The perception that the insurance industry does not embrace or utilize technology as efficiently as it could is simply not true, says Craig Beattie, senior analyst for UK-based research company Celent. If anything, the insurance industry is actively studying and implementing new technology all the time to improve their product systems, find new ways to enhance the customer experience, and provide better coverage options to insureds.
Beattie analyzed and explained the factors that influence carrier product technology in a report he authored titled “Designing for Product Agility: Where Should Insurers’ Products Live?”. In this Q&A with MyNewMarkets.com, Beattie discusses current technology trends in insurance product development and how agents and brokers can benefit from understanding this process.
Beattie: The simple fact is we’re in a new normal for the insurance industry – have been, really, since the financial crisis. The world’s changed a little bit. It’s getting a little bit faster. Technology adoption is changing. Customer expectations are accelerating as well. All of these things are driving the need for insurers to improve their agility…
In a recent survey we did of insurers, we found that agility, or speed, really means being able to amend products quickly, being able to bring new products to market quickly, being able to identify under‑served markets or niche markets where there’s opportunity and really attack those as quickly as possible, before the competition.
This has become a competitive imperative for the insurance industry, driven by changing consumers, increased regulatory activity, and, really, just a changed environment for the insurance industry.
MNM: You mention in the report that “speed to market can define winners, and losers and small mistakes are quickly capitalized upon and become big problems”…How is technology helping and hurting the design and implementation process of new insurance products?
Beattie: The answer really varies by which country you’re talking about, which regulatory framework you’re talking about. If you take an example from the UK, the customer base has become very, very price‑sensitive, particularly around motor insurance, and that behavior has led to a rise in what we call pricing aggregators or price‑comparison websites, where you can quickly and digitally get prices from many, many different insurers. This is leading to real‑time pricing updates. You’re getting insurers that are updating prices multiple times a day, and they’re really trying to secure the book of business that they think is optimum for them.
For those insurers who aren’t listening to the customers as they’re coming in the door, they can very swiftly find that…they’re much like the people standing in a line who get asked for volunteers and everyone else steps back. Certainly, they’re getting a book of business that they didn’t want simply because of the activity of other insurers. ..
There are many examples of that around the globe, probably on different time scales. It’s that kind of tendency, that kind of ability, that kind of competitive advantage that insurers are looking for, whether it’s measured in minutes, hours, days, months, or years. For many insurers, deploying a new product or amending a product is something that takes months.
MNM: Do you think that insurers focus too much on being the first to do something and not on doing it right, because of technology and the way that consumers have changed? Or do you think that they’re still taking their time and making sure that the products are ready for market?
Beattie: The insurance industry is heavily regulated. In many ways, it must get it right the first time. We are seeing [some] insurers starting to experiment with things…This is good for the consumers and good for the insurance industry. At the moment, it’s a very regulated environment, and it’s a subset of the insurance industry that’s really pushing the boundaries.
MNM: In your view, are insurers embracing product technology as efficiently as they could?
Beattie: The insurance industry actually does itself a disservice. There’s a perception internally, and this is echoed externally, that the insurance industry is very staid, it’s very risk‑averse. That’s simply not true.
If you look across the insurance industry at how technology’s being adopted, how predictive analytics is being used, how new data sources are being used, and actually how the insurance industry is helping customers at very, very difficult times, in very unexpected places.
If we think back to 2011, where we had quite so many catastrophes worldwide and actually the insurance industry, globally, responded to that…Now, is each individual an insurer, adopting all of the technology they could and getting the full potential out of that? No.
…I think [insurers are] pragmatically investing what funds they have in technology and doing that appropriately. I think there’s an opportunity here for people with experience in other industries…to really bring some of those solutions in the market because actually that’s where the insurance [industry] needs some help.
MNM: In the report, you talk about the main components of insurance products and you also talk about the product structure and how a product is assembled within itself and how groups of products are assembled together. Why is this important particularly for agents and brokers to know or realize?
