Looking Back to Find a Way Forward

As the pandemic’s stranglehold on the economy begins to loosen and daily life slowly makes its way back toward pre-pandemic normalcy, the insurance industry can start to breathe a little easier.

But it’s now, more than ever—when the lived experience of working and operating during a pandemic is fresh on the industry’s mind—that the industry needs to take a good look at what the pandemic has taught and incorporate those lessons for the future.

The Digital Way Forward

One of the key lessons—and perhaps the most important—to take away from the pandemic is that the digital way of doing business is here to stay. Those who do not understand that are in significant danger of disruption. This essential shift in how we get our work done applies not just to brokers and insurers but to the industry as a whole, so it’s crucial to keep in mind moving forward. Experts say the insurance industry’s progress toward digitization still lags behind other segments of the larger financial services industry, a condition that many insurance executives acknowledge—and lament.

“As an industry, insurers were not prepared for the pandemic,” says Greg Murphy, executive vice president for North America at insurtech Instanda. “Given the physical restrictions, and our heavy reliance on online services as a result, the situation is showing how important digital transformation is just to keep businesses afloat, let alone transformational experiences.”

Girish Balasubramanian, general manager of agency business and agency channel management at Next Insurance, agrees. “It is fair to say that, compared to, say, a sister domain like payments, insurance is probably a good five to 10 years behind,” Balasubramanian says. “Part of this can be ascribed to the intrinsic conservatism that is part of the survival instincts and DNA of the industry.”

This conservatism is also evident on the brokerage side of the insurance business. “Insurers often have more control over their businesses than brokers,” Balasubramanian says. “The average insurer also has more scale and resources compared to the average broker. So the pace of digitization for insurers has led the pace of digitization for brokers.”

Andy Niver, head of product development and innovation at ReSource Pro, a company that helps firms design and implement digitization programs, says the pandemic exposed some fault lines in the sales process. “The biggest thing the pandemic revealed was people couldn’t use cocktail parties or casual meetings to make sales anymore,” Niver says. “It exposed the [brokerage] firms that were not prepared and could not sell on their expertise.”

Zac Overbay, chief operating officer of incumbent broker Woodruff Sawyer, refers to the pandemic as “a rude awakening” for an industry in need of digital transformation. “As harsh as it sounds,” Overbay says, “the days are numbered for brokerages, large and small, that are not focusing on technological innovation, digitizing the business, and reinventing the customer experience. Some will ‘Uberize’ the insurance value-chain, and they will be the winners.”

Digital Workplace Challenges

But that is not to say digitization is a silver bullet for all the industry’s problems, a cure-all that can be applied to any and all situations. Even as the pandemic highlighted the importance of digital tools, it also exposed the difficulties that come with a virtual or hybrid workforce.

One of those issues was how to gauge and track remote employee productivity. “Most people manage by walking around,” Niver says. “If you see someone in the office, they’re doing work. But the pandemic has forced people to be much more diligent about ensuring their people are at work. Brokers didn’t really have a baseline before the pandemic on how productive people are being and didn’t really have a solid idea of what their people should be doing day in and day out. They discovered they needed to find an answer to that quickly.”

Respondents to The Council’s Q4 Commercial P&C Market Index Survey COVID-19 Supplement cited the same issue, mentioning they felt employees were less accountable at home. Several described seeing employees “cutting corners” more often, as well as feeling that distractions at home were often prioritized over work.

Another key problem that brokers ran into during the pandemic was how to sustain office culture. According to the survey, 45% of respondents believed that moving to remote work had a very or somewhat negative effect on their office culture. Those respondents cited the lack of communal sharing of knowledge and the loss of the casual friendships and camaraderie between employees. They said remote work has hampered collaboration and team-building, especially for new employees.

“How people connect virtually, stay connected, collaborate, assemble and celebrate together is critically important,” Overbay says. “It took time to work through how to assure we stayed connected, could effectively collaborate, learn, and maintain the things that really mattered to us.”

While the pandemic has highlighted the problem of sustained workplace collaboration without physical connection, digitization has offered solutions, perhaps none as ubiquitous as Zoom.

“Zoom and other videoconferencing was certainly a technology that was already taking hold, but clearly the pandemic made it more mainstream,” Overbay says. “There were some creative technology platforms that helped keep people connected and collaborate more easily, such as Slack and Trello.”

Of course, using such digital meeting software comes with challenges, such as the potential to increase a company’s cyber-risk profile. “Security risk while outside a company’s network was a tough transition for everyone,” Overbay says. “The level of risk changed when people began working from home. Those firms that were using multi-factor authentication, VPNs, and had robust security monitoring were well positioned for the COVID-19 transition.”

Meeting Customer Expectations

Nevertheless, taking to heart the crucial lesson that digital will become an integral part of the insurance business could also help both insurers and brokers meet changing customer expectations. “Customers are highly frustrated with the insurance-purchasing and risk-evaluation process,” Overbay says. “There are lots of process inefficiencies, data redundancy and a real lack of data. Customers want an easy, simplistic platform to seamlessly manage their insurance renewal. They want data to support their risk-purchasing decisions.”

