Brokerage Ops the April 2016 issue

Time to Deliver

Prep for future disruption by fulfilling our traditional promise.
By Dan Epstein Posted on May 4, 2016

In his 2003 book, The Slow Pace of Fast Change, author Bhaskar Chakravorti highlighted how powerful innovations in technology and business often suffer slow adoption. He illustrated how in a networked world, individuals, companies and regulators are all interacting, watching each other, guessing and second-guessing which investment choice is right. Often the conservative choice is hard to dislodge. But when alternatives reach a tipping point, change can come dizzyingly fast.

Insurance, a traditionally slow-changing industry, has more than its fair share of headwinds to innovation. It is a fragmented industry, compounded by state regulation, an extended value chain of retail and wholesale distributors through carriers, reinsurers and capital markets, and a plethora of orbiting service providers.

Fragmentation has inhibited transformational change and has led to a prevailing view that through continuous improvement, industry players can always adapt and catch up to change.

This fragmented marketplace has traditionally protected incumbents, but predators are circling. “Insurance Tech,” Silicon Valley-backed software companies, are looking to deliver insurance solutions. They observe the structural inefficiencies in the industry, which agents and brokers work through every day, and see red meat, tantalizing opportunities for new and disruptive paradigms. How are traditional agencies to adapt and stay competitive in the face of this threat?

Disrupting the Distribution Model

You can see the signs of coming disruption. Usage-based telematics (Progressive), peer-to-peer insurance models (Friendsurance), e-aggregators (PolicyGenius) and Internet of Things (IoT) companies that are offering insurance coverage embedded with their products (autonomous vehicles). In 2015, venture capital companies invested $2.65 billion in insurance tech with the intention of, at the very least, shaking things up.

Some see the traditional agency model as living on borrowed time. Debates rage about the unique role and value that agents and brokers provide. When they really want to scare us, potential disruptors talk about “the Uber of insurance,” promising to transform the role of the agent to create a completely different customer experience.

This transformation is most advanced in personal lines, where digitalization is facilitating straight-through processing and reducing the need for human intervention in policy processing. By analogy, think of people doing their simple taxes online using data-driven technology and intuitive user interfaces.

But more complex commercial lines are not immune to disruptive transformation. Digitalization, automation, analytics, embedded devices and telematics provide powerful tools to be integrated into new service and business models that can considerably change the value proposition for insureds.

The Job to be Done

While highly attuned to these possibilities, I still foresee independent agents remaining relevant well into the future. But there is a caveat: Agents must truly and expansively fulfill their core promise to provide peace of mind to their insureds.

I am often struck by the notion that the job to be done by retail agents is to provide peace of mind. It is not enough to provide a piece of paper and a commitment to represent the client’s interests in the event of a loss. Increasingly, peace of mind means providing information seamlessly, when and where the client wants it, via a user-friendly interface, backed by data and tools to help prevent rather than simply mitigate or retrieve losses.

One agency principal recently noted it was imperative “to make the friction points go away” in the risk management process. But this is only the starting point.

Consider your organization. How much of your employees’ time is devoted to increasing your clients’ peace of mind? Or even understanding what peace of mind really means for your clients?  By contrast, how much time is spent on compliance activities, busy work and redundant processing? While most insurance professionals are highly service oriented, most insurance activities are not.

Developing client intimacy and institutionalizing that knowledge into daily practices is critical. This is because agents and brokers already have the trusted advisor relationships that software companies and device manufacturers will struggle to attain.

This is the key asset to protect and enhance. 


You might think the first thing to do after reading this is to invest in new online systems, portals and user experience consultants. This is secondary. The first thing to do is get your operational house in order: Look internally at your service operations and understand how aligned your business processes are to your business strategy. This may seem counter-intuitive: To improve customer intimacy and deliver peace of mind, focus first on internal operations. 

Streamlining operations is the foundation of the most successful innovation programs. Simplifying operational complexity increases transparency and strategic focus. Reducing process variability eliminates waste and inefficiency. Most agency leaders don’t realize how much time producers and service teams spend on redundant and non-core activities. This is time that can be reinvested in deepening an understanding of client preferences, purchase habits and risk profiles that will ultimately affect loyalty and retention and enhance the new business value proposition.  

Creating internal capacity is not rocket science. It is achieved through operational best practices like increasing strategic visibility so employees can better align priorities, segment accounts, standardize ad hoc tasks, source the right work to the right person and improve the operational IQ of your people. Operational analytics additionally provide insights into which accounts or lines of business are profitable, which are dilutive and what to do where there are gaps.

Where once employees were under pressure to meet client needs, compete on price, put out fires and clean up backlogs, new, internal capacity will be discovered and directed to writing more profitable accounts, improving customer intimacy and innovating around digital channels and data-driven, risk-prevention business models. 

While the threats of disruption from Insurance Tech are real, the outcome is no foregone conclusion. The agency of today will suffer decline, but the agency of tomorrow is within our grasp—not by saddling an already complex operational environment with more sales people and systems, but by building an organization on a foundation of operational and process excellence. 

In doing so, the agents and brokers of tomorrow will assert their relevance and long-term competitiveness by delivering their clients the promise of peace of mind more expansively than ever before.

What does peace of mind mean to your organization?

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