On April 6, 2018, the New England 1752 Club sponsored a distinguished panel of local insurance executives discussing technical innovation affecting insurers using the independent agency distribution channel. The meeting took place at the Dedham Country and Polo Club with a luncheon served following a spirited and informative panel discussion.
A panel of four thought leaders in the New England P&C industry
The discussion panel consisted of four leading insurance executives focused on the implementation of technology and on innovation in the marketing of insurance.
Moderating the panel was, the host of the Insurance Innovators Unscripted Podcast, Abel Travis. Mr. Travis recently was named the new Head of Innovation of the AF Group, a Michigan-based company presently focused on workers’ compensation. Prior to joining the AF Group, Mr. Travis was most recently an Assistant Vice President, Head of Commercial Lines Product Management, with The Hanover Insurance Company.
The panelists included Nicole Perrault, Erin Cummings, and Keith Jensen. Ms. Perrault is vice president of risk management at Narragansett Bay Insurance Company. At Narragansett Bay, Ms. Nicole leads product management, risk management, and analytics department, which is also responsible for the product pricing processes and new business development.
Ms. Cummings is the chief information officer for the Norfolk and Dedham Group and has strategic oversight of information technology and infrastructure, application development, data management and client services.
Mr. Jensen is the chief marketing officer for the Plymouth Rock Assurance Company with responsibility for corporate marketing, direct marketing, marketing analytics, rate pursuit, and agency markets.
Discussing innovation for carriers using independent agents for distribution
Mr. Travis started the discussion stating that companies using the independent agency distribution marketing channel, “…currently find ourselves at an extremely important moment for our company-carrier to adapt business models and norms to current or future market demands.” He then stated, “What we will do is engage in a robust discussion on what is going to impact this transformation, and then how we can understand what the transformation is going to do to the value chain within our organizations, and our ability to continue to grow and be competitive in the future.”
The panel discussion lasted over an hour with Mr. Travis presenting some insightful questions that panel members responded to with equally insightful answers. Some of the questions asked, in a much fuller manner, to the panel included:
- What technology trends do you see impacting carriers distributing their products through the independent agency channel?
- How do you think carriers can create a sustainable differentiation, and be more competitive in their markets?
- To understand the digital profile of your customers, you need good sources of data. What are some of those challenges to being able to access the needed information to build customer profiles and continue to grow long-term?
- Will agents and brokers respond positively to the increasing use by carriers to leverage their risk profiling with big data and third-party data to get some of the answers to underwriting questions traditionally asked?
- How can carriers looking at what’s happening with changing customer expectations and partner with their independent agency channel to help them to drive or to continue to drive value to the customers that they both serve?
- How can carrier help their agents work more closely with those new insurance technology companies providing added-value services to improve their agents’ contributions to the insurance value chain?
- What are some of the things that can enable agents and carriers to drive added beneficial touchpoints with their policyholders?
- What is the potential for outside capital including reinsurers funding business models including direct to consumer or MGAs, edging out independent agents?
- Why does the independent agent lag on marketing usage-based automobile insurance where direct marketers are successfully marketing this directly to consumers?
- What scares you about the future and how that may impact your organization?
A few of the panel’s discussion points follow.
Technology affecting the independent agency system and carriers using this marketing channel
The first part of the panel discussion focused on the questions relating to the impact of technology on the incumbent carriers focused on the independent agency system.
To Ms. Perrault, this conversation had to revolve around the technology and direct to consumer platform appearing to challenge carriers marketing through independent agents. Moreover, to her the correct response was not to view this as a challenge, but to learn from it as a way to assist carriers to acquire business more efficiently and directly.
Ms. Cummings seconded Ms. Perrault’s opinion and noted that some of the disruptive startups infiltrating the existing value channel are working with independent agents in a way that has advantages over the way incumbent carriers tend to work with them. To her, incumbent carriers have to be aware of these trends and take advantage of them. As Ms. Perrault summed up the issue of the disruptive new technology: “It is really almost exciting to learn…what’s working and learn from them [the disruptors], and….be in a place to just capitalize on it.”
On agency carriers differentiating their brand and enhancing their insureds’ experience, Mr. Jensen spoke about Plymouth Rock’s by avoiding an “either/or” paradigm: Pegging the company’s marketing as either agency-based or direct to consumers.
