Recently, I spoke at the 2017 AAMGA Automation Conference in Atlanta, an annual gathering of MGAs and insurance professionals that centers on automation and advancements in insurance technology. It was great to hear from MGAs and to learn more about the trends and challenges affecting change in our industry. However, one theme resonated throughout the conference: Technology and the future of insurance. How is insurance embracing innovation? How are MGAs and insurance professionals using technology to better connect with customers? What opportunities are afforded to businesses that embrace change?
Technology has changed our world tremendously in the last few decades, challenging us to re-imagine what customer experience means in the 21st century. In order to think about where we are headed, it’s important to think about from where we have come. Corded phones and long lines for phone booths gave way to smartphones and 24/7 communication. Weekly visits to the bank gave way to online and mobile banking. Rows of filing cabinets taking up space in office corners gave way to cloud storage for instant access to files anytime, anywhere.
The technology gap is widening and there are a lot of factors impacting it, ranging from changing customer expectations, evolving technology, new business models and a changing workforce.
Think about what we are seeing in 2017: Millennials, customer experience, InsurTech, drones, driverless cars, smart homes and wearable devices all continue to be headline stories, with new innovations being unveiled almost weekly. These new connected technologies may threaten traditional insurance models, making it harder for businesses that don’t adapt to grow and thrive in the digital world. Understanding how these technologies are changing our industry is crucial.
So what are the biggest drivers of change to consider?
Rapidly changing customer expectations
New consumer technologies are everywhere, no matter the industry. But that technology is definitely bleeding into the insurance industry. The pace of technology in our space has trailed behind other industries at times, but the changing demographics of consumers, workers and small business owners make this market ripe for disruption. A recent research study by Morgan Stanley found that by 2020, more than 60% of small businesses in the U.S. will be owned by Millennials or members of Generation X. This new generation of buyers leads to great opportunities for us, but with any opportunity come challenges. We need to spot and respond to this shift in expectations. It’s time to re-imagine this space.
Pace of innovation
It’s evident that digital technology is changing our work and personal worlds, creating enormous opportunity in the industry. In the past, incremental innovation in our industry has kept pace with many customer expectations. But that is no longer the case with the rapid pace of innovation and technology, changing demographics and the proliferation of the internet-of-things (IoT), which according to multiple analysts, by 2020 will be close to 35 billion devices, and by 2025 is projected to be worth trillions annually. While our industry’s ratings with Millennials continues to get better, it is not keeping pace at the same rate as their expectations and experiences with other industries.
As many analysts allude to, there will be many startups that fail, however, there will be a small percentage that will prosper that are very likely to include some that disrupt and transform the industry. Companies are already taking advantage of opportunities that are emerging from these whether that is investments, partnerships or applying the technology to their own innovations.
These startups are not only targeting consumers but small businesses, with Boston Consulting Group estimating that by 2020, about one-quarter of small-business insurance in the U.S. will likely be sold digitally, up from 4% today. If small-business customers are able to do more buying and renewing of insurance online, MGAs, brokers and agents must embrace innovation to find new ways to create value for these customers.
How can your business leverage change to help close the technology gap?
- Start leading through innovation.
When it comes to your systems, maintain the existing, but get moving on the new. It is too easy to keep going with the status quo, but it’s necessary to start changing your culture now. Start thinking like a start-up, and encourage “What If” and “Why Not.” Be innovative and think outside the box. Embrace InsurTech technologies that will move your organization forward.
- Use and invest in your data.
There are many opportunities around big data, so be ready to adapt to a rapidly changing industry but don’t ignore incremental data quality improvement opportunities. If you aren’t changing yet, be ready to do so because it will soon be all about your customers. You need to move at their speed, not yours. And finally, plan to control your destiny but be ready to adapt to your customers’ needs.
- Invest in recruitment and retention.
As Millennials will soon comprise the majority of the insurance workforce, focusing on recruitment and retention is essential to ensure the future of your business. Is your workplace environment “Millennial-friendly”? Millennials also want competitive benefits packages, including creative “perks.” Consider multiple strategies that are being embraced to obtain an edge in recruiting technical talent such as widening the definition of a well-qualified candidate to include those from technical schools and boot camps that specialize in coding and software engineering. And consider creating innovation labs to promote creativity as well as attract technology talent. All are important to obtain and retain top talent.
- Build a digital roadmap for your business.
There is a growing need to enhance the customer experience and connect all parties throughout the insurance lifecycle. According to the IIABA 2016 Agency Universe Survey, 72% of agents use market access providers, with MGAs and wholesale brokers being the most prevalent. For the MGA channel to remain competitive and continue to respond to the growing expectations of agents and insureds, it is critical to develop a digital strategy that enables increased data exchange and immediate, 24/7 access to information. Look at each stage of the insurance lifecycle and all interactions with your customers as part of your technology roadmap. Ask yourself what incremental steps can you take to increase the customer experience based on today’s expectations – both with your agency partners and the insured.
As innovation continues to affect change in the insurance industry, businesses that fully embrace digital technology and develop their roadmaps for change are best positioned to respond to new customer service paradigms and capitalize on new business opportunities. Want to know more about the digital transformation of insurance? IVANS Connect is the insurance industry event to learn about the technology trends shaping the industry and network with industry peers and thought leaders.