance direct online. It was probably only a matter of time — personal lines such as auto have been sold directly for many years.
“Small business owners in particular are more savvy. They understand their business better than anyone.”
– Tom Kavanaugh, partner, PricewaterhouseCoopers
“We’re seeing more of a propensity, especially in small commercial businesses, for a willingness not only to shop around more but to use a direct channel versus historically what was much more driven by agent and broker activity,” said Tom Kavanaugh, Chicago-based partner, Financial Services Practice at PricewaterhouseCoopers (PwC). “Small commercial is beginning to act more and more like individual consumers.”
Overall, there’s much more information available online and through digital channels, and financial IQs are growing, so there’s more willingness to have a more self-directed shopping experience than in the past, Kavanaugh said.
“You’re beginning to see more and more activity, particularly at the early stages of the process in terms of the research component,” said Kavanaugh.
“Small business owners in particular are more savvy. They understand their business better than anyone,” he said.
Hiscox USA was the U.S. pioneer in direct online sales of insurance policies to business. New York-based Kevin Kerridge, the company’s head of small business insurance set up and ran Hiscox’s direct-to-business operation in the U.K. for 10 years before taking on the challenge of establishing a similar enterprise in the United States in 2010.
“Ninety percent of the policies we sell through our online service are first-time buyers of business insurance,” said Kerridge. “And I know the reason for that. If you’re a small business and suddenly you figure out you need, say, errors and omissions coverage or general liability, today most of these people are so plugged into online technology that the first thing they’ll do is Google the subject rather than go through an agent who does their car or their home insurance.”
Half of Hiscox USA’s first-time business goes through a digital channel without touching a human being, Kerridge said.
“Within 20 minutes, they get their policy document online. Through other channels, that could take a week to accomplish,” he noted.
Google is obviously key for Kerridge’s business. “We want to be highly rated on natural search rather than through ads. Anybody can buy an ad,” he said.
But agents aren’t excluded from this approach, far from it.
In the last year, Kerridge said, his firm has started to leverage its direct sales technology by giving agents instant access to the same products consumers can buy on its website.
“Outside agents are selling hundreds of Hiscox policies each week through Hiscox online wholesale portals,” he said.
The Social Channel
Social media is another area where some brokers are getting it right.
Just last month, Risk & Insurance® gave a Power Broker® award to Denton Christner, a vice president with BayRisk Insurance Brokers, who founded insuremyfoodtruck.com in mid-2012.
Nine months into 2013, the site had more than 7,000 unique visitors. The site receives between 60 and 125 quote requests per month and is serving 400 mobile food vendors in multiple states, he said.
Christner connects with his customers via social media outlets such as Facebook, Twitter and Instagram to get to know them personally and find out more about their businesses.
“Social media is a way to build word of mouth, to capitalize on positive reviews from people who have used us.”
– Kevin Kerridge, head of small business insurance, Hiscox.
Some carriers are also employing social media to bolster their marketing efforts.
“Social media is a way to build word of mouth, to capitalize on positive reviews from people who have used us,” said Hiscox USA’s Kerridge.
“I have a dedicated social media person on my team. We took a gamble early on with social media — Facebook, Twitter and LinkedIn — to monitor and influence conversations about our company and our products.”
Education and Branding
Added PwC’s Kavanaugh, “You’re seeing agents leverage technology more and more across the entire customer lifecycle. You’re seeing agents use social media platforms for prospecting and customer acquisition.”
Sites like YouTube are being utilized for different educational components, Kavanaugh added.
“Certainly, the individual branding component comes into play in a big way and you’re even seeing agents using quick-quote or direct-quote functionality on their individual websites in order to cater to people going further and further into the shopping process.”
At Aon, gathering social media data is part of a multi-channel marketing strategy, said Donnelly.
“This campaign will also include some traditional media channels —some of the industry publications, there might even be some broadcast and there could also be trade events included,” he said.
“The beauty of a multi-platform approach is that we can track engagement with prospects across all those channels, with the goal of converting that client or prospect with a solution that is tailored to them,” Donnelly added.
Putting Big Data to Work
Big brokers are going after bigger clients and have been investing for years to get there.
The Aon Global Risk Insight Program (GRIP) employs an automated approach to serving clients around the world.
The platform was developed in 2008 to aggregate and analyze Aon’s insurance placement activity, from submissions to quotes to binding.
The tool allows Aon brokers to tap into the universe of GRIP placement data to benchmark clients against their peers with respect to limits, exposures, premium spend and rate, said Donnelly.
It also enables Aon brokers to select specific views of marketplace developments such as pricing trends and forecasts and carrier quoting behavior.
