Insurance industry technology is experiencing a revolution. While insurance carriers and venture capital firms have been behind much of today’s insurtech innovation, insurance agents and brokers have also jumped into the fray, seeking to turn insurtech to their advantage even as others seek to deploy new technologies to displace them.
Agents need not fear disruption from insurtechs, or at least not all of them. While there’s a good percentage of startups looking to replace agent distribution, there’s a growing number of insurtechs looking to help the agent distribution channel, too, says Steve Anderson, long-time technology authority for agents. “It’s not quite as unbalanced as some people think it is.”
Ron Berg, Agents Council for Technology (ACT) executive director, agrees, adding that while in the past insurtechs may have been viewed as “disruptors” to the agency model that’s not the case today. “We need to drop the term disrupter because it clouds what is really available for innovation and what we can learn from and use as a distribution channel,” Berg said.
According to Berg, technology is both accelerating and merging to the benefit of agencies. He sees two categories of insurtechs: those trying to take over the independent agency segment and those trying to partner with independent agents, vendors and carriers.
There are so many new insurtech ventures it’s difficult to track and Berg and others predict continued investment in agency-focused insurtechs. “We are absolutely going to see more expansion,” Berg said.
Anderson, agrees, that the opportunities for insurtech platforms focused on the agency distribution system are plentiful — especially those focused on improving the customer experience and increasing operational efficiency. “Those to me are the two areas where I see lots of startups,” he said.
Threats to the agency channel will continue as well because some will always see agents and brokers as an unnecessary middleman. “But, frankly, we’ve heard for 25 years that the agent was dead and there hasn’t been much change,” he said.
However, agents and brokers can’t rest on their laurels, according to the veteran agency consultant, who urges them to adopt an “innovation mindset.”
“I think it’s really difficult for agents and brokers to truly innovate and their mindset is an issue,” he said. He reminds agents that while there is always a risk in action, in doing something, today there is perhaps a “greater risk in not doing something, in inaction.”
Agencies must experiment with insurtech to find the right fit, Anderson says.
First, he advises agents to be aware of what’s “out there.” They should read, look and listen to what’s going in agency technology advancements, Anderson says.
Second, agencies should understand that technology isn’t perfect and some insurtechs won’t work. “They’re going to fail, and that’s a necessary part of the process.”
Third, agents must try and then try again. It’s cheaper today than ever before to try a new technology platform, he said. “You’ve got to be willing to experiment to find the real nuggets that are going to work, and mindset is really key here. The impediment will always be, ‘We’ve never done it that way.’ That’s just not a viable answer to anything anymore.”
Small commercial lines is one area ripe for insurtech innovation and there’s no shortage of players looking to revolutionize this space. Small commercial rating has been a losing proposition for most agents and brokers. According to Anderson there have been many attempts to make small commercial rating more efficient, but the cost of obtaining a policy quote remains high and often unprofitable for agencies.
“Comparative rating in personal lines has streamlined the quoting process (making it more efficient) but we don’t have the same type of process for small commercial,” Anderson said.
Not all insurtechs are out to displace agents.
“If somebody can streamline that process, from both a sales growth (perspective) as well as an operational efficiency perspective, that would be a huge advantage.”
Not all insurtechs are out to displace agents. For every incumbent insurer investing in or partnering with online platforms that bypass agents and brokers, there is at least one committed to agents and the small business market.
In this report, Insurance Journal examined several insurtech options that are looking to help the agency channel in small commercial lines.
Touted as a single-entry market access solution for property/casualty agents, xagent announced in March the closing of a $2.1 million seed funding round in which NFP Property & Casualty Insurance Services Inc., and Insgroup, a Houston-based privately held independent broker, participated. The startup also has the financial support and backing of several other top 100 agencies.
Terry Scali, CEO, NFP’s P&C division, and Brian Kapiloff, CEO of Insgroup, helped to spearhead the seed funding, according to Bryan Baird, president and CEO of xagent.
NFP and Insgroup are among a growing number of xagent fans — more than 500 thus far, according to the firm — that have registered for the upcoming beta release of xagent’s new Universal Submission App.
Scali describes xagent as similar to personal lines rating platforms but for small commercial lines accounts.
“At the moment our account managers, account executives and producers have to go online to the insurance company rating portal, input information that’s already in our systems and generate a single quote from a single carrier,” he told Insurance Journal. “If we can multiply that effect with one single source technology and remove our people from the process of sitting in front of rating systems, then we increase our efficiency and that delivers a better relationship between us and our participating carriers.”
Insgroup was one of the first beta test users of the system and Kapiloff believes in the platform so strongly the agency was willing to invest it its development not only for its own growth but also for the benefits it will bring to the agency distribution system.
“Platforms like xagent, or another similar platform, are going be a disrupter in the distribution model,” Kapiloff said. “Small agents that don’t have the volume to attract direct appointments are going to be able to access standard markets that they did not previously have direct access to by using this platform, or other platforms like it.”
For NFP, the xgent platform stood out as a solid fit for what all agencies want to accomplish – improved efficiencies and productivity for producers.
