Insurance Technology’s biggest drivers include Big Data, Artificial Intelligence, blockchain, and digital ecosystems. Insurers are already investing in Insurtech, but the portion of MGAs and agents in the industry remains untapped.
In this blog, we will be discussing how the disruption of insurance technology will affect insurance agents as well as agencies. We’ll also look at Insurtech trends in 2020 and ways you, as an agent, can make the most out of it.
What is Insurtech? Why should we care about it?
According to Investopedia, Insurtech is all about using technology-driven innovations designed to boost savings and enhance efficiency from the current insurance industry model. In simpler terms, Insurtech is the amalgamation of Insurance & Technology.
In contrast to other markets, the insurance sector has always been inclined to the traditional way of doing business, at least until recent years. Advances in insurance technology has given a platform for upcoming Insurtech startups to thrive in the industry.
According to Statista.com, Insurtech companies have been able to generate about $1.1 billion in the first half of 2019 alone. At the end of 2018, Insurtech startups reached 1500 in number with an unprecedented annual growth rate of 41% between 2019 and 2023.
The line here is clear- insurance technology is already setting its benchmarks. And you need to know where your agency stands!
Technology in insurance brings change, and change is scary.
Most insurance agents today have busy lives- they have paperwork, frequent client visits, and management duties. Because they run a commission-based business, they do not want to invest in technology.
Agents today don’t see short-term returns and take investing in Insurtech as a career risk.
Plus, most agents are people who’ve worked in the industry for a few decades. It is fair from their part to be resistant to technology. It goes the same for agencies. They’ve been using the same legacy-based systems for way too long.
They are also reluctant because the benefits of Insurtech aren’t obvious. If agents were getting one lead a day traditionally, they could obtain ten leads now by leveraging technology. With the nine more contacts they’re getting with Insurtech, their productivity and sales are bound to increase.
The problem is that these benefits are not being communicated to the agents properly. We’ll talk about more on this later.
For now, let’s jump into some of the insurance technology trends of 2020 that are changing the industry. And also, how you can use these trends for your benefit!
The insurance community is known for its resistance to new technology. The disruption of digital mechanisms like AI and Machine Learning are slowly starting to redefine the essence of the insurance sector- customer relationship through trust and advice.
Technology in insurance today has a lot to bring to the table. For instance, take automated processing systems that automate all the servicing tasks. This includes underwriting as well, which completely changes the roles of insurance professionals, and by a considerable margin too. But it’s not changing in the way you think!
However, big data and machine learning are technologies that are mostly used by insurers, not agents. These technologies allow insurers to provide their products and services online — through their websites, mobile applications, and even through texts.
As a result, insureds can now get quotes and bind coverages online or through their cellphones as every customer’s data exists in their systems. If the insured can do all that online, why would they need insurance agents?
Would this mean that insurance agents and agencies will go out of business?
Let’s look at this from a different perspective. Agents will not have to deal with the paperwork, visit their clients to collect information, and handle grievances all the time. With the shift of technology, the roles of agents will slowly change into a risk advisory role.
Agents must start tweaking their approach of selling by focusing more on advising and counseling their clients.
Regardless of whether you’re a captive or an independent agent, it is high time you level up and embrace this change. Customers will be looking for a personal touch when it comes to advising them regarding their risks and what to insure. In other words, customers need agents to understand their needs fully and counsel them to make the right decision regarding insurance.
All this change has turned out great for agents. According to Applied Digital Broker Annual Report, digital agencies experience an increase in revenue by 156% per employee. Getting involved with Insurtech is the way to go for the agents of tomorrow?
The takeaway- insurance technology does not replace insurance agents but rather help them provide better customer service.
‘Customer Retention is the key to making your business successful. You have to listen to your customers and address their problems to make them happy.’ If you’ve been a part of any business, you’ve probably heard this mantra.
In recent years, customer retention has proven to be a better indicator of success than operational efficiency. A study from Harvard Business School shows that an increase in customer retention rates by only 5% will increase your revenue by 25–95%.