Balasubramanian emphasizes the many benefits that digitizing parts or all of the purchase process can bring. “The seamless experience that digital insurance players can provide their customers is invaluable,” he says. “Even small businesses that go through agencies to get the right coverage expect a number of those processes to be online,” such as payments and certificates of insurance.

“The process hasn’t changed, per se,” Niver says. “People are just reimagining it to be low-touch and centered on the buyer.”

Of course, as the time-consuming parts of the quote-bind process become increasingly digitized, brokers have to find ways to differentiate themselves. And as Niver and Overbay point out, the pandemic galvanized the movement to employ technology to reshape the customer experience. Those brokers that do not embrace this movement, Niver and Overbay contend, will soon find their days numbered. According to Niver, brokers will need to “differentiate based on their specialty—on being a risk advisor.”

“Customers are savvier than ever,” explains Balasubramanian. “They often seek customized coverage and are increasingly aware of new risks such as those brought on by climate change or terrorism or pandemics, for that matter. Agents who hope to win and retain a customer have to figure out the value that they are adding over buying a policy online.”

This is true for brokers and for the industry as a whole. “We are seeing customers want lower prices, easier processes, and value-added services,” Murphy says. “Insurers who can adapt to these preferences will be market leaders.”

Outside-In Approach

Aside from the issues that can emerge with a digital or hybrid workforce, other obstacles can impede the adoption and effective use of digital tools. Given that the pandemic accelerated, if not outright forced, the digital transformation of many firms, the time is ripe to address those barriers.

One key obstacle is the company mindset. As Balasubramanian says, “Digital transformations often run into substantial obstacles and take two to three times the time that companies anticipate. Perhaps the biggest reason for this is that companies believe that digital transformation is synonymous with ushering in digital tools and technologies and uprooting legacy systems.”

However, he adds, “Digital transformations are first and foremost about a mindset change. Few companies pay attention to addressing the angst of their most tenured employees, who fear irrelevance post transformation, and are at best grudging participants in such efforts. Ironically, these are the subject matter experts whose participation would make the biggest difference between success and failure.”

Other obstacles are the legacy systems on which incumbent insurers and brokerages have relied for decades. Many of the newer solutions simply don’t play well with existing systems. “That gives brokers pause to adopt the technology or solution because it creates contact switching between applications,” Overbay says. “Contact switching—toggling from system to system during your workday—is a big pain point. Don’t solve for one technology problem and create another. Brokers are clamoring for one system of record that contains everything they need to complete their work on behalf of their clients.”

Balasubramanian acknowledges the difficulty in bringing together legacy systems and new digital solutions. He advises against taking an “inside out” approach, in which companies begin with upgrading and modernizing their legacy systems. He favors what he calls the “outside in” approach, in which companies cater to the evolving digital needs of customers and invest in digital marketing tools. “Outside-in transformations are surprisingly both easier to accomplish and pay off faster,” Balasubramanian says. “The payoffs from the initial phases can help pay for the inevitable complexity of dealing with finally uprooting legacy systems.” And now that the pandemic has obliged firms to adopt outside digital tools to weather the lockdowns and economic downturn, there may be now an opportunity to turn to the inside.

Overbay also points to the challenge of finding a solution that fits your business. “Creating innovative solutions for any problem in the value chain is challenging because solutions may be geared toward a certain niche or market segment,” he says. “They may solve for a piece of the problem but not the entire problem.”

In fact, Overbay says, another overarching problem is the lack of uniformity and standardization. “Many insurers are focused on creating a digital platform for underwriting and quoting risks,” he says. “But insurers each want to develop their own marketplace, with their own underwriting rules and data sets. Most of the insurers consider their underwriting process unique and differentiated from its competitors, so don’t look for standardization soon, at least not in all lines.”

Looking to the Future

Given the seismic shift in the adoption of technological tools triggered by the pandemic, it is worth considering what firms can do to prepare for the next big disruption in the insurance world. Across the spectrum, from insurer to broker, all seem to agree that one thing is paramount: technology.

“Brokers need to take on technology to give their people the time to be an advisor,” Niver says, citing how the use of a digital tool to help compare policy language can save firms hours of time that can be spent serving as the advisor that today’s savvier clients expect.

Likewise, Murphy says, the industry needs to “rethink underwriting and claims,” in part through the greater use of tech. He says companies should model their approach after other complicated industries, such as financial services. “Do not spend so much time trying to come up with the perfect answer,” Murphy says. “Iterate and ensure you can allocate a little money to test.”

Balasubramanian agrees. “The use of technologies is critical for building a better product by more accurately assessing and pricing risk while not burdening the customer with too many questions,” he says. “Technology can make even the claims process straightforward and more friendly.

“The next disruption could be the result of a novel use of technology in any piece of the insurance value chain. Given this, no amount of preparation is truly sufficient. What helps create a bit of breathing room for companies to navigate disruptive changes is a loyal and satisfied customer base, at least one towering core competence and a strong partner ecosystem.”

It’s clear there are a number of questions the industry ought to keep top of mind during this next decade. “What technologies will change the way in which we work?” Overbay says. “What processes will be replaced by AI, robotic process automation, and blockchain? Where will the human-centric consulting and decision making still thrive? There are two types of brokerages in this regard: those that know it’s coming and are trying to look around the next few corners to be prepared for what lies ahead and those that are stuck just navigating the street they’re on now.”