“We’re interested in technology and other insurtech that brings to the forefront efficiencies and productivity,” Scali said. There’s no shortage of insurtech ideas in the market today centered on what some might call the “disintermediation of agents or insurance companies or both,” he said. But the xagent platform is more of a friend rather than a foe to agents.
“This is kind of an ally, if you will, to productivity for insurance agents and brokers and that’s what caught our attention,” Scali said. “In our business model our largest expense in servicing customers is the human factor so anything we can do to gain productivity, bring processes that take time through communications with insurance companies more efficient, that improves productivity levels and frees up time for our people to help customers.”
The idea for xagent (pronounced “za-agent”) began in 1997, says CEO Baird, when he first entered the insurance industry. “I just remember seeing how behind we were in technology,” he says. Baird went on to build two different wholesale brokerage firms in the senior living/assisted living segment: Lighthouse Elder Care and K&B Underwriters.
“That’s a very complex, subjective underwriting process that takes a lot of work,” Baird said. “We had to build a process to streamline business as much as possible and began to look at gathering data and building predictive modeling rates for pricing.” Baird knew he could move toward a more automated model.
As the years progressed, Baird realized: “If we can do this in a class of business as complex and subjective as nursing homes, why can’t we do this in any class? We can, literally, and so that’s where xagent began.”
Baird sold his wholesale brokerage interests and began developing xagent’s Universal Submission App about a year ago. “I just thought, there’s got to be a way to scale this (small commercial quoting) and do it much quicker by creating an automated submission process. But also building out of that your analytics of pricing and program development by partnering with agencies.”
For the past year, xagent has been getting ready to launch, “bootstrapping” with very little money put into marketing. “We’ve been out there working with our first carrier and getting ready to launch our multi-carrier platform in the next six weeks,” he said. “Those 500 agencies that have signed up are just doing that from the landing page, which is not even a full website.”
Xagent also has been transacting real business as well. “We’ve got a private beta right now where we’ve had agents working live, quoting business to make sure everything works.”
The investment by NFP and Insgroup is taking his platform to a new level and their influence over carrier partners is also helping. “We’ve actually been inviting our carriers to participate on this platform with us,” Scali said.
Kapiloff believes that xagent’s Universal Submission App will change the way that carriers distribute their products.
“Carriers are going to find that their technologies, and their way of doing business, asking agents to input the information to their systems, and asking agents to input the same information into multiple systems, sometimes three, four, five, six systems, is going to be a thing of the past,” he said. “Whether it’s our company or other companies that are trying to change the business model, in similar ways, I think the days of carriers having their own proprietary rating systems is coming to an end.”
The hurdles to connecting insurance companies and brokers are starting to come down, said NFP’s Scali. “Many of those hurdles were simply access to market barriers and a lot of those barriers are now being challenged somewhat or entirely removed,” he said.
One advantage, Baird said, is that xagent is built by agents, for agents. “We’re agents and we’ve got agents coming in and investing and helping us,” he said. Another advantage: the time is right to implement a real insurance exchange platform, he said.
“People have tried to come up with (exchange) solutions in the past,” Baird admits. But insurance carriers weren’t ready to go this direction. “That’s changing right now.”
Think of xgent like a Priceline for insurance agencies, Baird said. “They can put their data in one time and get multiple quotes back. In the platform, we’ll not only connect carriers to log-in and get the quotes back and bind the business real-time (but) our platform will also do rate, quote, bind and issue.”
Xagent is a licensed managing general underwriter or managing general agent in 50 states and will write both standard and surplus lines markets.
Bold Penguin, a start-up known for its online marketplace portal for commercial lines property/casualty agents, is also an “exchange” of sorts, says Ilya Bodner, CEO of Bold Penguin.
Bodner has been a tinkerer in the insurance industry for 15 years. He started his career as a captive insurance agent by becoming the principal and opening up two Allstate offices in central Ohio.
“Bold Penguin is an exchange where different agents, agencies, brokers, carriers, MGAs, insurtechs, whatever you call yourself, can come in and trade risks based on their desired appetite,” Bodner said.
“An example would be someone from Arthur J. Gallagher that doesn’t get paid commission on anything that’s less than $10,000 premium, can load in their customer’s application and try to match it with a small retail agent on the corner of Main and High that wants exactly that type of small business, and vice versa.”
The platform provides a variety of segmentations based on business type or size, coverage type, size of coverage, number of employees, date incorporated, past carrier, past coverage; just about anything on an Acord form, Bodner explained.
“We are trying to make it easier for the agents, specifically in commercial insurance, to go from quote to bind faster. That’s our big, hairy, audacious goal,” he said. “There’s nothing in the pre-sales or the marketing side. Nothing in the data management or agency management system or servicing, and nothing post the bind itself.”
Bold Penguin tries to digitize, virtualize, and capture everything, and then automate workflows.
“The exchange helps enable that because when you’re trading risks inside the exchange, all the information’s captured there so there’s no dual data entry. We can hook into agent portals, carrier rates, you name it, to make it a seamless transition,” according to the CEO.