But how does insurance technology come into this?
A lot of insurers and even agencies are investing vast amounts of money in integrating big data analytics and intelligence into their business models. Big data allows you to use data processing models that store customer information and use it to map out their preferences and joint issues.
There is a lot of potential for IoT and big data in the insurance industry. Many insurers are collaborating with companies like Vitality and Amazon to provide more tailor services to their customers. Chatbots and virtual assistants are also very popular for personalized real-time customer assistance.
Once insurers adapt to these technologies, they give agents wider avenues to explore. New niche markets will be available for business. As a result, agents can better understand customer behavior and use this data to determine specific policies to sell to target markets.
According to Accenture’s Global Distribution and Market Consumer Study, 46% of consumers are ready to give more cash as well as data to get fully tailored, real-time services.
IoT facilitates risk assessment to insurers in different markets by gathering data through devices like GPS car tracking devices, smart smoke alarms, and alarm systems to sell them personalized products.
The takeaway- The use of Big data and IoT in insurance allows agents to find new customers in niche markets and retain existing ones by using customer data to provide personalized service.
In recent years, Blockchain solutions and Distributive Ledger Technology have escalated from being a seemingly complicated fad to an essential tool for market competitiveness.
Blockchain and DLT enable insurers to access platforms to share digital data, avoid paperwork, and create an accepted standard for data management. Insurers can use their secured data chains to develop products with stronger value propositions. Insurers can assess risks better, process claims faster, and enhance fraud detection- all by analyzing clustered customer data.
You don’t fully understand what blockchain is, do you?
Don’t worry. You’re not the only one. In a recent global survey by HSBC, 80% of people who had heard about blockchain did not know how it works. Blockchain is a decentralized system that uses connected chains of user-generated data that must be verified by the entire system.
To put it simply, this platform is fraud-proof.
But how does blockchain affect insurance agents?
With blockchain’s platforms, a lot of cost and time can be saved by quickly verifying consumer data and claim history. Because of it, there is a reduction in the back-and-forth involved in cases of quoting, reinsurance, and claims processing. As risks are better assessed, rates can be adjusted accordingly, and the level of fraud detection is very high.
However, Blockchain is a few years away, and as an agent, you do not have to know how it works. You might need to know how to use it since it is rapidly becoming the method of preference for data verification.
Insurtech agencies now pose significant competition to insurers who are selling policies directly. Many insurers over the years have invested a substantial amount of capital in insurance technology for themselves. Despite this, the results have not turned out in their favor.
However, with careful analysis, collaboration, and integration, specialists believe that they can close the gap between insurers and Insurtech agencies. According to worldInsurTechreport.com, 90% of Insurtech startups and 70% of Insurers agree with collaboration to develop a new ecosystem. Also, 96% of insurers do think that digital ecosystems are having an impact on the insurance industry. ( Accenture 2019)
Above all, Insurtech’s distinct aptitudes make incubators the perfect partner for nurturing a strong foundation in the marketplace. A lot of traditional insurance agencies might be uncertain about the road ahead.
It is high time for these agencies to either invest in insurance technology and innovation, partner with an Insurtech agency or just shut down their agencies for good.
Don’t panic; this will not happen immediately. But if you’re an agent and you want your career to grow, then this is the right time for you to hop in the train of insurance technology. It’s now or never.
The takeaway- Digital ecosystems are blooming — join the insurance technology wave before it’s too late.
Missing out is not an option!
As outlined in this blog, it is evident that insurance technology is the new standard in today’s insurance industry.
If you’re uneasy or unwilling to adapt and change, success will be hard to find. Don’t just take our word for it, either. Ask around. Newer agencies are using AMS and quoting modules to simplify and automate tasks that would previously take hours.
In conclusion, insurance technology is shaping and changing the insurance industry, and missing out is not an option! Did you like what you just read? Let us know what you think about insurance technology and share your opinions in the comments section.
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