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The Rough Notes Company Inc.



October 04
07:01 2018

Agency Financial Management


How MGAs, MGUs, program administrators and wholesalers can get—and stay—in the game

Digital disruption is a hot topic in the news—as well it should be. When new digital technologies dramatically impact the business models and value propositions of existing goods and services—think taxi service, travel agents and brick-and-mortar retail establishments—it is time for businesses to sit up, take notice, and ask the question: “Is my industry next?”

According to research reported on earlier this year by Accenture, a global management consulting and professional services firm, 93% of chief strategy officers (regardless of industry) agreed that they likely will be disrupted within five years, but only 20% feel highly prepared to address it.

From naming their own price to picking only those policy components they desire, customer demand for personalized coverage will only increase moving forward.

The retail insurance business—an industry that has seen little change over decades if not centuries—is already experiencing digital disruption on a number of fronts. These digital innovations, often referred to as “insurtech,” include smartphone apps, online policy handling, claim acceleration tools and more.

Where is the P-C industry feeling disruption? At almost every level—from providers, products and processes to pricing and completely new insurance models.

New providers include both first-time entrants like Lemonade—“Instant everything. Killer prices. Big heart.” or Canada’s besure™—“Protecting ANYTHING that matters.” to large, established companies like Amazon that have the means and the cutting-edge technology to provide customers

with the one-of-a-kind buying experience they have grown accustomed to receiving. Beyond being agile and scalable, these companies are not weighed down by legacy systems and high operating costs.

Emerging products consist of those that are entirely new to the marketplace, such as coverage for self-driving cars and cybersecurity, which pose risk-modeling challenges because there is little or no historical data, and those that focus on single-item coverage or a specific niche, unlike more traditional policies.

Perhaps the biggest disruption or evolution in the traditional approach to obtaining insurance is the amount of time the process takes—or doesn’t take. The once-common routine of a one-on-one meeting followed by completing and submitting an application to underwriting and waiting to receive a quote is quickly being replaced with “insta-quotes” from a provider that is available 24/7 and armed with an automated insurance agent or chatbot. Claim processing time also is decreasing, while improved customer interaction is being demanded.

With new technology we see pricing models changing. From naming their own price to picking only those policy components they desire, customer demand for personalized coverage will only increase moving forward.

Also disrupting is the Peer-to-Peer (P2P) insurance model. This model allows individuals to self-organize and pool their premiums for mutual interests to insure against a risk. Lemonade, for example, is a property and casualty insurance company that uses cutting-edge technology to simplify the process from end to end, all while creating a more transparent insurance experience. Their website——goes into detail about where the buyer’s premiums go and how their business model works.

How technology can transform insurance businesses

What does all this mean for insurance businesses like MGAs, MGUs and wholesalers? While more specialized than retail agencies, these businesses will soon feel the digital disruption if they have not already. In fact, one might contend that aggregation and consolidation in the market are the first steps these entities are taking with regard to digital disruption. As MGAs, wholesalers and others make acquisitions, merge or begin succession planning, it is the perfect time to assess those legacy systems that can bog things down and to explore what cutting-edge technology is available.

How do you begin to assess what technology is out there? First you may want to examine what tools retail agents as well as other businesses within the insurance industry are already using and which of the many options might enhance your processes, free up time for your sales team and, perhaps most important, provide a quick, intuitive and seamless experience for your current and potential customers.

Let’s look at some of the options.

Chatbots play the role of general contact management. Using artificial intelligence (AI), chatbots are software programs that can communicate with humans. Unlike chatbots of the recent past, artificial intelligence allows today’s chatbots to understand the meaning of what was said or typed—including the context of specific words based on the phrases in which they appear—and to interact naturally with clients and potential clients. For example, chatbots can analyze customer needs and match them to existing or modified product offerings and then provide quotes.

There also is a wide variety of software advances using AI for insurance businesses to simplify the following functions:

  • Claims management
  • Quote management
  • Policy management and administration
  • Document management
  • Documentation software
  • Commission tracking
  • Contact and Customer Relationship Management (CRM) software

While you may be using some of these types of software, keep in mind that technologies are evolving all the time. To sample what is available, visit sites like or and search for insurance. Also consider attending a conference focused entirely on insurtech.

New products and providers

While technology can help meet customers’ expectations and can simplify making insurance solutions available for anything, anytime, anywhere, other factors are disrupting the industry.

One is new product offerings—whether that is an entirely new product, like cybersecurity, or niche coverage for a single item or category of items. Staying ahead of the curve with product offerings is essential, as is offering them with the latest technology.

Finally, new providers are entering the market—some with entirely new business models. It is important to be aware of the ways technology is supporting these new businesses. Once identified, assess whether there is any application for your business. Finally, keep your eyes open as business models can come, go and/or morph into potential opportunities for collaboration.

There is no doubt that the rapidly evolving digital age is disrupting industries around the globe and closer to home. To succeed, insurance businesses need to embrace products, services and the supporting technologies that will keep them competitive in the ever-changing marketplace.

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

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