What Isn’t Possible?
Among brokerages, data is finally starting to drive business strategy.
By combining technology with an entrepreneurial mindset, innovative brokers are harnessing the power of data, combined with technologies like artificial intelligence, to gain insights into growth opportunities across all lines of insurance and adjacent financial services.
• Acrisure has moved into asset management and real estate services
• Howden has launched capital markets capabilities and a multi-pronged insurance ecosystem
• NFP has opened a digital marketplace that breaks down traditional commercial-personal lines barriers for insurance buyers and is using embedded plays to grow distribution.
“The insights we have, and the information we have, have allowed us to spot these adjacent opportunities and are hence why we continue to invest in technology while we provide a broad-based set of solutions for our clients,” Acrisure CEO Greg Williams says. “As we explore those verticals, we’ve also discovered those adjacencies have adjacencies.”
The fintech sector itself could be competition for brokerages—and it’s gotten a solid head start.
Google and other tech behemoths are demonstrating the client value creation possible with extensive use of data analytics.
Embedded products, easier access to capital, and even adjacent industries are some of the opportunities innovative brokers are exploring.
The company is positioning itself as a fintech leader, and Williams notes that, while the insurance brokerage industry has a total addressable market of around $600 billion, that rises to $6 trillion for all of insurance and $23 trillion for financial services. “There is certainly more opportunity in terms of maximizing scale while fulfilling the needs of our clients,” Williams says.
While adjacent financial services offer potentially lucrative opportunities, the fintech sector itself could be competition for brokerages—and it’s gotten a solid head start.
“Start with the fact that fintech is about five to eight years ahead of insurtech,” InsureTech Connect co-founder Caribou Honig says in an email. “Also recognize that some fintech products—trading from companies like Robinhood or Coinbase, transaction products from neobanks like SoFi or Nubank—naturally lend themselves to higher engagement than most insurance products. When taken together, it’s much more likely we will see the winning fintechs move into insurance rather than the other way around.”
The competition goes beyond fintechs to the behemoths of technology. Just last month, Leader’s Edge reported on Google’s advancement into insurance, including initiatives in risk modeling, underwriting and data analysis. As technology companies, fintechs and others expand their reach into insurance, the ability of brokers and the insurance industry to organize and act on data will prove crucial in their efforts to stay competitive.
Building a Multi-Pronged Insurance Ecosystem
U.K.-headquartered Howden Group saw the advantages that data, analytics and digital platforms could offer in its existing business and in creating new opportunities when it launched its data and analytics arm HX (previously Hyperion X) in 2018. The goals of HX were twofold: to execute Howden’s digital transformation and to harness the power of the group’s data for insights, innovation and quality in terms of products and services for clients. The result has been multiple initiatives that create efficiencies in bringing knowledge to clients, capital to risk, and reach across the insurance value chain.
“What the world hasn’t had in the past is differentiated technology from an intermediary and proprietary, near real-time data that can be used consistently to make better decisions,” says David Flandro, head of analytics at HX. “We wanted to provide that because we knew it would help our clients and differentiate us as an intermediary.”
In December 2020, the firm launched Howden Capital Markets, which offers M&A advisory services, raises capital for insurance clients, and helps them offset low interest rates and securitize cover. The move into capital markets, Flandro says, was a natural progression as Howden builds its treaty reinsurance business while offering clients a wider range of solutions. “Reinsurance in particular is actually a form of contingent capital,” Flandro says. “If you are a broker, you want to be able to offer all forms of capital to your clients.”
Quickly demonstrating its intentions with these new capabilities, in January 2021 Howden Group announced its first underwriting capital investment—$84 million in support of Tamesis, the reinsurance division of Howden’s DUAL Group, the world’s largest international MGA. The capital was provided by Howden Group and a third-party investor.
Howden Group CEO David Howden, in a statement about the investment, said: “The transaction represents what we can now do for our clients when we harness together deep expertise from across the Group—in this instance, Howden Reinsurance, Howden Capital Markets, Tamesis, and DUAL—with the strength of our balance sheet.”
Commenting on the investment, Artemis noted: “Howden, in already having all the pieces to establish this type of capacity vehicle, in both insurance and reinsurance broking, plus underwriting through an MGA, as well as its recently launched Howden Capital Markets unit, is ploughing ahead with bringing new capital to market in the most efficient manner possible, raising it and putting it directly behind its underwriters.”
HX has also launched a series of data-and-technology driven initiatives in just a few years, including its Rethink digital underwriting platform, its xTrade Digital Marketplace, and its NOVA business intelligence platform, all of which aim to bring more value and efficiency to brokers, policyholders and carriers.
xTrade enables Howden’s clients, brokers and carriers to trade digitally and exchange real-time risk data via user interface or API, says xTrade managing director Paul Hillier. According to HX, the platform is used often for higher-volume, lower-premium risks that wouldn’t otherwise return a profit, and it requires minimal human intervention.
