"Incumbents must innovate before innovators find distribution" | Insurance Business America
“It’s up to the incumbents to find innovation before the innovators find distribution.” That’s the race in the excess & surplus (E&S) lines industry at the moment, according to Ryan Collier (pictured), chief digital officer at Risk Placement Services (RPS), and self-confessed “friction-free” digitalization warrior.
RPS is a true incumbent in the E&S market. The nationally focused managing general agent (MGA) and wholesale broker works with around 20,000 agencies and 100,000 retail agents. But just because RPS has this “fantastic benefit of distribution,” that doesn’t mean the firm can rest on its laurels, according to Collier. Incumbents need to innovate, he said, because once the disruptive innovators discover distribution, they’re going to chip away at market share.
Collier’s comment is no cause for panic. Rather, it highlights the open playing field of opportunity for change and innovation in the E&S marketplace. Collier pointed out: “I think the E&S market and the model it has created over the last 50 years has been one of innovation. The marketplace has historically been known as more innovative on coverage, on ways to underwrite, and on trying to meet the new and changing needs of consumers.
“However, I do think that our innovation has been a little slower on the digitalization front or having a digital footprint. There’s been so much focus on solving problems for the here and now - for example, trying to put a usage-based insurance product in place, or trying to find ways to work with Bitcoin – that I think the E&S industry has been a little bit slower than usual on the then. That’s one of our challenges when it comes to competing with the innovators; we have our today to worry about, while the insurtech start-up can focus more on solving the problems of tomorrow.”
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If anyone can take the innovators on, it’s the E&S players, according to Collier. He described the E&S marketplace as a sheet of paper covered in pencil. The market uses pencil so that it can erase things, change things, move things on the fly, and be creative and adaptive. In contrast, a carrier in the standard market might use pen, so they have to find a way to reduce their writing in pen before they can get to a clean sheet of paper. While the E&S marketplace has somewhat of an advantage over the standard marketplace in this scenario, the insurtech still has a head start. They’re able to innovate on to a clean sheet of paper without making any disruption to a current business model.
There are other barriers to innovation beyond the writing already on the wall (or on the piece of paper in the above scenario). Collier told Insurance Business: “Not many people like change. When you have to change mindsets, change philosophies and change business models, that’s a friction that gets put into the disruption. And when I say disruption, I’m not talking about disrupting the insurance industry. I’m talking about the inefficient way that the industry has been run on behalf of our customers for hundreds of years. I’m not trying to change the industry; I’m trying to change the way the insurance industry handles their business and treats their customers.”
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Collier, who has served as RPS’s chief digital officer since 2016, runs a tight team under the dictum that “status quo is unacceptable”. The team challenges every step of what Collier describes as “the friction filled insurance process” in order to make it friction free. One of the most common pain points felt not only in the E&S marketplace but with insurance transactions in general is the time and effort it takes to rate, quote, bind and issue a policy.
“Customers have to answer way too many questions to get a quote started,” said Collier. “Once they’ve answered those questions, they send their information to a retail broker, who takes a day or two to digest it, before sending it to a wholesale broker. We might then take a day or two to digest it, before sending it to the carrier, who takes two or five or 10 days to digest it and do their assessment of the risk. And then it goes back through that whole process again – back to the wholesale broker, the retail agent, and eventually the customer. Historically, the whole process has taken anywhere from 30 to 60 days, requiring a lot of work from the client to complete the application. And then on top of that, it can take another 30 to 60 days for them to actually get their policy.
“I joke, but you can you can build a house or a car faster than you can build an insurance policy, because that insurance client might complete their application on June 01, bind their policy on August 01, and get their policy delivered on September 01. What we’ve done at RPS is to create a digital platform that completely turns that upside down, and enables a retail broker to service their customer, rate, quote, bind, issue and pay in about 60 seconds. The customer, who is used to completing a 10-page application, as that’s what RPS has given them for the last 20 years, can now get the same coverage or better by answering four questions in just one minute. And the retail broker can do that on behalf of the client – in the same amount of time it takes to make a cup of coffee.”