Streamlining Small Business Insurance through Broker-Carrier Connectivity

Dovetail is a digital MGA, serving as a technology solution for quoting, binding, and billing small business insurance. Why did Dovetail choose the MGA route, and why choose the agent channel instead of selling insurance direct?

Our delivery model from the beginning was to be a pure MGA or carrier back office, providing underwriting and policy servicing on our carriers’ behalf to agents, and letting agents do what they do best – managing relationships with insureds.

We feel the MGA model provides better value-add to all members of the small business insurance transaction, whether you’re the carrier, agent or policyholder, and it positions Dovetail to provide better visibility on the performance of each insurance product to the carrier.

Our technology platform is being developed in such a way that if a direct channel evolves, nothing will be a barrier to going that route; however, we believe that the agent adds a lot of value in the insurance transaction as a qualifying factor, a trusted advisor and consultant. Buying insurance for a small business is complicated, and it requires expertise that isn’t necessarily innate in small business owners today. As a result, buying direct could lead to a small business owner being underinsured or not having the right coverages for their business.

Broker-carrier connectivity has long been a chicken-and-egg issue – platforms need broker participation to get carrier buy-in, but they won’t get broker participation until they have the right carriers on board. How do we tackle this challenge?

Dovetail is uniquely positioned as part of Victor, which provides the size and scale from a distribution perspective to instantly attract carriers to the platform. Every conversation we have with carriers confirms their interest in being part of this ecosystem. The next challenge is to ensure product density – products for the specific risk and for the specific class of business available on the platform. As our range of products grows, we expect to be even more attractive to brokers and agents.

What do you see as the future of the broker-carrier relationship? Has the battle to be closest to the consumer already affected this relationship?

That’s an interesting question. I don’t see a battle erupting in the marketplace as much as others do. There is space for both the carrier and agent to have relationships with the customer because each offers different value to the customer. In my point of view, we largely don’t see this as a conflict. In fact, a study by Liberty Mutual and Safeco, “Understanding Millennial Insurance Consumers,” found that about half of millennials are looking for experienced insurance professionals to guide them in buying coverage.

How does Dovetail use existing data, as well as new forms of data collection, to better and more accurately price and underwrite small commercial insurance?

Today, Dovetail uses multiple data sources to underwrite and price the risk. We learn every day from our carriers which of these data sources perform well and which don’t. We see that personal lines data is getting much more sophisticated, but good, small commercial data sources are still hard to find. We expect that to get better in the next 12-18 months. As commercial data sources evolve, a key tenet of the Dovetail and Victor strategy will be to become experts in which third- party data add the most value to which risks across the country.

How can a brokerage firm successfully incentivize brokers, account managers and other employees to change or alter existing business process that have been ingrained for 10+ years? Particularly considering it might take some time to experience the benefits from implementing new platforms and technologies.

In our lives outside of work, our expectations of technology as individuals have all evolved in the past 10 years. When you go to book a flight or buy something off Amazon, your expectation of that experience has changed. You know what is a good digital experience and what is not. Couple that with the changing workforce, with millennials comprising the largest segment of the working population, and we know the workplace of tomorrow will be different. According to our recent white paper, Agencies of the Future, “the differences that will distinguish tomorrow’s agencies are likely to be less about what agencies do, and more about how they do it.”

Brokers, account managers and employees need to bring that mindset into the workplace and demand change because brokerages that make this shift are rapidly going to become more efficient and effective than those that don’t. We see it everyday – processes that work well and those that don’t. The small commercial space is such that you can’t afford to be in it as a broker or carrier and do things the way you’ve always done them. You will never make money at it. That’s why it’s an underserved marketplace.

Those that adopt technology, invest in efficiency, and move rapidly are going to build the scale they need to be effective in small commercial insurance. From a risk spread perspective, a loss ratio perspective, and an operational effectiveness perspective, I would argue that there is a mandatory critical mass for success that many carriers do not reach in small commercial premium volume. We’ve talked to carriers that struggle to figure out how to make money in this area, but they definitely see potential for the future if the right steps are taken.

Does Dovetail work with existing legacy Agency Management Systems to streamline and improve data collection?

Working with an AMS is part of Dovetail’s roadmap for the future. While not currently in process, we would expect to be integrating to an AMS in the next couple of years. We understand the value this will bring to the broker experience and why that’s important for them.