“The aim is to move beyond documents to provide a faster and more efficient data-led model for broking and underwriting all types and classes of global specialty business,” Hillier says by email. According to Hillier, xTrade logged premium throughput of $129 million for the financial year ending in September 2021, exceeding its 2021 target of $100 million.
The Rethink digital follow-form underwriting platform, launched less than two years ago, is also working to make it easier for certain risks to be placed. According to Rethink CEO Dan Prince, the platform is looking to write about $200 million of premium in 2022.
Rethink, which has access to specially created syndicates and capacity, automates the matching of appetites to risk, in what Prince calls a remastering of the traditional Lloyd’s process. Rethink’s technology extracts data from Howden systems and expiry slips, passes it through an in-house rules engine, and matches it with carrier appetites. Then it sends a quote to brokers 60 days ahead of renewals, confirming the percentage of the risk Rethink can write. Rethink has central control for Howden of access to the Ki algorithmically driven syndicate, launched by Brit in 2020. “This approach has delivered fantastic results and a real collaboration with Ki. Proactively quoting on behalf of Ki has driven great adoption and helped us deliver Ki a balanced portfolio across all lines reducing the risk of anti-selection,” says Prince, who expects more algorithmic syndicates to emerge. As they do, Rethink will digitally connect to them to deliver all available smart follow capacity in one quote to the broker. “The broker,” Prince says, “will focus their effort on negotiating the best solution for their client and not managing numerous markets for follow lines.”
As the Amazon lifestyle finally begins to penetrate insurance, many brokerages are leaning into building a better digital user experience.
Leader’s Edge conducted a client communication survey among the top 10 benefits brokerages last September. Among other results, we found most firms had built or were building a comprehensive client-facing platform as the foundational building block for their engagement plan with employers and employees going forward.
And we are seeing similar platforms being built among other brokerages.
Howden launched its Nova business intelligence platform in July 2021. Nova amalgamates unique data sets, including proprietary Howden pricing and placement information, loss trends, regulatory submissions and broader market financials. HX says the platform aims to be a user-friendly way to view the insurance market and competitive dynamics across business lines and regions, better identify market opportunities, anticipate trends, mitigate risk and make data-backed decisions.
Initiatives such as Nova help attract new clients and strengthen ties with existing ones. “It’s paying off with new business opportunities. We have clients who now work more closely with us because we have a fully integrated business intelligence platform with better data,” says David Flandro, head of analytics at HX.
For its part, NFP is helping clients gain more insight from data. In June 2021, NFP launched NFP Connect, the platform that supports its digital transformation and has been built to create a better user experience by organizing systems, aggregating data and solving problems. The platform provides NFP account teams with a more streamlined way to support clients, while enabling clients to make more powerful use of data to drive efficiencies and gain actionable insights on programs such as benefits, retirement, property and casualty, and executive benefits.
“NFP Connect creates an opportunity to provide clients with insights from across their organization through a single interactive dashboard that is personalized for them,” Rieder said in a statement accompanying the launch.
As brokers continue to work to best serve their clients, giving clients access to valuable risk and market data in a way they can easily understand is becoming an important aspect of customer service.
Michigan-headquartered Acrisure has been on a rapid growth trajectory that sent its revenues to around $3.3 billion in 2021 from $38 million in 2013. And while M&A has been a significant driver of Acrisure’s growth—the company closed 132 transactions in 2021 and has completed more than 700 partnerships to date—the company believes its technology capabilities play a key role in driving the strategy.
“Our prolific M&A is due to the combination of a better business model, an entrepreneurial culture and a very high value proposition, given our technology platform,” Williams says. “Our control of the company also makes a difference both in acquisitions and in the ability to move at a faster pace.”
Acrisure’s technology initiatives have been key to both its organic and inorganic growth. The company built a proprietary data analytics system, Acrivision, about five years ago to spot opportunities and grow the business. From there it moved on to artificial intelligence, machine learning and robotic processing, launching its Auris AI platform in 2021. That platform helps to improve client centricity and drive technology initiatives through capabilities such as propensity modeling, predictive analytics, risk assessment and risk scoring. “We’re absolutely seeing the proof points that the technology platform is working,” Williams says.
The company made what it termed a “transformational” investment in AI in July 2020 with the acquisition of the insurance practice of AI technology leader Tulco. Tulco describes itself as an industry-agnostic investor that identifies industries with static business models and takes material stakes in companies ready to scale with the adoption of leading edge and proprietary technologies. In announcing the deal, Acrisure said it enables true deployment of insurtech at scale. Soon after, Acrisure began developing tech-enabled solutions outside its core insurance services, fueled by a $3.4 billion capital raise in March of 2021.
In 2021, Acrisure launched a new asset management division and followed that with a move into the real estate services business, acquiring Tempo Title, one of the largest U.S. private title insurance and settlement service providers, which formed the basis for Acrisure Real Estate Services.
Acrisure kicked off 2022 by acquiring national MGA and wholesale broker Appalachian Underwriters in a deal that expands its technology platforms and brings a valuable data set, including claims information.
