Smartly Leveraging Technology for Your Insurance Distribution Strategy

27 Dec 2017

The insurance industry is in the throes of major disruption.  For agents, the shift towards more of a digital advisor capacity, using technology to automate a previously human-led sales process, is both exciting and worrying.

The so-called “digital advisor” model essentially enables clients to communicate with chatbots instead of insurance agents in order to do things like buying policies, assessing risk, and other services usually handled by human sales agents. While this may sound convenient for the clients and cost-saving for the agencies, implementing such a model can have unwelcome consequences.

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Implied in this shift is the notion that insurance agents have become or are becoming effectively obsolete and can essentially be replaced by bots.

But can they?

The truth is, the human element that insurance agents bring to your insurance distribution strategy is invaluable. In a perfect world, insurance agencies would always strike just the right balance between introducing new technologies and maintaining a human touch where it’s most needed.

The Digital Advisor Model vs. Traditional Insurance Sales

The traditional insurance distribution strategy, called the “agency system”, was designed to increase policy sales by having insurance agents canvas local neighborhoods in search of prospective policyholders. These agents were, in effect, door-to-door insurance salespeople.

It may seem strange today, but when it was created, the agency system solved the expensive problem of creating and meeting demand for products that insurers found difficult to sell through other channels.

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And the system worked well for many years. Today though, technology has dramatically increased market access, reach, and penetration strategies, and opened up new channels — to the point that many are questioning whether the traditional “agency system” is still relevant, let alone necessary.

This is where the “digital agency” comes in.

Some insurance companies are experimenting with a “direct to consumer” approach essentially allowing clients to pick their own policies, interact with primitive chatbots, and run online quotes. Certain companies have even gone so far as to bind coverage online.

While there’s always an agent behind the scenes, his or her role in the early stage sales process is diminishing. Some see this as a good thing. However, there remain significant problems in handing the reins directly over to clients, let alone chatbots.

For starters, consumers are not insurance experts. While insurance providers and intermediaries  can certainly do more to educate the public, there will always be nuances that elude the client, that the client won’t be willing to invest the time to master, and that he or she consequently won’t know how to properly deal with.

For example, when a small business owner buys a line of commercial general liability insurance, a digital agency makes the process sound easy. The business owner can log online, run quotes, and start the underwriting process immediately.

In general, commercial general liability insurance covers lawsuits that arise from day-to-day business activities. However, this can leave the client with a number of questions If a competing business sues you claiming your advertising materials are similar to theirs, will you be covered? How about if an employee has an accident on office property?

These are just two questions in an enormous line of them that, unfortunately, most business owners wouldn't think to ask until it's too late. 

Without the guidance of an experienced, expert insurance agent, small business owners can find themselves incapable of anticipating their own needs prima facie  let alone capable of navigating the complex liability scenarios for which they'd require thorough explanations of the policy types and coverage options available to them.

An online quoting system can’t assess a company’s needs in an in-depth fashion. Likewise, chatbots aren’t sophisticated enough to make comprehensive insurance plans for complex or non-standard business needs.

For the needs of multi-variable, sophisticated, and often custom policies, the identification and presentation mechanisms required to deliver the best coverage options cannot adequately be automated. In most cases, only an agent can handle that kind of nuanced and detailed analysis and turn out the appropriate recommendation.

That’s not to say technology has no place in the insurance sales process. It does. But, what’s needed is a balance between technology and human beings who have the creativity, critical thinking, and emotional intelligence needed to  deliver not just comprehensive insurance policies, but peace of mind.

What’s the Ideal Balance?

In a global fintech survey conducted by PwC, 80% of insurance business participants recognize that more and better technology can benefit them  specifically where it comes to the challenge of meeting evolving customer needs.

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With this in mind, it’s evident that insurance agencies need to adopt some sort of technology into their day-to-day operations. But at what point does technology overshadow the human connection between agent and client? And what’s the ideal balance?

One easy way to integrate technology into the insurance sales process — without compromising your operations’ human intelligence — is to implement an intelligent digital management platform. A duly advanced platform allows clients to log into their own personalized portals to access their policies anytime, anywhere — while simultaneously empowering agents with the support needed to better serve their clients.

For example, an online portal would allow policyholders to view their policy details whenever they wish, or make changes to their address, billing information, email, and even renew their policies as they approach expiration.

At the same time, agents would still be involved in the sales and client management process. A good digital management system simply enables agents to step into the role of a trusted advisor, guiding clients in their policy decisions. The agent would be the one to help explain certain features and make product recommendations based on relevant client data.