With a team of 100 colleagues, the Aon Centre for Innovations and Analytics, based in Dublin, analyzes millions of data points captured by Aon GRIP to help clients make more informed strategic decisions related to risk and insurance, said New York-based Robert Stein, U.S. middle market chief broking officer with Aon Risk Solutions.
“By capturing information about the broking process as it is unfolding, Aon arrives at early insights into developing trends,” Stein said.
At the same time Aon is pushing hard on the technology front, however, Stein underscored that the industry should not lose sight of the human side of the business.
“I think it’s important to note that brokerage is a people business, but while there’s no substitute for strong personal relationships, our goal is to make our products more business-minded so we can make more fact-based decisions that allow us to problem solve in a better way,” Stein said.
In Chicago, Ted Devine, former president of Aon Risk Services and one of the driving forces behind the creation of Aon GRIP, has created a new set of insurance services around Insureon, which counts Edgar Bronfman as a major investor.
Insureon, an insurance delivery platform for small-business owners, earlier this year announced an agreement to acquire Insurance Noodle, an online wholesale insurance broker. Insurance Noodle was a subsidiary of Willis Group Holdings.
“The combination of Insureon’s top-tier online strategy with Noodle’s geographically diverse network of brokers and agents is a key component of our long-term strategy for growth,” said Devine.
“We’re expanding our web presence via web pages, digital advertising, social media, blogs, eBooks and other digital attributes so that when small-business owners search for information about protecting their business, regardless of industry, they find it via an Insureon property,” said an Insureon spokesperson.
When it comes to enhancing broker-carrier relations, ACE Risk Management has developed several technology-driven programs.
“Every piece of ACE Risk Management business that we can make electronic, we’re going to do that,” said Matt Merna, New York-based division president of ACE Risk Management.
Toward that end, the company has introduced ACE Worldview, an online tool that allows its brokers and clients to access their electronically held documents in one web-based portal.
“It makes it very easy for clients to access policies, endorsements, contracts, legal agreements and collateral — everything that can be stored and accessed electronically,” said Philadelphia-based Gary Kramer, senior vice president, ACE Global Services.
After consulting with its brokers and clients, the company also developed ACE Accelerator, which is for automotive selection forms. “As a client you have to choose your coverage selections and this previously was a very difficult practice in which a client would have to fill out 300 pages of forms,” Kramer said.
Now, instead of having each form signed and dated individually, ACE Risk Management asks overarching questions about the desired coverage. The responses are then mapped to the forms, and everything is electronically signed with one click of the button.
“So what used to take probably three business days now takes less than 20 minutes for the client,” Merna said.
Raising the Experience Bar
Commercial insurance has recently faced several major challenges. Economic distress has made it difficult to profit off of investments, thereby necessitating profitable underwriting to drive returns. In addition to soft rates, exposure bases (i.e., U.S. GDP) are flat, if not effectively down, and interest rates are at historic lows.
As a result of these and other pressures, the overall commercial lines market has shrunk since 2007 — from $241 billion in 2007 to $222 billion in 2012 — and has been recovering very slowly over the last five years. Difficult economic conditions and saturation of a highly fragmented market has increased competition, leading commercial carriers to improve their value proposition by offering a better customer experience for both the end insured and producers.
Commercial carriers have every incentive to invest in improving the customer experience.
In contrast with personal lines (e.g., private passenger auto insurance, for which most carriers struggle to promote a superior customer experience and divert consumers’ attention from price), ease of doing business and other value-added services — even as basic as advice — greatly influence placement.
From the lower end of small commercial to the largest commercial accounts, producer experience and, by extension, the experience of the insured has increasingly become a critical factor in a carrier’s ability to acquire and retain clients. An underwriter’s product expertise and local market knowledge often takes precedence over price.
In the meantime, shifts in customer expectations, access to information and diversifying needs are creating networks of increasingly self-directed, self-organizing and self-aware groups. This has broad implications for the design, manufacture, marketing, pricing and servicing of commercial insurance.
Small and medium enterprises increasingly interact and transact through a variety of channels. PwC’s recent Future of Insurance research shows that 49 percent of SMEs now use the Internet to supplement or replace agents and brokers in their search for commercial insurance.
As a result, investments in technology, customer data and analytics across the spectrum of carriers — from small to large commercial — are raising service expectations. Based on their business and operating models, carriers need to judiciously select and prioritize on which business and technical capabilities they should focus.
For instance, a niche market positioning that targets only a very narrow customer segment may require specific capabilities that are relevant to only that segment, such as specialized risk control services for medical facilities.
The distribution model also should greatly influence the types of customer experience-related capabilities in which to invest. For example, middle market carriers with numerous local offices will have to expend more effort, such as on guidelines and training, to promote a consistent customer experience.