Beattie: The reason that that’s important is there’s actually no agreement between carriers and vendors around that, although most people have their view about how it should be done…
Those decisions, the way that the things hang together, the way that the components are assembled, the way the products work amongst each other, the way that you change the products when new regulation comes in, all of these things almost define a DNA about a different structure, a different culture. It’s very useful for a carrier to be able to understand that before selecting a system.
From the agent’s point of view, from the broker’s point of view, it’s useful to understand the culture of the organization. From that, you’ll get a sense of where the products are likely to vary in the future, because all products change over time. ..[Knowing] what’s important to the organization they’re working for, where they have products that are likely to flex in the future could give them an advantage.
MNM: In terms of product structures among carriers, do you see a lot of similarities? Do certain carriers tend to follow a certain pattern with their products? Is that something that you have noticed in your research?
Beattie: There are a lot of products out there that are very similar to each other. Auto products, homeowner’s products between the carriers are not really that different. They’re quite heavily commoditized. That’s a trend that we’re seeing stretching up into small business insurance and things like that…
At the end point, the thing the customer receives is actually quite similar. Behind the scenes, there’s huge variations in how the insurers build those things, the vendor systems support building those things, and how they’re assembled together to come to this almost common point.
MNM: Considering that all insurers have different product structures and systems, how can agents and brokers be properly prepared to work with multiple insurers and their systems, or can they?
Beattie: I think the adoption of an open standard is a great thing for the industry. It’s at least a greater speed of delivery for the insured. ACORD is having stronger influence across the globe now. Not in all territories, but it’s having stronger influence. There are homegrown standards in different countries, as well.
These are good things for the industry. It allows for some of that confusion to come out of the way. It allows brokers and agents to offer the products that customers want. That’s the main thing that the insurance industry should be doing.
The differences between the insurers, the ways in which they choose to be flexible, how agile they are, how quickly they can deliver, this is a good thing for the industry as well. It varies. If everyone did the same thing and the broker said to one of the carriers, “We need to offer a product like this,” and they said no, then all the carriers would say no. Actually, in the current environment, maybe one of the carriers can pull this thing together quickly and efficiently because of the way that they’ve chosen to go about delivering flexibility in their systems, delivering flexibility in their organizational structure and their processes, as well.
MNM: How do you think that agents and brokers can work with carriers to design or implement more useful products and more efficient product systems, or can they?
Beattie: Brokers and agents are right there on the frontline. If something’s taking 28 days when it should really be done in 10 or maybe overnight or instantly, it’s the brokers and agents that face the wrath of the customer on that.
Absolutely they need to be feeding back to the carriers where things are working for the customer and where things are not working for the customer…The agent is in that unique position of being right up there with the customer, seeing what the customer likes about the product, about the experience, about how things are going, and what they dislike. Getting that feedback back to the insurance industry as a whole is crucial for the industry to move forward and to remain relevant to its customers.
MNM: Do you think technology is taking away from the agent/client relationship and also the agent/carrier relationship?
Beattie: Technology has got the opportunity to reduce things down. Conversations don’t happen because things happen automatically, and it can dissociate, right? Technology can stand between two people rather than helping two people…
But in terms of the insurance industry, we’re probably still having conversations that take time that we probably don’t need to have that are actually just solving problems with products – problems with organizational structure, problems with systems as well – and actually that just adds cost to the insurer. It doesn’t really add value. That’s something that technology should help us to improve and cut out those conversations that are unnecessary.
I think, however, there are conversations that are necessary. Agents need to stay close to the insured to really understand their needs, understand what it is they are looking for from the insurance product, how their life is changing, and actually that’s just a very, very human thing. It’s about just staying in contact.
In summary, technology has the opportunity to remove those kinds of conversations that never added value, but actually just added costs to the insurers, and they shouldn’t happen anyway.
Technology has the opportunity to enable communication where maybe it should happen but maybe didn’t in the past, to better enable our agents to get close to their customers. Of course, technology is a tool. It’s something that we have to use appropriately, so we can get it wrong, but I think technology has the opportunity to make things better.
To hear more from the interview with Beattie, check out the podcast below: