The head of an insurance management platform developer believes insurers are currently facing five major issues that need to be addressed.
In a feature article on ITProPortal.com, Novidea CEO Roi Agababa mentioned that despite a “buoyant stock market and a positive outlook for the US economy,” the insurance industry still has a few challenges.
He identified five challenges:
- The commercial insurance market has been soft for a long time – The market has been soft since the early 2000s, Agababa said. While there have been signs that the market is hardening in certain segments, the pressure on premiums and commissions is forcing agents to change tactics.
- The insurance sector is growing slowly – Annual agency growth in 2006 was at 12.5%, but that slumped to 1% in 2010. An S&P forecast said that for 2018, growth might rebound to an average of 3% to 5%, but nothing significant in terms of gains.
- M&A is an appealing option for growth, but is difficult – Insurance agency M&As increased by 31% in 2017. But while mergers and acquisitions are a way for insurers to improve revenue growth and expand their scale, they can be difficult to make a success of. Poor leadership, closing business with a low ROI, increasing costs due to management attention being elsewhere – all these things can make an M&A deal fall apart.
- Insurance rules and regulations are getting tougher – Both state and federal agencies (as well as the National Association of Insurance Commissioners) continue to toughen the operational framework of insurance agents in the US, Agababa explained. Insurers that also operate outside of America are even subjected to even stricter compliance standards.
- Customer expectations have changed – Citing a report by Salesforce.com, Agababa said that more than 70% of customers expect businesses to adjust communications and services based on knowledge gained from previous customer interactions. Customers also want a hassle-free insurance shopping experience, where self-service is possible. This trend will likely persist, as digital-savvy millennials replace baby boomers as the primary buyers of insurance.
Given all these challenges, Agababa said that it is now more important than ever for agents to “maximize sales from their client base, deliver a compelling customer experience, and keep costs in check,” things insurance technology can help with.
However, Agababa also noted that many agencies continue to rely on legacy systems that are “slow, inefficient and make access to data difficult.” He then recommended that insurers should switch to the latest agency management systems, which can let agents “make decisions based on hard-edged analysis rather than intuition.”
“Effective data management gives [agents] a better understanding of customer behavior — when, how and why they interact with the agency — meaning they can offer a personalized service, pre-empt problems, and tailor products in response to changing needs,” Agababa said.