He related how Plymouth Rock’s owner, Jim Stone, figured out how to combine direct and agency channels the way no other company has: Market online, sell online, have an efficient call center and pay commissions to agents. Plymouth Rock offers the best of both the agency and the direct marketing channel. As Mr. Jensen summed up the company’s competitive offer: The Internet experience, a likable brand, independent agents through an independent agent company—choice, expertise, local relationships, local advice.
Big data and insureds’ profiles
Ms. Perrault also spoke on big data improving the customer experience. She focused on redundant operations. “The independent agent asks the customer the questions, they tell the insurance company, and the insurance company then compiles it, checks it, sends it to their reinsurance broker, they compile it and check it and send it to the reinsurer who then compiles it and checks it.” She asked: “Why are we all compiling and checking it? Every single year, especially if you send it to another carrier, we are going to do that all again, and essentially the risk has not changed. Why we are doing that over and over again doesn’t make sense.”
She noted that although carriers feel that the data is proprietary, it is not, with big data sources producing all of the same information from other sources. Instead, she argued to let the data take care of itself and instead put the carrier’s emphasis on just making sure the customer is serviced. Alternatively, she stated, “Be wary of the risk, be cognizant of it, and instead put all our emphasis on service.”
Usage-based automobile insurance
Ms. Cummings’ opinion was that if telematic technology can attract people who are good drivers, to begin with, that is a real win for a company. She noted direct writers are using this technology successfully, but incumbent carriers are not. This success by direct writers, to her, seemed to belie conventional wisdom that the worst risks are going direct, and the better risks tend to use agents. However, she did not think that this type of technology could affect behavior beyond driving.
Mr. Jensen discussed a new usage-based insurance product called “Road Rewards” launched by his company a few weeks before in Massachusetts. He explained direct carriers sell about 40% of their business with usage-based insurance. The independent agents sell about 4%. He opined, “If we keep that pace up, all the safe drivers will be in direct [carriers], and we will have all the people who do not want their driving measured.”
The new program gets past the agent uncertainty, Mr. Jensen explained, and all that hassle of plug-in devices. It is just a smartphone application, easy to download, and when the insured drives, and drives well, they receive rewards. For example, a reward may be $.10 off a gallon at a Shell gas station. If the insured drives poorly, nothing happens: No change in premium, no non-renewal. The hope is, that if the app is widely adopted by Plymouth Rock’s insureds, the result will be fewer accidents.
Some of the panel’s thoughts on risks and opportunities in technology invading the insurance space
To Ms. Cummings, there is a risk that incumbent carriers will not react quickly enough and adopt efficiencies quickly enough because they have the tendency to be a little bit slow and a little bit methodical. Carriers may also lag by tending to downplay what the disrupters are doing, even though they are doing great things that incumbent carriers also can do if they apply themselves.
To Mr. Jensen, driverless cars are going to happen, and eventually, average auto insurance premiums will go down. Auto insurance will become a “shrinking industry,” and that should “scare us.” What is not a shrinking industry, Mr. Jensen said, is the home line. There are more expensive homes and more coastal homes with higher claim costs. So, as the auto market goes down, carriers will push on the home business.
Also, Mr. Jensen pointed out even though auto premiums will go down, if the technology gets ahead of the prices there could be a tremendous amount of profit on the way down to a smaller industry.
To Ms. Perrault, now is the time if carriers are willing to shake things up, they have a tremendous opportunity to do so. She said was “super-excited about ‘disrupters.'” She believes carriers are going to learn a lot from them and have the opportunity to take advantage of the changing buyer profile and capitalize on it. She ended by stating about her view of the future insurance landscape, “I am just excited…”
About the 1752 Club
The New England 1752 Club is for insurance company marketing professionals working with independent insurance agents, agencies, and their customers. The 1752 club provides venues for networking among companies, agents, and agents associations to raise the status of the entire insurance industry with positive public relations as well as continuing education and expansion of expertise.
The club takes its name after the year from the founding date of the oldest property carrier in North America, March 26, 1752. The Honorable Ben Franklin, along with a local group of volunteer firefighters, formed “The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.” This first mutual insurance company, the Philadelphia Contributionship, remains in business today.
Anyone interested in learning more about the 1752 Club should feel free to contact Dan Findley at his email: DFindley@andovercos.com.