That’s a question producers have long considered when deciding where to place their business — whether to go with a regional company that has close relationships with their agency and a keen understanding of the market, or choose a national carrier that may have an advantage in pricing, coverage or claims-paying ability.
At my firm, you will be the carrier of choice if you can compete on process, product and price — with a heavy emphasis on ease of doing business. That hasn’t changed much in the over 120 years my family’s agency has been a property-casualty sales leader in New England. Today, our agency represents over 100 companies on behalf of clients.
Technology was supposed to upset the applecart. Those companies that had deep pockets to invest in technology — presumably the largest carriers — would be the winners. Digitalization would create greater efficiencies, and provide new ways to measure and control risk, engage with customers and drive down prices. Small and regional carriers, it was thought, would be squeezed out of the market because they couldn’t modernize fast enough.
Technology is certainly transforming our industry. There have been a dizzying number of developments in just the last few years: big data, mobile platforms, the Internet of Things, telematics, drones, wearables, artificial intelligence — to name just a few. It’s an exciting time, but the digitalization of insurance is happening slowly and unevenly. McKinsey & Company reports that digital penetration is still less than 40 percent in the financial services sector, and I would guess it’s even less in insurance.
What this means is that the regionals are still very much in the game, and the smart companies — the ones that do technology right —will have a leg up on everyone else, regardless of size.
In my judgment, regional carriers still have an advantage because they have close ties with their agents and brokers, they tailor products to meet the needs of the local market, they can make underwriting decisions quickly, and they can change their business processes faster than the nationals. However, they are not immune to disruption or competition. So here’s what all carriers need to be doing to better serve agents and brokers, and their policyholders:
- Get the technology spend right. A number of regionals in our area have stepped up their technology spending. They’re collaborating with each other to make their processes more efficient, and investing in new systems that make sense for everyone involved, the carrier, agent and consumer. While regional companies may not offer fancy apps like the big direct writers, they still can provide 90 percent of what a consumer wants online such as bill pay, claims reporting and ID cards. They also understand what I need on a daily basis, and they usually get it right.
- Use agents as a sounding board and ally for change. Too often carriers pay lip service to their agency advisory councils or don’t even solicit agent input. I’ve seen companies roll out new systems with glitches like not being able to notify the agent that a renewal has been issued. Things like that drive agents nuts and could be avoided altogether by establishing a channel for users to provide feedback before new systems are implemented.
- Don’t’ be selfish with automation. Automation that saves the company money but puts an additional burden on agents is not really an improvement. Having the agent mail the policy to the policyholder saves the company money, but it raises our costs. Allowing the policyholder to update an auto policy online is great, but when we can’t access the declaration page and print it out or do a binder that is satisfactory to the bank or dealer, then it’s not really a cost savings. Increased efficiencies should have end-to-end benefits — from the company to the agent to the policyholder.
- Use data analytics to help agents be successful. Insurers collect tons of data, but they don’t always share it with their agents in meaningful ways. Companies are doing a relatively good job of sifting data to analyze claims losses, measure marketing effectiveness, underwrite and price more accurately, and provide more tailored products. It’s rare, though, for a company to extend that analysis to an agent’s book of business. I appreciate those companies that are willing to provide insight into my customers — for example, show me which clients are vulnerable to switching to another carrier. By partnering with the companies on analytics, we can work together to retain business, increase sales, improve customer satisfaction and drive down costs.
- Understand that relationships matter. Smaller companies may not be able to invest in new technology at the same level as the big nationals, but they make up for it in other ways. That Zig Ziglar quote that “you don’t build a business — you build people — and then people build the business,” very much holds true today. All things being equal, relationships trump technology. As they invest in technology, companies need to do it in a way that builds lasting relationships with their agents.
- Get active in industry groups. Agents that are involved in groups like the Agents Council for Technology (ACT), AUGIE, ACORD and ID Federation are passionate about creating a culture of innovation. These groups are bringing together all the different players in our industry to collaborate on technology solutions. User groups like NetVU also are a force in advocating for system-wide efficiencies and greater productivity. I’m surprised how many carriers aren’t involved in these groups or don’t attend industry meetings. Through industry forums, we can work to improve operations for agents and carriers, and pass those savings along to our policyholders.
Technology can help everyone in our industry better meet customer expectations and improve profitability. So whether you are a regional or national company, being nimble is important. Being tech-savvy is important. But don’t forget the importance of building solid relationships with your agents and brokers as they are the heartbeat and lifeline of your business.
Michael J. Foy is president of Foy Insurance Group in Exeter, New Hampshire. He currently serves as chairman-elect of the Network of Vertafore Users (NetVU), an independent national member organization committed to providing industry advocacy, world-class education and networking to more than 30,000 insurance agencies, carriers and MGAs, and more than 500,000 users of Vertafore’s solutions.
Published article by Mike Foy in Carrier Management