A Fully Optimized Digital Industry

Everyone in the insurance value chain wins when the broker is equipped with better data, says Jeff Cohen, senior vice president at Zywave.

Cohen paints a vivid picture of what a fully optimized digital industry could look like but cautions that we’re not there yet. He discusses where the industry is on this journey, why digital evolution is moving at its current pace, and what we can do about it. He also digs into the differences between manual and digital processes, how to bring out useful data points for insureds, and how Zywave is building its data from the ground up.

Transcript

Jeff Cohen: The vast majority of businesses in the U.S. are small businesses. And so, you know, we’re working, I wouldn’t say from the ground up, but from the idea of, you know, the smaller risk to the larger risk. The forces of collaboration are also changing when you think about customization and flexibility and the nature of risk.

Sandy Laycox: Welcome to the Leader’s Edge podcast. I’m Sandy Laycox, editor in chief of Leader’s Edge. In this podcast sponsored by Zywave, I talk with Zywave senior vice president Jeff Cohen. Our topic is digitization, and Cohen paints a vivid picture of what a fully optimized digital industry could look like, but cautions that, no, we’re not quite there yet. Give it a listen.

Jeff Cohen: Much of this revolves around the the transforming of a number of tasks that would be done, I’ll call it manually, but what I really mean is via a lot of emails, Repurposing and rekeying and resending, and did you get that, and where is it, and when are you gonna respond to me? This is, you know, optimizing digital distribution, which means connecting trading partners to one another in a way that facilitates flow of information much more efficiently. This this whole idea that, I’m gonna kill myself for the next three hours to make a $100 on this thing that when I should be doing these other things.

Sandy Laycox: Right.

Jeff Cohen: And I could I could do this much faster and much more effectively for my policyholder client if I could see multiple options, receive multiple prices, quotes, indications, and go back to my policyholder and explain, here are your options, and let me counsel you that I think this one is the best one.

Sandy Laycox: Next, Cohen discusses where the industry is on this journey, why digital evolution is moving at the pace that it is, and what we can do about it.

Jeff Cohen: We have taken a few baby steps.

Sandy Laycox: That’s it?

Jeff Cohen: We have we we have a we have a lot of ground to cover. But back to your question, I I think we are we have we have taken baby steps so far. And when I listen to the number of placement professionals on the brokerage side complain about the lack of response on the carrier capacity side, you know, we don’t often hear back. Forget about a decline. We just don’t hear anything.

We can do a lot better.

Sandy Laycox: So why what’s taking so long? What are the hurdles that we’re just, you know, struggling against?

Jeff Cohen: So I think there I think there’s absolutely three factors. I don’t know. I’m sort of trying to bucket in my mind as you ask the question. You know, there’s a mindset component, and a lot of that is, you know, insurance is slow to change. There’s a this is the way we’ve always done it, for generations, perhaps.

You know, there’s that aspect. The notion, the forces of collaboration are also changing. And this is a key component, when you think about customization and flexibility and the nature of risk. And then I would tell you that there’s also an element, and for me, the most interesting aspect of this this whole conversation lies in differentiation. And what I mean by that is really, how does the most basic you know, I need a price check-in aisle 3.

How do you know, here’s your price. Well, now can you check this price? And can you check that price? And what if I did it this way? What if I did more?

And rather, could you put that information back to me in a in a way that would be helpful for me to know more about the coverage and the options and so that I could also explain this more effectively back to my policyholder. And I can give you plenty of examples. You know? I need a quote on $1,000,000 of cover.

Here it is. But suppose I gave that back to you with well, just so you know, Jeff, all the entities that look like your policyholder’s business, they all buy 5,000,000 of cover, just so you know. How do you feel now? Why don’t I offer you a quote on the 1,000,000 that you asked for, and I’ll give you a quote on the 5,000,000 that everybody else finds? I can do both for you.

