Program Specialization is Paving a Powerful Future for Insurance Agents

Oct 01, 2018

More and more insurance programs are pushing the envelope around specialization in order to compete for business. In what’s effectively becoming an insurance arms race, MGAs are investing in new technology to, in part, deliver more diversity in the coverage and pricing options they offer.

This particular evolution in the complexity of products comes with a growing demand for insurance agents to study both their clients’ businesses as well as the product differentiation available in the marketplace. The competitive advantage is there for the taking by agents who can align the unique needs of their clients to the appropriate risk appetite and customization offered by one insurance program over another.

For the agents that embrace this opportunity, the future is bright.

Part of the driving force behind the increase in specialization is the failure of past programs to fully understand their individual and aggregate risk. As Sebastian shared, “a ton of companies have either lost their authority to write or have dropped out voluntarily because the loss ratios were so bad. Most of these programs simply didn’t have the data, visibility or experience to ultimately identify and properly price the good versus bad risk.” In response, carriers in the US and Lloyd’s of London syndicates are holding back binders or covers until an MGA can demonstrate a winning strategy.

An overwhelming majority of these new strategies involve getting more data about the insured into the underwriting process, and there’s good reason for that. First, greater insight into the insured provides obvious intelligence about who insurers are potentially providing coverage for and what risk they represent. But as importantly, a wider spectrum of data provides opportunities to uniquely price each risk and, in turn, provide premium options that give the agent and their client control based on their risk-to-price tolerance.

It’s a strategy that Sebastian sees the agent playing a key role in. “If we’re delivering coverage terms and this particular insured is concerned about premium, but they have the ability to take on more risk there’s no reason they shouldn’t have a myriad of coverage, premium and deductible options to make the choice that’s right for them. We need agents to act as that additional consultant, the same way a client needs to talk to an accountant or their attorney, they need their insurance agent to help them understand their options and choose the right path.”

"Only through automation and technology can we present several options in a profitable and consumer-conscious timeline."

Turning on this data and providing more options, however, isn’t a simple switch. New technology around policy management is providing the automation necessary to compensate for these advances in data-driven underwriting and complex rating features. Sebastian highlighted, “the insurance industry has established certain deductible options as a choice for insureds depending on the coverage they are looking for. While there is some logic to these options, the restraints of a manual insurance placement process are limiting the client’s abilities to take on more risk and reduce their premiums. The client deserves the right to explore more choices, in terms of coverage, deductibles and premiums. Only through automation and technology can we present several options in a profitable and consumer-conscious timeline.”

It’s an innovative road that Sebastian is personally familiar with. “The technology we’re investing in now is improving the data that goes in, improving the process and speed for both underwriters and agents, and that’s pushing our profitability forward.” For instance, the newest policy management systems are able to ingest an array of third-party data providing a variety of more accurate information. In addition, this data is paired with automated rating engines to instantly identify a more intelligent price for each risk that can be shared with the agent in real-time or kick out an internal alert that a senior underwriter needs to review a submission further.

Although premium will always play a role, program specialization is more about matching a client with the right options and letting them choose the price that best balances their needs. This is a point of great urgency for Sebastian. “The conversation has always been about premium dollars. If I had to make a mission statement about why we’re investing so much in technology it’s because we need to change the conversation. It’s about the delivery of the product. It’s efficiency, clarity and the actual choices that deliver valuable options to the client. And being able to get through this entire scenario efficiently, with all the information necessary to make smarter decisions.”

Sebastian also believes that clients should hold their agents accountable. “The clients that take the time to think about their personal and professional risks and not just the invoice that comes in front of them are on the right track. The better agent will engage the client in reflecting on an assortment of operational questions about both their business and personal needs now, as well as where they see themselves or their business in the future.” How an agent responds and participates in this process of due diligence will provide clarity on their value.

"When agents start talking about things that are specific to a client's business or their day-to-day lives, the more they become an irreplaceable consultant."

What insurance agents can’t afford is to deny that the climate within the industry is changing and that technology will play a crucial role. Granted there is such a rapid influx of insurtech, by no means should agents memorize every available tool coming out the door. There should be a level of self-reflection and personal accountability, however, to evolve correspondingly with the market. The pursuit to be better by taking advantage of the resources that MGAs are bringing to agents is the more important endeavor. From there, agents must find and focus on the tools that are right for their clientele.

While automation may remove the agent from basic types of insurance coverage, product specialization is a huge opportunity for agents to grow their business. Sebastian commented, “I think the more complicated and specific products necessitate an agent and MGA who can effectively work together. When agents start talking about things that are specific to a client’s business or their day-to-day lives, the more they become an irreplaceable consultant. Altogether this leads to a longevity and depth in their professional relationships with clients.”

" more profitable without necessarily making the conversation always about premium."

Sebastian closed by summarizing his feedback for agents. “You need to be knowledgeable about the products that are out there. You need to be able to articulate the difference between them. And you need to be more efficient, so that you can be more profitable without necessarily making the conversation always about premium.”

MGAs are turning to specialization and technology to deliver better products to the insured and more profitable results to their partners. This changing landscape demands that agents utilize the tools provided by MGAs to make the buying process more customizable for their clients. With highly efficient and personalized products, agents can spend more time developing their own specialization to expertly guide clients in choosing the insurance options that are right for them and their business.

Knowledge is the greatest power, and in a more diverse marketplace, those that study and adapt will see the greatest gains.

Written by Michael Fiedel, partner and VP of Business Development, PolicyFly.