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Insurers’ digital initiatives: EY analyst offers mixed view

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From the back office to the front office, insurers are investing heavily in technologies to bring efficiencies to operations long overdue for an overhaul.

High on their list of priorities are digital platforms that enable smoother servicing of producers’ day-to-day needs, from account and event management to sales leads.

This was a chief takeaway of a Dec. 7 break-out session, “Agents of the Future, Digitizing Distribution,” which took place at National Underwriter’s 2016 Annual Insurance Executive Conference. Presented by Ernst & Young Executive Director Melanie Henderson, the session explored technology and channel initiatives underway in the industry, producers’ view on them, and where carriers are coming up short.

Related: LexisNexis shifts life insurance underwriting into high gear

The need for product innovation

The last, she said, extends to a core component of the carrier-producer relationship: product.

“Producers are increasingly looking for customized products to meet changing market demands,” said Henderson (pictured here at the conference). “What’s interesting is how much product innovation will play in determining what they want to sell. And right now, agents are telling carriers that what they have isn’t as attractive as what they want to go to market with.”

That’s evident in research she detailed at length from a 2016 report from Ernst & Young that polled property and casualty/personal agents (58 percent of the survey’s respondents), life and retirement agents/advisors (15 percent) and small commercial lines producers (27 percent).

When asked how much product innovation will be a driving factor behind the “producer of the future’s” expanding portfolio, nearly half of the agents and brokers surveyed (45 percent) think that innovation significantly facilitates new business. Just over 50 percent agree that developing “new and innovative products” should be a key focus of carriers.

Many producers are also looking for improvement on the underwriting front. Nearly half (50 percent) told Ernst & Young they want greater access to underwriters and favor using the same underwriter. More than one-third (35 percent) want to “formalize or improve the process” for reviewing or appealing an underwriting decision.

Related: Innovative thinking vs. innovation: key differences uncovered 

The value that producers attach to social networks — Twitter, Facebook, Instagram and the like — is most pronounced among property and casualty/personal lines agents, the Ernst & Young survey finds. (Photo: Thinkstock)

Gauging the D-to-C threat

Direct-to-consumer initiatives and digital insurance models are a mounting concern to a solid majority of agents, said Henderson.

Among the life and property and casualty agents polled, more than half perceive carriers’ direct-to-consumer and digital endeavors as at least “somewhat” of a threat. Nearly 1 in 10 life producers (8 percent) view them as a “full threat.”

Whereas carriers are exploring alternative distribution, producers believe they still add value. About three quarters of the survey respondents view the agent/advisor channels as “important for insurers.” Much smaller numbers are “neutral” as to the value added (22 percent) or “fail to see” their importance (3 percent)

Related: 5 things you need to know about the future of life insurance

Conversely, producers have certain expectations as to their involvement in carriers’ direct-to-consumer initiatives. The largest percentages — 40 percent and 52 percent, respectively, of life and property and casualty agents selling personal/individual lines; 37 percent of commercial lines agents — say that insurers should “work with me” and clients to resolve issues during the sales process. In most cases, between 20 percent and 25 percent of agents across all lines expect that carriers will:

  • Manage customer interactions but “keep me informed.”

  • Facilitate a servicing or claims/benefits request, but defer to the agent as the “sole point of contact” (among personal property and casualty agents, the figure is 17 percent).

Turning to how producers aim to balance new customer acquisition and cross-selling initiatives, about half of producers (49 percent of life agents, 53 percent of property and casualty agents) prefer a balanced approach to increasing “wallet share” and the number of clients. One in four or fewer favor “more wallet share and fewer customers” or “more customers with less wallet share.”

Related: Here’s why digital life insurance sales are growing

“What’s interesting is that the level of sales focus varies by product line,” said Henderson. “On the life insurance side, producers prefer to acquire more customers and let carriers handle servicing, which is understandable given the difficulty in selling ancillary products. But they do want to stay involved in existing relationships.”

As to those customer connections, more agents are seeking to engage clients and prospects through social media, the research indicates. The value they attach to social networks — Twitter, Facebook, Instagram and the like — is most pronounced among property and casualty/personal lines agents (5.7 on a 7-point scale, where 1 is the lowest score and 7 the highest). Among commercial lines and life agents, the values are 5.4 and 4.6, respectively.

Often, said Henderson, producers are uncertain as to which social networks to use, and the messaging to convey over each, to achieve sales and client relationship objectives. Insurers thus have a role to play in communicating social media best practices.

Related: How to disrupt the high-tech disrupters

Factors that producers consider in aligning with a carriers are the types and breadth of product; level of training and services; ease of doing business; and digital channel support. (Photo: Thinkstock)

From one to many

As the survey’s respondents are mostly independent, one would expect they’re interfacing with more than a single insurer. And, indeed, about 9 in 10 agents across all lines do business with two or more carriers in some form.

At least 1 in 5 of them:

  • Have from two to five “most favored carriers” but can place business with others (25 percent of life agents vs. 20 percent of property and casualty agents).

  • Have one or two insurers they favor for each product (21 percent vs. 20 percent).

  • Place business with many carriers (19 percent vs. 22 percent).

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Just 1 in 5 in or fewer agents have a “primary alliance carrier” but can place business with other insurers (from 12 percent to 20 percent, depending on the line). And only about 1 in 10 (from 11 to 13 percent) have a captive/exclusive relationship with a single insurer.

When deciding on insurers to align with, compensation is a key factor, but not necessarily the most important. Also considered by agents, said Henderson, are the types and breadth of product and rider options; level of training and services; ease of doing business; and digital channel support.

To what extent are the quality of tools a factor in producers’ decision to align with one or another carrier? On average, the survey’s respondents rank this factor high on Ernst & Young’s seven-point scale:

  • 5.7 among property and casualty/personal lines agents.

  • 5.6 among commercial lines agents.

  • 5 among life insurance agents.

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Especially in need of a revamp are “digital onboarding” (recruitment), digital account management, event management, sales lead and applications tools, said Ernst & Young Executive Director Melanie Henderson. (Photo: Thinkstock)

Where insurers are falling short

“What’s noteworthy here is that the quality of tools is much lower among life producers than P&C and commercial lines agents,” said Henderson. “Producers are not necessarily unhappy with the tools they have today. But the opportunity is to give them more — tools that will help make them more productive and easier to do business with you, particularly in the life insurance space.”

Related: S&P panelists: Insurance industry is ‘ripe for disruption’

There is an opportunity, too, to assuage agents and brokers that their work will be enhanced — and not threatened — by digital automation and insurers’ direct-to-consumer sales initiatives. Henderson expressed confidence that agents and brokers will continue to play a role in providing customized advice for clients needing comprehensive, holistic planning. She noted also that Ernst & Young is developing interactive tools, including online video tutorials, to help facilitate producers’ conversations during client engagements.

She added that insurers must offer these and other sales support functions to differentiate themselves and attract and retain independent producers. Recent Ernst & Young research on distribution management identified a range of capabilities and resources — customized marketing collateral material; content management and decision support systems; leads management and customer relationship management software; and email and workflow communications apps, among other tools — that producers want from carriers.

Requiring an overhaul, said Henderson, are digital platforms that enable smoother operations and servicing of producers. Especially in need of a revamp are “digital onboarding” (recruitment), digital account management, event management, sales lead and applications tools.

“Insurers are now investing substantially in these areas because the need for improvement is significant,” said Henderson. “Producers need these tools so they can spend their time more productively and efficiently.” 


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