How do digital brokerages perform compared to their peers?

Report finds that the pace of tech adoption is slow

How do digital brokerages perform compared to their peers?


By Alicja Grzadkowska

A wave of digitalization has swept across insurance brokerages as a result of the coronavirus pandemic. However, even before the pandemic hit, key drivers like new technologies and shifting consumer preferences had already impacted the pace of technology adoption in the insurance industry, as revealed in the 2020 Applied Systems Digital Brokerage Report.

The report found that brokerages that have implemented a well-rounded technology strategy, whether this involves self-service quoting, 24/7 access to policy details, mobile applications or data analytics, are seeing both better returns on their technology investments as well as a bump in revenue. Nonetheless, not all brokerages are moving along this digital path at the same speed.

Here are the top insights from the 2020 Applied Digital Brokerage Report.

Technology adoption timeframe
One of the key takeaways from the 2020 report is that most Canadian brokerages realize the importance in having a digital strategy. In fact, Applied found that 93% are prioritizing this strategy over the coming one to five years, though larger brokerages (those with $25 million or more in revenue) and 87% of medium brokerages (those with $5 million to $9.9 million in revenue) are more likely to have a digital strategy in place already.

While the Applied survey was conducted before the pandemic, it noted that now more than ever before, “Brokers must build their paths forward to navigate a post-pandemic business model that supports the digital reality we are living in today.”

Foundational technology for brokerages
In a digital-forward environment, brokers continue to turn to their management systems as their most important piece of technology.

In Canada, the adoption of management systems by brokerages remained strong year over year, coming in at 97%, versus 96% in 2019. While this adoption generally correlates to the size of a brokerage, even those Canadian brokerages with less than $1.25 million in revenue saw a 93% management system adoption rate. On the other hand, for those with revenue in excess of $1.25 million, 100% reported using a management system.

According to Applied, “The brokerage management system provides a single source of truth for customer information, and gives a complete view of clients and prospects to each person in the brokerage to access and act upon – regardless of role, time or location.”

Opportunities in automating the brokerage business
While management systems are vital to the insurance lifecycle, brokers in Canada are using front-office automation tools to manage sales and marketing activities less frequently.

The 2020 Applied survey found that from the 27% of Canadian brokerages that have been early adopters of technology to manage their marketing, 57% have revenue between $10 million and $25 million, and 42% have revenue of $5 million to $9.9 million. However, large enterprise brokerages in Canada, as well as the UK and Ireland, indicated they are not adopting this type of technology, despite the many benefits of doing so.

Using an automation tool to help brokerages proactively reach out to clients and prospects on a regular basis with useful news or information keeps these individuals engaged, in turn ensuring that the brokerage’s brand stays top of mind.

“With so few brokerages taking advantage of sales and marketing automation tools, the door of opportunity is wide open,” according to Applied.

Benefits of a broker-insurer relationship
Applied also determined that while the insurance ecosystem is more connected in 2020, there is still some room for improvement. For instance, the use of download services is strong and widely adopted, with more than 50% of Canadian brokerages surveyed receiving all download types. Nonetheless, billing, CSIO eDocs, and personal lines are the standouts, with an adoption rate of 77%, 83%, and 96% respectively.

Moreover, Canadian brokerages continue to discover the value of using Applied IVANS Exchange, with adoption landing at 17%. This reflects a significant 55% jump over 2019’s adoption rate of 11%.

“Independent brokers and insurers must be in lockstep at every stage of the insurance lifecycle to ensure policyholders get the best advice, coverage, and service,” said Applied.

Cloud is the way to go
Globally, cloud usage is up 9% from 2019, as 71% of brokers choose to host their software in the cloud. However, there are some sore spots. For instance, in Canada, large brokerages are the least likely to use cloud software hosting, according to Applied, though numbers are starting to suggest a slight increase in the pace of adoption.

With the world moving to remote working as a result of the pandemic – a trend that is likely to outlive the coronavirus – brokerages would do well to consider turning to the cloud, especially considering its many benefits, from improved performance, flexibility and security, to reduced IT resource expenses, disaster recovery, and the ability to access data anytime, anywhere.

Ambivalence to data analytics is changing course
While the global adoption of data analytics software lags behind the use of other digital tools, 29% of brokerages currently use this application, reflecting a 26% increase from 2019. In Canada, 55% of large revenue brokerages utilize data analytics – a trend likewise seen in most other geographies since larger organizations tend to have more technology, business development, and data analyst resources in-house to manage these types of applications, according to Applied.

For those brokers who have yet to jump on the data analytics bandwagon, they should consider the fact that these applications, which provide deep, graphical analysis of the rich data available in the management system and submission tools, can propel growth by offering up insights on important performance indicators for a brokerage’s book of business, their employee operations, as well as their insurer relationships.

Adoption of self-service tools on the rise
In contrast to data analytics, brokerages are enthusiastically jumping on board with self-service tools, according to the 2020 Applied report, which reported a 50% increase in usage from 2019. In Canada, mid-sized brokerages were the highest adopters of these tools.

In the same vein, the adoption of client mobile apps also increased 50% year over year to 27%, and for all regions surveyed, 52% of brokerages extended mobile technology to their employees.

Self-service tools allow brokers to meet their customers and employees wherever they’re located. “Online customer self-service portals and mobile apps give customers freedom to initiate policy changes and quote new policies online; view, download and print policy documents; and pay their bills online, without having to come into the brokerage,” stated the Applied report.

Digital adoption rate inches upwards
Overall, while Applied has pinpointed certain pockets of robust technology use by brokerages, they have adopted other digital tools at a slower rate. As a result, the average score for digital technology adoption increased in 2020 by just 2% when looking at all geographies. Specifically in Canada, this score now stands at 44% among independent insurance brokerages.

Those companies that have yet to make the digital leap should know that the Applied survey reveals that digital brokerages experience greater monetary return – of 158% higher revenue per employee – than those that do not go down the digital path. This is because adopting digital tools lets brokers keep their eye on the prize – the customer – and selling as well as servicing them, rather than performing manual tasks.

“Given such little change in the score year over year, it reveals that brokerages still have a long runway in terms of digital technology adoption and realizing the opportunities it provides to service and support connected consumers, especially in the new normal brought on by the COVID-19 pandemic,” stated Applied.

To find out more about Applied’s 2020 Digital Brokerage report, click here.

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