With the substantial increase in automation over the past 30 years, the one thing that has not gone down for most companies is the expense ratio. Efficiency (in terms of expense ratio) has not improved with increased automation.
McKinsey & Co. – the king of whacking jobs. Having worked at Aon, after Greg Case (a minion of McKinsey & Co.) took over, Aon began to immediately cut jobs and outsource all of the “non-client facing” personnel. It didn’t turn out as well as they planned.
As companies merge and get sold, the acquiring company tends to whack jobs from the acquired company. That is where I see the most change in the industry.
I am sure Agent is one of the brokers who sends disastrously formatted Excel files and scans PDFs instead of editing them so they end up almost unusable. Assuming he even needs to use either of those technologies in the tiny backwater market he has to be working in.
Having been in this business a long time, I can’t agree with a single sentence in that final paragraph. The vision of a company that automates all its revenue generation (and the CEO!) but leaves the actuarial department in the ’70’s with lead pencils and slide rules is pretty hilarious.
Actuary, are you into those Predictive Modeling algorithms yet? How about Price Optimization that some carriers are practicing?
Some on this blog think agents using AMS Vertafore 360 with PL Rater are operating in the dark ages. I wonder how Veratfore dominates the operating systems used in this country. Must be smoke and mirrors, right?
For the love of God, please stop displaying your ignorance of insurance pricing. The companies whose policies you are selling are using predictive modeling to determine their rates.
Yeah, but what about his rating software? Ha ha, he is such an unhinged dolt. I don’t think he even has a clue what predictive modeling actually is, even though he loves to whine about it.
Predictive modeling is a principle of insurance; while not always referred to as such, the basis of insurance pricing is predicting what could happened based on what has happened. This is not a new theory or concept; it’s just been put into buzz word phraseology. It’s all predictive modeling.
One the one hand, the general point that jobs will be consolidated through this next wave of new technology adoption is correct, because it is a statement of the obvious, consistent with past history/experience in any & all operation sectors (not just insurance)when new technologies are adopted at a significant level across an industry’s spectrum as is beginning and will continue to be the case in insurance for a while. Further, this has been and is ALREADY been happening in the business of insurance, primarily because (i.) more people were leaving than could be found for open positions, and (ii.) new technologies are allowing employees to handle more business and their transactions than before. So any business owner still operating knows that you consolidate (in various ways). Every retail independent insurance agency knows and is doing just this, as they have done so in the past. So what’s new???? The idea that 60% of “insurance sales agents” could be replaced by technology raises several questions. WHAT DOES McKinsey mean by “insurance sales agents?” What do they believe these people do? Without them, who exactly does their “sales” work in their absence? You know, Arthur Anderson (the firm that is no more) did a study decades ago advising that banks could sell insurance at 20% less than an agent because AA “thought” that the duties & activities of an entire independent insurance agency operation, for which they are paid their commission percentages, could all be done by a single bank teller who was paid a great deal less. So, how has and is that prediction working out?!?!?!?! Another question that must always be asked when moving to more expanded and dynamic technology is, just because an activity or group of activities “could be” done electronically – should they? A federal regulator was advising me how much better it was to purchase a specific type of insurance online, direct as a consumer. He went through the process, options, terms he had to look up their meaning, the additional information that he needed to collect, etc. and WOW he had a policy. I asked, how much did you save and how much time did the entire process take? He said it was a good process, because it held your “application” in the system, so you could back to it as you collected your information, looked up the definitions to understand better, etc, and it only took 3-days! GREAT! Now think about ALL the insurance that you have to purchase. Do you really want your self-help opportunity to be 3-days a piece? I don;t know about you, but I have a family, life and career to which I must attend!
Last, I’d ask McKinsey through new automation adoptions how many consultants will we be able to replace???????
Great points. I think the type of selling agents they talk about must be standard auto, home, etc. insurance, and even basic business insurance for small businesses. I know many property companies are going to underwriters who basically verify online submissions for basic buildings and vacant land. In the past that would have been raters, assistants, etc. A lot of companies still have typists, mail rooms, etc. Most of this can be automated enough that a single person or a computer could handle most of it.
I actually think 25% is an understatement in the medium-term. Getting nepotism out of the industry and replacing it with qualified people would chop something like 5-10% in some of the places I’ve seen!
You are right Excite. They do waste a lot of dollars on consultants in their quest to save payroll expense. I have seen a lot of consultants reports, particularly with inspections and audit and many are not worth the paper they are printed on.
You know Louie, embiggens is a perfectly cromulent word too! Glad you and I see eye-to-eye with Jebediah :) Now won’t somebody PLEASE think of the children?!
I’m all for automating processes to help make things easier for employees. But automation that is so efficient that it enables employers to reduce staff only works when you’re dealing with very specific, cookie cutter-type tasks and risks. Any deviation or complexity in the risk makes the process break down, and the remaining employees end up working outside of the ‘revolutionary’ system.
