People rely on technology more than ever. Nearly two-thirds of Canadians now own a smartphone, using them to do everything, from banking to regulating home heating. And, thanks to increasing automation, goods and services are available 24 hours a day, 365 days a year.
Yet the insurance industry, independent brokers in particular, is failing to take advantage of these and other critical technologies.
The good news is that most brokerages are excelling in some areas, most prominently in internal automation. A new survey from Applied Systems, a software provider for US and Canadian brokerages, reports that 98% of brokerages use an internal management system, and 75% have visibility across all departments, including personal and commercial property/casualty and sales.
Similarly high rates of brokerages are using the cloud to host their management systems. Sixty per cent of brokers said they leverage cloud technology, resulting in 16% higher revenue per employee compared to brokerages that do not use the cloud.
Things are less impressive in technology adoption that allows for client self-service.
Despite critical trends suggesting today’s consumer prefers to interact with financial services companies on their own time and in their own way, only 38% of brokerages surveyed offer e-signature functionality and even fewer (25%) use a client self-service portal. Just 17% provide their clients with a mobile app.
Perhaps most troubling of all, just 45% of agencies surveyed by Applied Systems have adopted technology allowing staff to access their management system outside of the office using a mobile device.
This is a critical oversight when Canadians are increasingly using their smartphones and tablets to transact business online – particularly as brokerages face increased competition from tech-based start-ups offering alternative distribution choices.
The founder of one such start-up notes that such issues detract from the core value of the broker.
“Insurance has not kept up in the advancements seen in other parts of society in terms of technology,” says Matt Miller, chief executive with US-based Embroker. “The core job of the insurance broker is still taking information from a customer, taking that to the carrier and taking information back to the customer. There’s not a lot of technology involved in that process, and it’s a huge pain point for customers when brokers use their time on inefficient workflows.”
Those inefficiencies are manifest in insurance premiums, as roughly just 50 cents of every dollar spent by the customer goes toward settling claims.
Miller adds that brokers have historically benefitted from the complex, opaque nature of commercial insurance, which prompts few small- to medium-sized businesses to review their policies and consider more appropriate or better-priced coverage.
As technology emerges to bridge that gap in education, however, brokers may receive some pushback on the value of their service model.
“I think what brokers haven’t really done is empower the customer,” Miller says. “They’ve created a role where they’re absolutely critical to the customer, instead of allowing them to take ownership of their own risk management through tools, resources and expertise, providing guidance where they need it.”
The irony is that by refusing to adapt, brokers are cheating themselves out of potential profit: data from Applied Systems suggests agencies using self-service applications have 9% higher revenue per employee than those that don’t.
Brokerages may also be risking potential connections with younger business owners who value self-service and tech-based offerings.
Technology companies, for example, which trend younger on average, account for a high number of Embroker’s clients.
As millennial business owners become an increasingly powerful force in the marketplace, traditional brokerages may grow to regret not accommodating the group’s preferences.
“I understand how powerful those relationships [with the broker] are, but if you look at how branding and trust works, you see that younger people often trust brands more than people,” Miller says.
“We want to build that trust by being highly confident and highly efficient, and we’re attracting people who want a different model, one that’s not as reliant on their broker taking them out to lunch or dinner.”
Michael Howe, senior vice president, product management, with Applied Systems, says it is possible that the way these trends are being discussed belies a positive shift in attitude among brokerages.
“Eighteen to 24 months ago, there was much more resistance to the idea of providing service in a non-personal way, but now I think we’ve gotten people over the hump and the difference in attitude toward self-service is night and day,” he says.
“We’re just in the early stages of adoption – in seven to eight years, I think we’ll see 90% of brokerages investing in self-service technology.”
While Howe believes brokerages will remain resilient in the digital revolution, he does, like Miller, foresee trouble for companies that continue to shun new technological development.
“You will always need someone to help you make smart choices in the complicated world of insurance, so the core value proposition offered by agencies will continue to exist,” he says.
“If brokerages don’t adapt and evolve with time, though, customers will go somewhere else and these start-ups could absolutely be a threat.”
The Applied Digital Agency Report found an industry-wide digital technology adoption rate among independent brokerages of 42% based on five core competencies: agency management system capabilities, business intelligence, insurer download adoption, cloud software and mobility.