Are humans necessary to deliver a policy from the insurer to the client?
I started out in the insurance industry as an agent almost 40 years ago. It was 1977 and there were no computers, cell phones or fax machines. No spell-check, only a Webster dictionary next to my electric typewriter, plus an ample (thankfully) supply of Wite-Out. It was the year that Steve Jobs and Steve Wozniak launched their first successful personal computer, which they called Apple II. Little did we know how that little box of electronics would revolutionize our lives in more ways than we could ever imagine. Today the computing clock speed of an iPhone is 1,300 times faster than the Apple II, and we can wear an iWatch that puts a computer on our wrist. If I had invested $10,000 in Apple in 1977, it would be worth over $3,000,000 today. On the other hand, if I had invested in Wang Computers, I would have lost my $10,000 investment.
Back then all documents were kept in paper files, and if someone had the file on his or her desk, you had to look for it. It was a big waste of time and took up lots of space. There was no scanning or downloading, just lots of monotonous filing. If a client needed something quickly you got in your car to deliver it or sent it by Express Mail. The pace of business was much slower then, and sometimes I long for those days, especially when I am gone for an hour and have 20 new emails when I return.
But I quit longing for the “good old days” whenever I put an address in my smartphone, or listen to turn-by-turn directions on my GPS instead of looking at a map. If you think texting is a distraction while driving (which it is), try driving while holding a huge Rand McNally atlas in front of you. One thing is for sure: Business has changed and will continue to evolve. What does that mean for the way the insurance industry is currently structured?
I like to compare the insurance delivery system to that of a factory. Underwriting information is like raw data delivered to the insurance company “factory” by agents on standardized forms we call ACORD. Insurance rates are calculated in the factory based on the information, and a quote is delivered back to the agent. The agent then delivers the quote to the customer, and if they agree, the agent communicates this to the company factory and a policy is produced. For the most part, this has worked for many years, but this method also has led to the commoditization of insurance and continues to frustrate agents, brokers and carriers who spend most of their time bidding insurance instead of helping their clients manage risk.
Some might argue that the insurance industry delivery system is outdated. Technology won’t slow down to let it catch up. Self-driving cars, drones, availability of big data, and companies like Uber and Airbnb will keep coming, causing disruption and possible coverage gaps. The rising cost of insurance will increase the demand for change or an alternative to the current system.
Are humans necessary to deliver a policy from the insurer to the client? Could insurance be purchased from a kiosk at the mall or an ATM at the bank? I believe people are an important component, but there are still many threats to our business model if we don’t pay attention. For example, Canada has national healthcare and work comp systems, so agents are not involved in these lines of insurance. Could that happen in the United States? What would happen if the government rolled auto insurance protection into a gasoline tax?
One of the ways insurers are leveraging technology is by using advanced tools like predictive modeling to underwrite and price business. Modelers use big data sets to predict client behaviors that lead to losses and improve their odds of making an underwriting profit. Modeling doesn’t change the raw material, but it gives the insurance company a more efficient way of sorting through it. As these tools evolve, it creates a double-edged sword: Underwriters will become more efficient, but we will need fewer of them. Having fewer underwriters may be a welcome solution to insurers because according to a recent report by the consulting firm PricewaterhouseCoopers, the insurance industry is acing a looming crisis—a rapidly aging workforce. According to the U.S. Bureau of Labor Statistics, the number of insurance professionals 55 years and older has increased 74% in the last decade. By 2018 a quarter of insurance industry employees will be within five to 10 years of retirement. As they retire, this aging workforce will put increasing pressure on insurers to do more with fewer people.
So where does that leave the agency delivery system? If agents are just delivery people bringing raw data to insurers and delivering quotes, they could easily be out of a job. Get consumers comfortable filling in computer-generated forms, use an automated predictive model to underwrite and price the coverage, deliver the policy by email, let consumers pay by credit card, and you’re out of a job. Some insurers may resist this development and declare their commitment to the agent delivery system, but that won’t stop GEICO or Progressive from carving away at insurers’ workforces, freeing up money to create more fun commercials with, in GEICO’s case, an animated spokes-gecko they don’t have to pay.
One way to make sure a computer or direct delivery model can’t replace you as an agent is by increasing your value to your customer and to your carriers. You do this by helping customers change the raw data being delivered to the insurance company factory and going beyond focusing just on insurance selling and spend more time identifying, analyzing and controlling risk. Embrace technology that allows greater access to information, improves productivity and enhances communication. Use the time you save to help your customers keep their employees healthy and safe and protect their assets.
We don’t want to end up like Kodak, Blockbuster or Borders: companies that were unable or unwilling to adjust to changes in their marketplace. Don’t let this happen to you.
Randy Boss is a Certified Risk Architect at Ottawa Kent in Jenison, MI. As a Risk Architect, he designs, builds and implements risk management and insurance plans for middle market companies in the areas of human resources, property/casualty & benefits. He has 39 years’ experience and has been at Ottawa Kent for 34 years. He is a lead instructor for the Institute of Benefit & Wellness Advisors, training agents how to bring risk management to benefits and cofounder of OSHAlogs.com, an OSHA compliance and injury management platform. Randy can be reached at email@example.com.