KEY TAKEAWAYS:
--Currently, non-core activities absorb roughly 40% of underwriters' time. Traditional manual quote and pricing processes are too time-consuming, especially as consumers demand quotes in hours rather than days or week.
--Luckily, scalable and authoritative data is accelerating the transition to automated models.
--91% of commercial insurance customers said they would get a quote online — but only 28% had. The gap means there is a significant opportunity for insurers willing to invest in streamlined, automated processes.
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2023 is the year of hyper-digitalization in commercial insurance; providers have recognized the benefits of automation and are embracing it. As the industry evolves, insurers are bringing the advantages of cutting-edge technology and advanced data capabilities to agents and the businesses they represent.
An improved customer experience was cited as a top priority by the Council for Independent Agents and Brokers (CIAB) in its annual outlook report. This new, streamlined purchasing process benefits clients and policy providers alike by enhancing the agent and customer experience while improving efficiency. It also means valuable insights for underwriting and pricing. Insurance companies that have adopted this approach have a significant advantage over their competition, which translates to sustainable profits in a competitive marketplace.
Changing Legacy Processes Across the Value Chain
Historically, commercial insurance was a highly manual, high-touch business. The detailed nature of the work could lead to significant price quote delays. Underwriters manually verified different aspects of risk — the type of business, number of employees, financial situation, etc. — because legacy data systems could not process complex business transactions and data sources were fragmented.
This was especially true for small and micro-businesses, where insurance underwriting is highly volume-driven. The low margins associated with these types of businesses, and the high costs that come with them, make high-touch underwriting impractical.
Commercial insurance is in high demand, with the U.S. receiving more than 400,000 new business applications every month since the start of the pandemic. Currently, non-core activities absorb roughly 40% of underwriters' time, which amounts to approximately $85 billion to $160 billion in efficiency losses over a five-year span. And consumer demand calls for quotes in hours rather than days or weeks. Traditional manual quote and pricing processes have become too time-consuming, particularly within these small and micro-business segments.
Further, the legacy approach runs the risk of error and lost or incomplete data. Under the traditional process, insurers may find it challenging to develop an accurate picture of business risks or to make informed pricing and policy decisions.
Luckily, scalable and authoritative data is accelerating the transition to automated models. AI-based processes and alternative data sources, such as aerial imagery, offer new insights detailing a small business's historical information, assets and exposures. Automated processes ensure that all the information is complete and accurate while minimizing the amount of manual data entry needed.
See also: Insurers Turn to Automation
Evolving Channels Improve Agent Insight
This technological shift has enabled insurance companies to offer a broader range of value. Commercial insurance agents have always brought vital advice and expertise to the industry. And as data sources become more accurate, agents can increasingly focus on the most complex transactions, offering specialized services and a more personal client experience.
Channel evolution is a crucial part of this improved customer experience. It introduces more online quoting and binding into the underwriting process. For example, in the latest TransUnion Annual Insurance Outlook Survey, 91% of commercial insurance customers said they would get a quote online — but only 28% had. These results indicate a gap in commercial insurance offerings and a significant opportunity for insurers willing to invest in streamlined, automated processes.
The transition to purchasing policies online is a natural evolution for many business owners. They already purchase their personal insurance policies online and are willing to obtain commercial insurance the same way. As a result, most independent insurance agents anticipate a significant increase in online commercial insurance buyers over the next three years.
Although online channels are evolving, digitalization does not diminish the agent's role. Instead, it evolves it. Insurers will continue to use agents to acquire larger and more complex policies. Most agents know this and are responding by deepening their industry knowledge through investments in education and technology to better serve their clients and remain competitive in the marketplace. According to CIAB's annual outlook report, agents are also offering additional payment methods, improving application and renewal processes, hiring specialized personnel to improve the client experience and prioritizing additional client services.
Increasing Automation Leads to Better Allocation
Agents are just one resource providers can look to as proof of technology's benefit. Commercial insurance provider expense loads remain high, and automation helps insurers balance those costs while better allocating resources. With the influx of data providers using AI and other digital technologies, it has become increasingly mainstream for commercial insurers to automate portions of their underwriting and pricing processes.
Only a few industry pioneers have delved into this space in recent years. Now it’s becoming a progressively more common practice. With digital imagery and AI-based information collection processes, there is now an overwhelming number of solution providers in this landscape. For example, for many small business classifications, such as artisan contractors, automation is relatively commonplace, with a large amount of publicly available data. In the past, underwriters would review these risks and make pricing adjustments. Digital technology can streamline these simple underwriting processes and quickly generate a quote based on real-time data.
See also: Where Small Commercial Insurers Are Investing
As the underwriter's role evolves due to technology, it becomes more focused on data analysis and identifying unique risks that don't fit into these data-rich categories. To optimize these efforts, commercial insurers are channeling their dollars where it makes more sense. Highly complex cases benefit from strong underwriters and agents deeply involved in the policy.
At the same time, tech tools are available to streamline less complicated cases where scalable data is more readily available. This approach allows insurers to bring down expense loads faster.
Digitalizing Is Commercial Insurance’s Path Forward
The commercial insurance industry continues its digital transformation and is not stopping anytime soon. Today's business insurance customers expect a convenient and seamless purchasing experience — one-third of consumers will walk away from a trusted brand after a single poor experience. Digitalization is crucial to client retention and acquisition.
Commercial insurers are turning to digital channels and using available data to meet these expectations and stay competitive in the marketplace. This move allows them to offer their customers more efficient, personalized service and stay ahead of the competition while improving their bottom lines. By embracing digital technologies, commercial insurers can enhance the consumer experience, improve their process and remain price-competitive for more homogeneous risks.