And you can go back to your policyholder slightly more informed. For me, this aspect of putting these pieces together is the essence of where I would like to see this industry go. You know, think about the carrier out there that has a tremendous amount of claims experience. Can you use that claims experience to do what a colleague of mine also says?

You know, are we using this information to make the world a safer place? For example, all these things happen to all of our other policyholders. So in advance, we’re going to advise you. Be careful of these things. They happen.

And so I say baby steps, Sandy, because I’m thinking about how far how much ground we can go cover, how far we can go towards this idea of combining pieces of information that do two things. One is make the broker party, retail broker, wholesale broker perhaps, more capable just by adding more data points and then being able to impact the policyholder with a better purchase decision, a better, an increased amount of insight on the exposures and liabilities that potentially lie ahead.

Sandy Laycox: So what is needed for the industry to get past the mindset? What would you recommend to the industry to move past some of these things to get farther along?

Jeff Cohen: Alright. So here’s the response I’m gonna share with you., right? Like, there are a couple of different dimensions to this. One is absolutely mindset. Like, we have to move it into an era of continuous improvement. And how do we one up at different junctures? There’s absolutely a technical aspect to all of this, you know?

Zywave wants to be very open API. How, you know, how do we connect? How do we get you to here so you can get to there? I live in Manhattan. I can get to JFK.

And once I get to JFK, I can go anywhere direct, almost anywhere. And that’s sort of, for me, the analogous aspect of we wanna be able to make a connection to a hub, and then from there, get you to everywhere you wanna go. You have to make that initial. I’m responsible for getting to JFK. Once I get to JFK, JFK could get me to anywhere.

It’s sort of the same thing. I can get to Zywave, and if I can get to Zywave, then I can connect you. And I would suggest that there’s a technical aspect to all of this that you have to overcome. I would also tell you that there’s a creativity element to this as well with regard to what are what are the pieces of information my customer needs in order to discern between these two types of coverage, these two options. Because if not, I’m just chasing everybody down the the lowest price rat hole, which isn’t always the best option.

You know, this cyber coverage comes along with risk management services, and this one comes along with risk, you know, security penetration testing, and this one comes along with response remediation aspects. And and how do I evaluate all these different options? How do I draw comparisons between different things before I just go, well, this one is cheaper than all the others? And I think but, you know, again, I think that that is an aspect to this that we all have to get our heads around.

Sandy Laycox: Then we dig deep into the differences between a manual and a digital process. We discuss how to bring out useful data points for insureds and what it means for the industry as a whole to better equip the distributor.

Jeff Cohen: Collectively, I think the industry can make great leaps towards making the proverbial broker more capable in whatever coverage we’re talking about. The carrier has an array of information from claims and submissions and all sorts of things that they’ve looked at to be able to say, here’s this isolated quote relative to these other things. For me, what Zywave is trying to achieve is this idea of, thinking about how do we make the broker more capable to represent the cover back to the policyholder. What other pieces of information can be delivered at that time? We have probably one of the largest collections of lost event data.

We know these $1,000,000 losses have happened. You have this many credit card elements in your database. And we know that when thousands and thousands of credit cards get breached, it looks like this in terms of severity. We can put those two things together for you. Or I’ll give you a better one.

It’s this notion of limit adequacy. I think one of the hardest questions for a retail broker certainly to answer is, okay. How much coverage do I need? You’ve convinced me. I have an exposure.

But how much is enough? That’s a tough question, especially when you’re a generalist and you handle a lot of different types of commercial entities as your customers. But this notion of limit adequacy could simply be, you know, here’s the limit that you’re looking at, and here are the percentages of known losses that have occurred. The limit that you’ve selected or the limit that we’re talking about would cover you for 43% of the known losses that have happened. You still have a big block of loss that wouldn’t work for the limit that we’re talking about.

