There have been some major changes to the insurance industry landscape since the COVID-19 pandemic. First and foremost, there’s been a shift in customer service and how brokers facilitate business. This includes how brokers interact with their clientele in managing insurance renewals and risk management. There are also observable differences in the way brokers interact with partners.
In the past, businesses would simply renew their policies and move on, perhaps not even reviewing the information or speaking with their broker. Since the pandemic, clients are looking to their reps for guidance and advice, especially when it comes to risk management.
According to the latest industry report, The State of Commercial Insurance: A survey of insurance carriers, brokers, and policyholders, the pandemic has amplified vulnerabilities in technology, talent, and infrastructure, and the lessons we have learned have better prepared the industry for the new challenge ahead.
During the pandemic, policyholders looked to their brokers for increased levels of service, transparency, data, and innovation. In fact, operational innovation has been key to the insurance industry’s strength. In the meantime, brokers increasingly sought to integrate their systems with carriers to expedite quoting and policy issuance, positioning themselves to provide customized products and services addressing risk. Educating the policyholder nowadays is key to their acceptance of new products and services, and while demand may be high, adoption is slow. This is because there is hesitancy until the losses become more routine.
Moreover, the majority of insurance carriers report partnering with big tech companies to provide the hyper-personalized, multi-channel customer experiences that big tech offers and that customers are accustomed to. Such partnerships might include embedding risk transfer, creating new distribution sources, or sharing data in exchange for risk transfer alternatives. Partnering with big tech can also either eliminate or reduce non-value-added decisions, including risk assessment decisions with low-risk complexity, and free up human capital and resources to concentrate on higher value and greater risk complexity assessments and decisions. From the client perspective, the efficiencies coming from seamless underwriting and claims processing are valued. Unfortunately, they still don’t see innovation driving lower premium pricing.
Currently, the biggest areas of demand include customer preferences and digital transformation; systemic risks, including environmental, social, and governance (ESG); premium pricing; overall macroeconomic conditions; and geopolitical risk. Consequently, the industry is being forced to transform to ensure that added value, transparency, efficiency, modernization, and relevance are delivered effectively to their customer base.
The report also found that talent and innovation remain the two major areas of investment for brokers and carriers. Returns on investment in these areas were also perceived as the highest. Even though they rated their technology investment as slightly higher, these groups agreed that investment in talent delivered more value. These areas are directly linked to companies’ ability to maintain their market leadership through superior underwriting and risk management expertise. It is always preferable to have a strong mix of both, but companies in various segments may prioritize investments unevenly, which can result in a costly catch-up later.
The evolving risk landscape—including global health, economic uncertainty and rising inflation, geopolitical risks, increasing cyberattacks, supply chain disruptions, and natural disasters—have had an enormous impact on the insurance industry. Combined with changing consumer expectations, technology innovations, and market conditions, the industry has responded incredibly well. With policyholders expecting customized service, transparency, data, and innovation from their insurers, operational innovation has been key to the insurance industry’s strength.
Carriers are realizing that investing in technology is a business imperative and are making investments ranging from customer portals and automation to AI and prescriptive analytics for underwriting.
Brokers are also investing in technology that improves the efficiency and efficacy of their work with clients.
As insurance professionals become more technology proficient, successful brokers are broadening their abilities through the expansion of advisory services to augment their product-selling capabilities. Brokers are also honing their “soft skills” while increasing data analytics capabilities and technical expertise.
As a means to offset rate increases, brokers and carriers are leveraging technology to add value to the client experience. According to the report, some brokers say that they feel they are losing credibility with their clients because premiums are increasing while limits are lower as carriers are reporting record profits.
The good news is there has been a positive impact in market conditions regarding carrier growth and profitability with increased rates, tightened underwriting standards, and reduced capacity in some lines of business or products. Inflation and increased exposures coming out of the pandemic brought about a tailwind to brokers’ commissions and growth, and, as a result, the ground may be set for new and nontraditional insurance players to capitalize on this market dislocation.
In order to counteract the impact of such competitors, traditional insurance carriers and brokers must continue investing in new technology, bring in fresh talent from diverse backgrounds, and prioritize quality training to ensure that their teams have the latest, state-of-the-art capabilities required to compete successfully in the ever-evolving insurance industry.
The most important thing to remember is to stay informed. JGS is here to help answer all of your questions.