by Andrew Breen
Every day in our increasingly digital world, about 50,000 independent retail brokers in the US alone are left in frustration. Commercial customers visit their static, low-tech websites looking for simple coverage like directors’ and officers’ liability or errors and omissions, but find only an invitation to call their office for a quote or at best to leave a number so the broker can call them back.
Busy small business owners who are comfortable buying everything from wholesale supplies to pizza delivery in just a few clicks have a very strong tendency to navigate away from “brochure” websites like these and keep surfing. The brokers and their markets miss out and the potential customer is lost. With nearly 70% of US SME owners going first to the internet or a call centre (McKinsey & Co, Small Commercial Insurance: A Bright Spot In the US Property/Casualty Market) for information about insurance, it is a large slice of the market to alienate.
This army of small US brokerages, most with a staff of a dozen or less, tend primarily to serve their local business communities. They hold the keys to some very attractive commercial risks and, since the sophisticated but mainstream search engines are designed to deliver local results, digital channel buyers in their target markets also tend to call on them first. But these producers tend not to be technical organisations. They have the drive and desire to write the business, but they lack the technological capability to close the deal online and the resources to build it.
Missing a trick
As insurers, we are missing a trick. It is possible for carriers, with resources vastly greater and data and analysis capabilities much deeper than independent brokers can bring to bear, to build web- and mobile-based quote and bind engines which small brokers can embrace. Such systems may be white-labelled with the broker’s own branding. We can give these small but valuable members of our distribution network an up-to-date digital presence, which will help to ensure prospects visiting their websites will not be shunted offline to more traditional channels – an inconvenience they are likely to refuse.
A handful of systems along these lines already exist, but some have been driven with the wrong interests in mind. “Getting closer to the customer” is a trendy goal in all parts of our industry. Some platforms have been created with this ambition, opening the possibility that once a customer has been captured, the producing retail broker can be removed from the equation altogether. We believe that to be truly effective, the branding must remain the broker’s own, in combination with that of a dedicated digital product. In our experiments with such solutions, the name Argo does not appear. Brokers retain control of their customer relationships, which is what they desire and what they do best. For them, and for their customers, a two-day quoting process is reduced to two minutes.
Insurance companies themselves are not all particularly digitally sophisticated, but the technology and data necessary to create, execute and operate such systems is here today. And the potential reward is significant: each risk with a premium of less than, say, $2,000 is probably uneconomic to underwrite individually, especially if a large chain of intermediaries sits between the customer and the underwriter. We estimate up to one-third of commercial liability risks are simply transactional in nature and can be underwritten adequately and profitably by an algorithm backed by a modern compute engine, rather than a human, which speeds responsiveness, dramatically reduces costs, and transforms otherwise unobtainable risks effortlessly into opportunities (the other 70% can be referred by the system to an underwriter for a swift, perhaps hours, response). Brokers too are typically extremely happy to adopt an automated approach, since every minute they spend on small, transactional risks eats into their margin.
Today’s buyers of things, especially the younger generations, expect to buy insurance the same way they buy many other essentials: with the click of a mouse or the touch of a screen. It is as true, or perhaps even more so, for time challenged cost-conscious business buyers as it is for consumers. By giving brokers a sophisticated digital presence which gets their brand into the ether and delivers automated quotes, we can create a multi-win situation. Customers who want insurance quickly, easily and digitally will get what they want. Brokers get to participate and service digital buyers at a very low cost. Insurers develop a source of potentially profitable small-ticket business which is otherwise difficult to see, and which in aggregate is very large, without requiring an expensive formal underwriting process for each risk.
As our world becomes increasingly digital, those who do not grab the reins will be left behind.
Andrew Breen is senior vice-president for digital at Argo Group
This column was originally published at Insurance Day; it is reprinted with permission