Maybe we should raise the limit. Or the limit that we’re talking about would actually cover 87% of the known losses, and those few other losses could be outliers for some reason. Like, that’s a much more informed conversation around how much cover is appropriate rather than well, the last quote I got was for this amount. What I’m suggesting is that this industry has a plethora of data in all different junctures, and we should all be focusing our efforts around making the party speaking to the policyholder, the seller, if you will, the distributor, as capable as possible. And that means all of us should be collaborating with regard to how much information we might be able to stuff into that price quote so that the policyholder is receiving the information with a, I learned something in the process. You made me more informed about this as well as telling me or helping me to discern that this option is the option we should go with.

Sandy Laycox: Zywave serves customers of a wide range in size and complexity, which means the end risk is just as varied. Cohen talks about the differences between small and larger businesses and how Zywave is building its data from the ground up.

Jeff Cohen: 15,000 brokerages and agencies as customers means we are serving the very largest global entities down to three people in the basement in some place. And as a result, the policyholders, the customers, the insured of these entities are different and the complexity of their exposures different. Having said that, I still maintain that there will always be a component where certain risks are manuscripted. And, you know, a broker and an underwriter and a risk manager are all gathering together to really talk about how certain things are unique from everything else. Let’s put those aside.

The vast majority of businesses in the U.S. are small businesses. And many of those small businesses have similar exposures. And so, you know, we’re working sort of I wouldn’t say from the ground up, but from the idea of, you know, the smaller risk to the larger risk, you know, mid-market in between. And there are definitely components of certain types of cover. Let’s go back to cyber.

You know? There are we’re still we’re working in a in a world where the vast majority of commercial entities don’t have a cyber policy. And how do you introduce that cover? In my view, brokers have to become smarter. And entities like Zywave have to help with that education process.

So do carriers and MGAs and everybody else. It’s a process. And I’d go so far as to tell you that, helping the sellers, as I refer to the distributors, become more capable should be a common goal for all of us in the business. Insurance is is one of those unique businesses where you actually want products to be copied because that allows the risk to be spread across multiple entities. At the same time, when you do that, you are setting yourselves up for a situation where price becomes the differentiator, and suddenly everybody’s undercutting the next person.

And that’s not good either. And so you sort of move into this sphere of constant innovation of small tweaks. Perhaps something greater than, wow, we introduced the semicolon into our form, but, you know, you’re looking for little enhancements. I’m simply out here suggesting that some of those little enhancements should be designed to foster greater understanding of the cover, utilizing data, utilizing experiences that come from the carrier side of the equation as well as from providers like Zywave.

And I think that’s I think that’s where you get there. You take steps along the path of how do I answer the most fundamental questions? Why is this cover different from that cover? Is price alone the only variable? Why should I have this cover?

If I should have the cover, how much cover should I have? Questions like that. And as we answer those questions, I think the benefit will go directly back to all parties. The policyholder will benefit because certain exposures that they might have succumb to are covered by insurance. The broker benefits, because this is just an increment of further organic growth.

And the carrier benefits too, because good premium is what you’re after.

Sandy Laycox: Finally, Cohen shares some thoughts on workflow and the reality of what it means when you have to log into a new screen.

Jeff Cohen: There there’s an element of workflow, which all parties really need to think about. When things are in my workflow, I pay attention to them. And when it’s just it’s one more portal, one more website, one more name and password that I have to remember for another thing, it’s just harder for me to go there. And I would encourage the various constituents that we talk to, all of us during our days, to be mindful of fashioning these efforts in the context of the workflow rather than creating one-off elements where you have to go and log in to another system because it just becomes unnatural.

Put it all for me in one place, and it works. And as I said earlier, I think that one place is also fashioned around when you need it, that timing. And that timing for me is crucial. It’s my customer is now interested in this particular cover.

Now I have to get the quotes. Now I have to talk about how I distinguish between them. This is, for me, a very important timing element to this aspect of the conversation. And I think when the carrier community, the broker community are all aligned to focus on that time point, we’ll make a lot of, progress in this dimension.

Sandy Laycox: That was Jeff Cohen, senior vice president at Zywave, sharing his thoughts on optimal digitization. Thanks for listening. For more Leader’s Edge podcasts, go to Leadersedge.com.