Human Interaction Is Still Necessary

There are many factors that go into purchasing insurance. These include risk assessment, an in-depth analysis of a client’s needs, a thorough understanding of the client’s background, and human intelligence to connect the dots and guide the process to a desirable outcome. If you take the human insurance agent out of the equation, you’re left with an advice gap. Where would a client go to ease his or her worries or when they’re in need of guidance?

For example, the probability that a given business owner will die is 100%. Given this fact, you might expect every business owner to hold some type of personal life insurance, a buy-sell agreement funded with life insurance, or corporate-owned life insurance. However, the 2017 Insurance Barometer Study, conducted by LIMRA and Life Happens, shows that most people aren’t thinking about life insurance for business purposes at all.

Why?

Because people don't like to think about their own deaths. There's an emotional block that renders even the most compelling business logic innert. Of all the reasons that make life insurance an appealing product, “business purposes” ranks last on the list of purchase motivators. Even among those who own life insurance, one in three admit that they don’t own enough of it.

Screen Shot 2017-12-28 at 1.16.26 PM.png Source: 2017 Insurance Barometer Study

To encourage responsible business decisions for matters couched in emotion, you need to frame the underlying rationale in emotional terms. This is exactly where an agent can step up and utilize human communication skills to close the gaps. The fact is that sometimes it takes a human to anticipate and correct for human irrationality.

Sometimes, of course, it’s not a matter of irrationality but of logistical challenges. In these cases too, the human agent is much more adept at formulating creative solutions to help people afford the coverage they need.

A human agent, for example, can play with more pieces of the puzzle, so to speak, and arrange them in more dynamic ways drawing on industry expertise to help insurers reconfigure price/cost structures and leveraging client data to help policyholders rearrange expenditures so that, at the end of the day, the policyholder can be fully covered in all aspects. This is something that even the most advanced chatbots are light years away from being able to do.

What’s more, insurance companies are actually making matters worse by oversimplifying their product offerings. By creating one-size-fits-all insurance policies, they’re trying to force square pegs into round holes. As a result, they’ve complicated the process to the point where product prices no longer reflect an individual’s risk meaning clients don’t get the coverage they actually need according to their specific risk profiles.

On top of that, some insurers have implemented an automated insurance distribution strategy that forces consumers to make decisions without the help and guidance of an agent. It lulls clients into a false sense of confidence that they’ll be getting what they need when they may really be getting coverage that’s overkill or worse — not enough, leaving the client at risk.

Welcoming Technology into Your Insurance Distribution Strategy

empower insurance distribution strategy with technologyFinding the right mix of technology and human agent involvement isn’t easy. But, digital management platforms go a long way in clarifying and managing these countervailing interests.

In other words, they make striking the right balance a lot easier.

At the end of the day, agents and brokers are still very much relevant when it comes to 1-on-1 discussions about insurance coverage and options. They have skills and expertise that are not easily replaced by technology. They also have the human and critical thinking capabilities needed to analyze data and create outside-of-the-box, client-centric policies, tailored to meet each client’s exact needs.

In the best examples, technology comes in as a valuable tool to empower agents with information that would otherwise be inaccessible. Data analytics and automation help reduce the amount of manual entry work agents need to do. They can also pull information from databases to help them make better insurance recommendations, cross-sell products, and fill in coverage gaps.

Cloud-based platforms further allow agents to “be everywhere” and sell from tablets, smartphones, or whatever other devices they might find within reach.

In addition, these digital platforms give agency managers a 360-degree view of the business, allowing them to see which clients are profitable, which ones are not, how much time agents spend on clients, and how much revenue each client, and agent, brings to the firm. Of course, a smart digital management system also provides insights into the productivity of each agent.

All these things empower a more data-driven, intelligent, and profitable decision making process.

Where To Go From Here

With the insurance industry shifting toward the “digital advisor model”, it’s critical for agencies to adopt intelligent management platforms that allow them to remain relevant and ahead of the competitive curve.

Although the call towards robotic insurance agents may seem convenient for clients and enticing for management, sooner or later it will become clear  that such an approach, taken admodum, would be more damaging than rewarding.

Nothing can replace the dynamic, multi-dimensional intelligence of human insurance agents, especially when they’re backed by powerful data analytics and business insight capabilities.


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Posted by Sharone Volk

A founding partner at Novidea and currently VP of Product, Sharone’s years of executive-level experience in insurance operations help guide Novidea’s global product strategy, innovation roadmap, product management and product marketing. Prior to joining Novidea, Sharone served as CTO at the Phoenix Insurance Company and as a VP of Technology at Migdal Insurance.
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