Acrisure is also expanding beyond cyber insurance into cyber security and risk management through its new Cyber Services division, which offers data recovery, ransomware response, threat detection and prevention, and other services.
Williams says the company is continuously looking for new opportunities. “We have evaluated approximately 50 verticals, and we are narrowing in on three more where it’s clear that our clients have a need. It starts with real estate, asset management and cyber security, but it’s going into many others as time goes on,” Williams says. “We’re nowhere near done as it relates to expanding into verticals. The product and service offering are just going to continue to expand and grow.”
Benefits and property and casualty brokerage NFP launched its innovation efforts at the beginning of 2018 to keep pace with the insurtech startups and emerging technologies that were changing and disrupting the insurance industry.
“What we’ve evolved to now is executing on a digital strategy,” says Mark Rieder, head of innovation at NFP. “Innovation is not about the technology. Innovation is about rethinking the way you do business, and it happens to be that the technology advancements allow us to solve for it in different, more efficient ways. Everything that we do right now is done with an eye on how it fits into our digital transformation strategy.”
NFP introduced its digital marketplace, InsurChoice, in September 2021 to provide businesses, membership organizations and strategic partners the opportunity to offer personal insurance solutions to their employees, members and customers. InsurChoice complements existing group and voluntary benefits by providing employees access to additional, individual benefits such as home, auto, renters, trip cancellation and pet insurance.
“We have taken off our insurance hat and put on the hat of the buyer, bringing products from all different areas of the insurance industry—P&C, health, life,” says Rieder, who started his own benefits brokerage business after college and later sold it to NFP.
While the industry thinks in terms of different insurance lines, those internal separations don’t really make sense to customers.
“A buyer doesn’t know the difference—they just want to be able to be covered,” Rieder says. “They want to have a nice experience. They’re in a marketplace, and they want to shop for life insurance. They should be able to do that and then toggle over and shop for auto insurance as well.”
NFP and its InsurChoice platform are very active in the embedded insurance space. The approach isn’t limited to a particular industry, per se, but succeeds where a contextual link exists between an engaged digital buyer, the product or service of interest, and a particular insurance product. “Then you have a recipe for success,” Rieder says. “We are big believers in embedded insurance. It allows a lot of the work we’re doing on digitizing our process to then be delivered through new methods of distribution.”
NFP partnered last year with Bindable, whose API technology supports digital quote-to-bind capabilities for auto, home and renters programs within the InsurChoice platform. That partnership fits in with the strategy of finding the best solutions, whether it means developing them in-house or looking outside.
“We’re not a believer in developing everything ourselves,” Rieder says. “We have a tremendous development team, but we also embrace the startup community because there are lot of innovators and thought leaders out there that are bringing products to the table that we can capitalize on.”
The company’s Innovation Lab, launched four years ago, is constantly researching and meeting with startups.
“We’ve probably sourced over 500 startups, insurtechs and brands,” Rieder says. “We don’t see that slowing down. It’s allowed us to get a better handle on our strategy and where we need to be going, because you can see what great ideas are being brought to market.”
Both new solutions and opportunities spring from better data, which leads to more insights and better business decisions, Rieder notes.
“We’re in a data-driven world,” he says. “Every other aspect of our lives is being influenced by data, the aggregation of data and the personalization of offerings. There is proof of concept all around us with shopping for clothing, groceries, videos, music—and that same kind of demand for personalization and a better user experience is leaking into our industry.
“Just look at the way Amazon, Google and other digital companies use data to drive a better user experience and better outcomes. If we don’t, as an industry and as an organization, embrace data and new technology—and really focus on the end user in the same way—then we run the risk of being disintermediated by new players entering our market that do.”
Hand in hand with the technology comes a corporate culture that supports innovation.
“We are a nimbler, more joined up and tighter, employee-owned broker, and that enables us to do things quickly,” says David Flandro, head of analytics at HX. “People who have joined us from other larger brokers are usually surprised at how quickly we can get stuff done.”
Howden’s ownership structure helps to promote that entrepreneurial culture among employees, who own 33% of the company, and strengthens its technology-driven initiatives.
“It’s a careful, iterative strategic growth process enabled by the right technology, tools and talent to be able to succeed,” Flandro says. “We’re doing it in an incredibly joined-up, non-corporate, really entrepreneurial fashion. It’s completely different from anything I’ve experienced.”
Similarly, the ownership structure acts as an advantage for Acrisure, both in promoting an entrepreneurial culture and making the rapidly growing company a more attractive partner for potential acquisitions.
“First of all, our business model is differentiated in terms of being very entrepreneurial and partnership driven,” says Acrisure CEO Greg Williams. “The business is 76% owned by people who work in the company every day.”
That ownership mindset fosters long-term commitment and a willingness to embrace change and new technology, further enhancing the value proposition for potential partners.
“I do think that is a bit of the secret to our sauce,” Williams says. “It’s that relationship, that dynamic that we have as a result of the ownership structure and the model.”