I seen the application process evolve over 40+ years. The only thing technology has improved is the expectation of a quick turnaround. To this today, submissions, that were once paper, come in over the net and guess what, lot’s of questions are needed just to establish basic underwriting information. Why is this? Because I really believe folks in the agents office are working from the insured’s current policy or just asking the insured a few questions. The quest seems to be get to the end to the QUOTE! Underwriting matters not. Get rid of the façade. Write the business, pay the losses and raise the rates.
I agree somewhat, but even though agents like to get a quick turnaround to quote something, a good agent asks the right questions, evaluates the risk, picks apart the existing coverage and tries to do better than the incumbent. I can’t tell you how many times I have found serious mistakes, misclassifications on insureds policies that were costing them money or leaving them vulnerable to possible claims. Also, companies can also improve their Supplemental Questionaires which are often repetitive or ask nonsense questions. Half the questions asked are N/A if they don’t apply to the prospect.
High school kids can help sell insurance and do processing input functions but I would not put an inexperienced one in charge, of an agency, for long; no matter how automated you need to know what you are doing: “garbage in garbage out,” and all that. I guess my point is companies may overpay on the other side of the equation (claims or E and O) if they shortchange the input side too much.
Correct knowall. Putting inexperience in charge is like playing Russian Roulette in this business. I don’t think an agent could afford their E&O on the next renewal with all the claims that are sure to arise.
And the agency-side will have to hire the 25% of insurance company employees as the insurers stop rating functions and delegate the task to agencies. This has been going on now for 15 years. Why agencies beg and plead for rating capability has baffled me…..you see where it’s got us……we’ve got skilled insurance producers and account managers relegated to glorified data-entry jobs. What a shame we’ve let the insurers dump on us as they laugh at their increased profitability.
I agree Ken. Most decent sized companies all have online applications for agents to input info. It is pretty much a cookie cutter approach. If they risk falls into the box on the appetite guide, a quote will be issued. If it doesn’t, the agent has to fill out a Supplemental of some kind and an underwriter has to look at it. I am talking about Commercial. In Personal Lines, we have PL Rater which the agent uses to do quotes. There is very little underwriting with Personal Lines and practically no exceptions made if pricing is an issue.
“Actuaries are among the safest”. This cannot be true. Judgement is not a unique selling point for actuaries, because its efficacy has not been tested. I have studied actuarial exams and the methods taught are classical not state of the art.
With the substantial increase in automation over the past 30 years, the one thing that has not gone down for most companies is the expense ratio. Efficiency (in terms of expense ratio) has not improved with increased automation.
McKinsey & Co. – the king of whacking jobs. Having worked at Aon, after Greg Case (a minion of McKinsey & Co.) took over, Aon began to immediately cut jobs and outsource all of the “non-client facing” personnel. It didn’t turn out as well as they planned.
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And downsizing due to a merger relates to the article talking about automation in the insurance industry how?
Because Obama.
I am sure Agent is one of the brokers who sends disastrously formatted Excel files and scans PDFs instead of editing them so they end up almost unusable. Assuming he even needs to use either of those technologies in the tiny backwater market he has to be working in.
Sometimes companies trip over dollars looking for pennies.
That robot face thing is creepy.
There’s something very creepy about that picture.
Having been in this business a long time, I can’t agree with a single sentence in that final paragraph. The vision of a company that automates all its revenue generation (and the CEO!) but leaves the actuarial department in the ’70’s with lead pencils and slide rules is pretty hilarious.
I wonder what Company’s CEO that is a picture of?
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Agent,
For the love of God, please stop displaying your ignorance of insurance pricing. The companies whose policies you are selling are using predictive modeling to determine their rates.
Yeah, but what about his rating software? Ha ha, he is such an unhinged dolt. I don’t think he even has a clue what predictive modeling actually is, even though he loves to whine about it.
Predictive modeling is a principle of insurance; while not always referred to as such, the basis of insurance pricing is predicting what could happened based on what has happened. This is not a new theory or concept; it’s just been put into buzz word phraseology. It’s all predictive modeling.
One the one hand, the general point that jobs will be consolidated through this next wave of new technology adoption is correct, because it is a statement of the obvious, consistent with past history/experience in any & all operation sectors (not just insurance)when new technologies are adopted at a significant level across an industry’s spectrum as is beginning and will continue to be the case in insurance for a while. Further, this has been and is ALREADY been happening in the business of insurance, primarily because (i.) more people were leaving than could be found for open positions, and (ii.) new technologies are allowing employees to handle more business and their transactions than before. So any business owner still operating knows that you consolidate (in various ways). Every retail independent insurance agency knows and is doing just this, as they have done so in the past. So what’s new???? The idea that 60% of “insurance sales agents” could be replaced by technology raises several questions. WHAT DOES McKinsey mean by “insurance sales agents?” What do they believe these people do? Without them, who exactly does their “sales” work in their absence? You know, Arthur Anderson (the firm that is no more) did a study decades ago advising that banks could sell insurance at 20% less than an agent because AA “thought” that the duties & activities of an entire independent insurance agency operation, for which they are paid their commission percentages, could all be done by a single bank teller who was paid a great deal less. So, how has and is that prediction working out?!?!?!?! Another question that must always be asked when moving to more expanded and dynamic technology is, just because an activity or group of activities “could be” done electronically – should they? A federal regulator was advising me how much better it was to purchase a specific type of insurance online, direct as a consumer. He went through the process, options, terms he had to look up their meaning, the additional information that he needed to collect, etc. and WOW he had a policy. I asked, how much did you save and how much time did the entire process take? He said it was a good process, because it held your “application” in the system, so you could back to it as you collected your information, looked up the definitions to understand better, etc, and it only took 3-days! GREAT! Now think about ALL the insurance that you have to purchase. Do you really want your self-help opportunity to be 3-days a piece? I don;t know about you, but I have a family, life and career to which I must attend!