Also, different sources of distribution will value different kinds of experience. While national brokers tend to be more transactional in nature and favor speed of processing and decision-making, small regional producers typically value coverage advice and are not as concerned about ease of doing business.
Regardless of a carrier’s business model, technology has been a consistent source of differentiation and an enabler of a superior customer experience, driving efficiencies throughout every stage of the sales funnel and customer life cycle.
New Customer Acquisition
The ability to collect and analyze customer data is the foundation of superior marketing capabilities. Better understanding of buyer behavior, demand for specific products or coverage, and pricing trends help carriers identify the most profitable market segments and growth opportunities.
Agents and brokers are increasingly leveraging new technologies such as social media to increase brand presence, generate leads and engage customers online. Underwriters at leading commercial carriers and MGUs likewise should promote their expertise in a given industry segment and/or line of business through “likes,” posts, retweets, blogs and articles on social media platforms.
Multiple social media outlets can help brand and disseminate thought leadership to engage both current and prospective producers.
Another key component of superior customer experience and producer productivity is ensuring that producers clearly understand a carrier’s risk appetite so they do not spend time on submissions that are likely to be rejected. This is an issue for many commercial carriers that struggle to effectively communicate their underwriting appetite, both internally and externally.
In fact, independent technology companies have emerged to address this problem by offering a new category of services to agents and brokers. For instance, there is now a search engine that gives agents and brokers a sense of insurance companies’ risk appetites, thereby allowing them to quickly find the right insurer for a particular risk.
This results in an improved quote ratio from carriers and provides more options to the prospective insured. It also saves time for everybody concerned.
The process of shopping and purchasing commercial insurance is still relatively complex. Future of Insurance research noted that nearly all non-insured small business owners cited the complexity of the process as one key reason for not getting coverage.
Ease of doing business is a key part of a superior customer experience and falls on the strategic agenda of most commercial line carriers, which are:
• Investing in streamlining and automating the underwriting process;
• Actively finding ways to simplify the data collection process by eliminating non-critical questions from their applications;
• Avoiding redundant information capture (i.e., re-keying); and
• Pre-populating submissions through third-party data services.
Beyond the initial step of capturing customer and coverage information, workflow management solutions enable better up-front triage and orchestration of account clearing, rating and quoting activities.
In an increasingly large number of small commercial segments, complete systematization of product rules and automation of underwriting decisions enable straight through processing — a commercial carriers’ ultimate goal as they strive to reduce quote turnaround times.
Some commercial carriers may choose to implement tiered service models to facilitate a superior customer experience for their most valuable producers.
Customer Relationship Management
Once a deal closes, carriers continue to look for ways to improve the producer and policyholder experience. Some carriers increasingly handle several policy administration transactions (e.g., endorsements, bill payments) on behalf of producers.
Policy administration service provision is increasingly taking place online. Even for large, multinational accounts, carriers have rolled out and continue to invest in self-service platforms that allow brokers and customers to focus on risk management, loss control and other value-added activities instead of premium payment tracking, loss reconciliation and other administrative activities.
Many carriers also have started to effectively utilize mobile computing (e.g., smartphones, tablets) to empower agents, claim adjusters, risk inspectors and customers by providing them on-demand access to both existing and new information and services.
In addition, data analytics are playing an increasingly important role, and can enable innovative value-added services, some of which may be disruptive enough to be successfully monetized and re-position a carrier’s business and/or operating model.
For instance, sensor technology has already started to transform the crop insurance business by reducing the need for traditional insurance coverage (i.e., insuring farmers against the loss of a crop or reduced yield from a crop), thereby enabling carriers to focus instead on preventive loss control services.
Sensors embedded in a field can measure the level of moisture in real time, which can then help determine the necessary level of irrigation and drive optimal watering. Several manufacturers have equipped their machinery to communicate with sensors and help farmers determine when a field is ready for harvesting.
Sensor technology also can provide real-time feedback on large scale disasters. Photos facilitate estimating damage, and mapping tools allow carriers to dynamically and automatically assign adjusters, contact customers and estimate Cat losses.
Sensor data provides carriers with real-time information on what has been damaged — Has the boiler broken? Is the basement flooded? Is there smoke damage? Is there mildew, rot or termites? Likewise, sensors can trigger customer alerts when there is minor — not just major — damage.
This presents the opportunity to stave off greater subsequent damage, as well as create pre-populated claims forms and even fulfill a claim before a customer knows the extent of damage.
Innovation has raised the bar for the customer experience and service expectations in the commercial lines sector. Commercial carriers must continue to invest in technology and find ways to harness customer data to remain competitive in the short-term.
