Please set up your API key!

The Rough Notes Company Inc.



November 27
08:53 2018

Agency Financial Management

By Rick Dennen


Determine where new technological advances make sense and understand the financial impact of adopting them

In my article in the October issue of Rough Notes, I wrote about intermediaries being ready for the Digital Disruption—when new digital technologies dramatically impact the business models and value propositions of existing goods and services and how the P-C industry is experiencing disruption at almost every level. If you have not already started to integrate new technology into your business, now is the time to determine where new advances make sense, how they will change the way you do business, the financial impact of adopting the new technology, and the infrastructure to support it.

Before diving in, let’s take a look at what experts predict will make the biggest impacts in the years ahead due to advances such as Artificial Intelligence (AI), a linchpin of digital disruption. According to a special report from The Economist, AI raises three major issues for businesses. One is the effect on jobs—the McKinsey Global Institute estimates that, by 2030, up to 375 million people, or 14% of the global workforce, could have their jobs automated away. While you may or may not experience a reduction in staff, the skill sets needed to operate your business will definitely change.

[T]he McKinsey Global Institute estimates that, by 2030, up to 375 million people, or 14% of the global workforce, could have their jobs automated away.

Privacy protection, another focus, also will be scrutinized more heavily. Privacy violations are inherent in a world where more and more data is collected digitally. This should be top of mind as you assess the ways you collect, store, use and protect client data. Don’t forget, privacy protection is required by your carriers as well as applicable federal and state laws.

Finally, monopolies outside of the tech sector will become more commonplace. For early adopters to tech, think Amazon® and its control of approximately 40% of online consumer markets in the United States. (Remember when Amazon only sold books?) As for keeping competitive, consider how working just 5% more efficiently could reduce costs to your clients and potential clients and allow you to capture significant market share going forward.

While change of this magnitude is impossible to predict, as AI constantly evolves, it is inevitable. According to a 2016 white paper from the Deloitte Center for Financial Services, “The bottom line is that insurers cannot afford to wait on the sidelines as disruptive trends in technology, the economy, and society threaten to negate the orthodoxies under which the industry has operated.”

So while your business may not be quite there digitally, you probably have a pretty good idea of where all of this might be headed—enough so that you can begin to plan strategically so you do not lose your competitive edge when facing proactive and innovative competitors, or better yet, so you can lead the pack.

As you make your way into the new normal, I would suggest assessing what disruptions are impacting you now or have the potential to impact you in the near future. As we covered in the last article, the P-C industry is feeling disruption at almost every level—from providers, products and processes to pricing and completely new insurance models.

So, what do these changes mean for your business as you strategically and financially plan, and where do you start? As you research the available options and the cost of each, look first for solutions that will increase productivity and enhance the client experience.

With regard to tech, there are many options to keep your business in the forefront. All-in-one P-C solutions that utilize AI or APIs (application programming interfaces) already exist for MGAs, program administrators, wholesalers, carriers and retailers. These offer a variety of features, including the administration of policies and claims, built-in rating, self-service portals, document management, billing, accounting, customer apps, CRM and more. (Visit websites like or and search for insurance to sample what is available.) Evaluate not only what is best for your business in terms of increased productivity and enhanced client experience, but assess how the new system will impact your bottom line.

Think beyond the cost of the software itself. What will the financial impact be to train your staff and make needed upgrades to your equipment? Also, keep in mind that initially, efficiency will likely be impacted while your team gets used to the new ways of doing business. Take this into consideration when strategically forecasting and planning and bear in mind the price you will pay should you choose to do nothing.

With more sophisticated software comes access to more information and the benefit of increased capacity for in-depth analytics. However, you will want to factor in the cost of protecting client data as well as your business from cyber threats. From ransomware that can hold you and your systems hostage by bringing your operations to a standstill to parties accessing your system to steal data without anyone’s knowledge, protecting your business and your clients’ personal data should be top of mind. Strongly consider partnering with a consultant that can perform an audit and assess your company’s risk profile and systems vulnerability. Then put a plan in place to protect your clients and your business.

Next evaluate your current marketing activities and strategies. In today’s business environment, marketing must go beyond a static company website. Can current and potential clients interact with your website through forms, premium calculators, quote requests, chat and more? Do you utilize a mobile app to grow and maintain your current business? What about a more advanced all-in-one platform integrating e-newsletters, social media, appointment scheduling and more? Assess the cost of doing business as you go to market differently. In some ways, there could be cost savings as you move from print to digital. However, you may need to work with an advertising agency to solidify your brand and get the biggest impact from your marketing efforts. Better yet, add marketing talent to your team.

Which brings us to your team. As you assess the cost of moving into the digital age, what will this mean in terms of staffing? As I mentioned previously, getting everyone up to speed with the new technology likely will entail training and the costs associated with it. Hiring someone with a background in marketing is a great way to bring in fresh, younger talent that is well versed in all things digital. You may want to select someone with not only the ability to maneuver through the digital landscape but to also help your current staff to do the same.

Information technology is another area where you may need additional resources. While you may not need a full-time IT person, you will want to find a reliable source to help you bring your business up to speed and be available for hiccups and upgrades down the road.

Once you have assessed the available options and the associated costs of the digital disruption, it is time to determine if you have the funds on hand to make the necessary changes. If funds are needed, rather than turning to a traditional lender that requires tangible assets such as inventory, equipment and real estate, consider a specialty lender. Specialty lenders, like Oak Street Funding, are accustomed to working within the confines of the insurance industry and can use intangible assets, like future cash flows, to provide an injection of working capital to smooth the way as your business takes on the digital disruption. n

The author

Rick Dennen is president and CEO of Oak Street Funding, which provides commission-based lending for insurance businesses that need capital to buy, build or sell. Dennen is a licensed agent in the state of Indiana for Life, Accident & Health products and a licensed Certified Public Accountant in the state of Indiana. In addition, he holds an MBA in finance and is an instructor of venture capital and entrepreneurial finance at the Indiana University Kelley School of Business. He can be reached at

Related Articles






Philadelphia Let's Talk - Click Here

Spread The Word & Share This Page

Trending Tweets