Last, I’d ask McKinsey through new automation adoptions how many consultants will we be able to replace???????
Great points. I think the type of selling agents they talk about must be standard auto, home, etc. insurance, and even basic business insurance for small businesses. I know many property companies are going to underwriters who basically verify online submissions for basic buildings and vacant land. In the past that would have been raters, assistants, etc. A lot of companies still have typists, mail rooms, etc. Most of this can be automated enough that a single person or a computer could handle most of it.
I actually think 25% is an understatement in the medium-term. Getting nepotism out of the industry and replacing it with qualified people would chop something like 5-10% in some of the places I’ve seen!
You would be the first to go on any downsizing since you are a Cancer on the organization.
Carriers should worry more about wasting countless dollars on worthless consultants. IMHO.
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Agent, with all due respect, frankly you are not competent to read and analyze a report like this, much less comment on it’s worth.
With no respect at all, you aren’t competent to do anything in this industry or comment on anything.
Carriers should also be thinking about getting rid of worthless employees who blog all day instead of doing the job they were hired to do.
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Breaking News Headline: Technology Increases Productivity
I’m always suspicious of statistics like “up to 25%”. That essentially means it could be negative to 25%.
Reminds me of this Simpson’s exchange:
Newspaper editor: …And to protect Mother Earth, each copy contains a certain percentage of recycled paper.
Lisa: And what percent is that?
Newspaper editor: Zero.
(Lisa frowns)
Newspaper editor: Zero’s a percent!
How perfectly cromulent of you, Rosenblatt!
You know Louie, embiggens is a perfectly cromulent word too! Glad you and I see eye-to-eye with Jebediah :) Now won’t somebody PLEASE think of the children?!
Or homer,
“Oh people can come up with statistics to prove anything Kent. Forfty percent of all people know that.”
I’m all for automating processes to help make things easier for employees. But automation that is so efficient that it enables employers to reduce staff only works when you’re dealing with very specific, cookie cutter-type tasks and risks. Any deviation or complexity in the risk makes the process break down, and the remaining employees end up working outside of the ‘revolutionary’ system.
I seen the application process evolve over 40+ years. The only thing technology has improved is the expectation of a quick turnaround. To this today, submissions, that were once paper, come in over the net and guess what, lot’s of questions are needed just to establish basic underwriting information. Why is this? Because I really believe folks in the agents office are working from the insured’s current policy or just asking the insured a few questions. The quest seems to be get to the end to the QUOTE! Underwriting matters not. Get rid of the façade. Write the business, pay the losses and raise the rates.
I agree somewhat, but even though agents like to get a quick turnaround to quote something, a good agent asks the right questions, evaluates the risk, picks apart the existing coverage and tries to do better than the incumbent. I can’t tell you how many times I have found serious mistakes, misclassifications on insureds policies that were costing them money or leaving them vulnerable to possible claims. Also, companies can also improve their Supplemental Questionaires which are often repetitive or ask nonsense questions. Half the questions asked are N/A if they don’t apply to the prospect.
High school kids can help sell insurance and do processing input functions but I would not put an inexperienced one in charge, of an agency, for long; no matter how automated you need to know what you are doing: “garbage in garbage out,” and all that. I guess my point is companies may overpay on the other side of the equation (claims or E and O) if they shortchange the input side too much.
Correct knowall. Putting inexperience in charge is like playing Russian Roulette in this business. I don’t think an agent could afford their E&O on the next renewal with all the claims that are sure to arise.
And the agency-side will have to hire the 25% of insurance company employees as the insurers stop rating functions and delegate the task to agencies. This has been going on now for 15 years. Why agencies beg and plead for rating capability has baffled me…..you see where it’s got us……we’ve got skilled insurance producers and account managers relegated to glorified data-entry jobs. What a shame we’ve let the insurers dump on us as they laugh at their increased profitability.
I agree Ken. Most decent sized companies all have online applications for agents to input info. It is pretty much a cookie cutter approach. If they risk falls into the box on the appetite guide, a quote will be issued. If it doesn’t, the agent has to fill out a Supplemental of some kind and an underwriter has to look at it. I am talking about Commercial. In Personal Lines, we have PL Rater which the agent uses to do quotes. There is very little underwriting with Personal Lines and practically no exceptions made if pricing is an issue.
“Actuaries are among the safest”. This cannot be true. Judgement is not a unique selling point for actuaries, because its efficacy has not been tested. I have studied actuarial exams and the methods taught are classical not state of the art.