Minimize the Risks of Client Lawsuits
When a top litigator prepares a case for a trial, part of the process is mapping out a clear, written story to put in front of a jury. Professionals looking to avoid or minimize the impact of client lawsuits would be smart to follow that lead, according to Christopher Piety, underwriting counsel, Professional Lines Risk Management, Aspen Insurance.
“Just like when a talented lawyer faces a jury, the better prepared you are, the stronger your case will be and the more likely you will prevail,” Piety said. “That means being very clear when writing an email or a letter to a client. Approach these communications as if you were writing directly to a future jury.”
Piety explained that in the wake of several recent sizeable professional liability claims, lawyers and other professionals (i.e., accountants, architects and engineers) must deliver clear, concise written communications, to create a record of what happened along the way. “On some of the larger claims that I’ve been involved in, whether it is with lawyers, accountants, architects or engineers, it really boils down to managing client expectations. And to do that requires effective written documentation,” he said.
For example, Piety said that in a recent professional liability claim, a lawyer did nothing wrong other than failing to put into writing advice that the circumstances of the client’s case changed, which typically translates to an added risk that the desired outcome may not be achieved.
“When you write an email or letter, it’s critical to include specifics. It will go a long way to avoid potential trouble, especially if the situation ends up in court,” Piety said. “A good defense is a strong offense.”
– Christopher Piety, underwriting counsel, Professional Lines Risk Management, Aspen Insurance
“The attorney didn’t spell out in writing that the evidence no longer supported the client’s seven-figure expected outcome,” Piety said. The client eventually dropped the case and then sued the lawyer for malpractice, claiming that the attorney’s failures cost them a positive result. Without written documentation advising the client about the risks, the attorney could not prove the client had been advised.
Screen for Bad Apples
“Professionals need the courage to ‘fire’ a potential problem client should any serious red flags emerge,” Piety said. “Not every piece of business is a good one.” Along those lines, he offered a few bits of advice to avoid potential problems when choosing clients:
- Obvious Red Flag: A potential client that “burned through” multiple professional services firms. Worse, have they sued any of them?
- Reputation Check: After completing a credit check and/or litigation search, research the potential client’s reputation in the local business community.
- Financial Stability: Check to see if the client is financially sound. Sometimes, problem clients manage to transfer their financial problems to their professionals in the form of unpaid fees and/or malpractice claims.
- Available Staff: Make sure your firm is prepared and staffed to properly do the work requested.
Clarity is Critical
“When you write an email or letter, it’s critical to include specifics. It will go a long way to avoid potential trouble, especially if the situation ends up in court,” Piety said. “A good defense is a strong offense.”
Professionals need to carefully detail the scope of work when starting a new project or case, particularly if the client is also new. From a risk management perspective, it’s most critical to completely outline limitations and risks.
In addition, specific risks to various types of professionals may include:
- Law Firms: Never offer guarantees for specific results, and understand that silence can be interpreted by a jury as agreeing with a client’s unrealistic expectations.
- Architects and Engineers: Specify what you will and will not be responsible for. Never agree to indemnify anyone outside the firm.
- Accountants: Advise clients and others using your work that attest engagements only provide limited assurance of no material misstatement in the financials, but do not guarantee the absence of fraud or financial problems with the attest client’s business.
“Throughout the entire business relationship, it’s a good idea to document any ongoing changed circumstances, no matter how seemingly small, and advise clients of any new related risks and/or performance limitations,” Piety said. He outlined these examples:
- Accountants: Quickly advise clients in writing when the client’s own poor record-keeping is causing the audit work to be more expensive and/or creating risk of material misstatement requiring additional client action.
- Lawyers: Advise clients in writing when discovering evidence that may potentially change the value of the case.
- Architects and Engineers: Communicate in writing when change orders on a project require expensive design changes that may negatively impact the overall project budget.
“Just like when a talented lawyer faces a jury, the better prepared you are, the stronger your case will be and the more likely you will prevail. That means being very clear when writing an email or a letter to a client. Approach these communications as if you were writing directly to a future jury.”
Piety said the failure to act quickly often causes confusion, which can in turn lead to unnecessary and unforeseen problems. To stop that from occurring, he offered these insights:
- Communicate immediately, via writing, any emerging issues that affect a client’s expectations and your ability to meet them.
- Clients who fail to pay in a timely manner or seem unhappy early on in the relationship probably have an issue that should be addressed immediately.
In the end, only by having a clear written record of what actually occurred can professionals ensure they will reduce, or even prevent, the threat of a claim. Do not give your future opponent an opportunity to fill in the gaps with their own version of reality designed to sway a jury against you.
“Always focus on the fundamentals because fundamentals are what will really help a defense,” Piety concluded. “In so many cases, written communication will prove to be the critical factor between winning and losing.”