Bodner says Bold Penguin is helping to solve efficiencies by finding certain niches, certain classes, certain business types, where carriers are more technologically flexible to offer the integration. But even he admits there’s more work to be done when it comes to quoting small commercial, or in Bold Penguin’s view, SME’s with 100 or fewer employees.
“I think anyone that tells you they solved it as a start-up is either lying or just completely brainwashed themselves to believing an alternative reality,” he said. “We’re certainly making great strides to solving it, but it still has a long way to go, and the industry itself has a long way to go.”
The biggest challenge for solving the years long dilemma of single entry rating is carrier integration, Bodner said. “The biggest hurdle for us has been, by far, integrating with insurance companies and the first part of the problem was them believing or taking a chance in a startup,” he said. “We struggled with that for the first year of existence, and we’ve overcome that successfully because the exchange took off.”
The challenge is age. “That is the legacy technology that exists in insurance companies,” he said. “Even the CIOs that bought into our concept, even the CEOs that have given us money to go out there and integrate with their insurance companies … Even when that happens, when people buy in, there are still mainframe software and servers that exist inside these insurance companies that are old.” Often, the people who originally wrote that code are either retired or passed away. “The people that are fixing the legacy systems are scared and I can’t blame them.”
Added to that has been the distrust people had in the beginning over insurtechs. “People weren’t sure if we were friends or foe in the beginning. Are we digitizing, are we cutting out the agent, are we virtualizing the process? We’ve been very consistent with our message that we’re here to empower the agent, the trusted advisor, to do his or her job a little faster, simpler, smoother.”
Bold Penguin has options for any size agency, he says. “If you’re a small mom-and-pop shop or a fourth generation agency, we have a login, a web portal, or an app you can go through, and use our technology. If you are an insuretech, we have an API (application programming interface) you can integrate. If you are a giant call center, a giant brokerage, we have business rules and mechanisms you can adopt and pull-in and just set up your own contract. If you are a carrier-owned internal brokerage, we have a way for you to have an enterprise level integration or an account you can set up just by going to our website.”
Ask Kodiak sees itself as a Kayak.com for commercial insurance.
Ask Kodiak’s cloud-based, software platform helps commercial and specialty property/casualty insurers market their products to independent agents, providing them with real-time carrier appetite information, eligibility requirements, and product highlights for rating, quoting and underwriting decisions.
However, according to Michael Albert, co-founder of Ask Kodiak, he’s not in the insurance business.
“The one thing that I would say about us upfront is that we are a technology company, which is to say we’re not really in the insurance business proper,” Albert said. “We are support players in building technology that folks on the distribution side and on the carrier side can all use.”
Ask Kodiak offers brokers a simple way to search for eligible carrier markets. Carriers get a digital marketing platform that gives them unique analytics about what agents and brokers are searching for and some easy-to-use tools to feature their products.
The company’s search engine capabilities are also integrated with Bold Penguin’s commercial lines agent portal. “The integration with Bold Penguin helps agents quote new business faster and gives insurers more desirable classes of risk by their own definition,” Albert said. Bold Penguin uses the Ask Kodiak API to do just that.
Agents and brokers can use the Ask Kodiak platform for free after signing up.
“We’re trying to help the agent on the commercial lines side with efficiency. The way things are traditionally, they’re getting updates on carrier products as appetite changes, or new states are rolled out, or new coverages are rolled out. They’re getting those updates by an in-person visit from a territory manager, or by an email, or we’ll just say by old-fashioned means of communication,” he said “What we’ve built is a tool really that our carriers can use as a marketing platform to more effectively get the message out about their products, what coverages they support, what they’re good at, what classes they’re in, what geographies they’re in.”
For agents, it really comes down to a “search bar,” Albert explained. “They can come in and type, ‘I’m looking for insurance for a roofing contractor,’ or ‘I’m looking for a business owners policy.’ Our search engine will then surface the matching carrier contacts,” he said. Ask Kodiak works well for small to the more complex middle market risks, he said.
Albert and his co-founder, Allan Egbert, are no strangers to insurtech. The two previously ran strategy and product at AgencyPort, an agent portal for insurance carriers.
“We know the space well enough to know that our customers, the carriers, don’t view their products as commodities and don’t always want to compete on price,” he said.
Ask Kodiak is not about delivering the cheapest, fastest quote. “It’s about giving our carrier customers a stage to say, ‘Hey, here’s why we are the best product for a lawyer in Minnesota, or a car dealer in Iowa. Not only price, but here’s the attributes that make us special in that class, or in that state.’ So the agent is really armed to sell a policy,” according to Albert.
Albert understands consumers will pressure agents on price and service. “Consumers just expect more,” he acknowledges. “Our platform, our tool, is really designed to help agents be more efficient in the sales cycle, so that they can get the business closed.”
For Ask Kodiak, as for Bold Penguin, carrier buy-in and integration have been challenging. “It’s a mean industry,” Albert said. “Insurance is not exactly a supportive, nurturing incubator for any kind of start-up, whether that start-up is supportive of the insurer, or trying to disrupt the industry. It’s a tough space to get something new going.”
But not when it comes to agents. “Agents are game. They are salespeople, and fundamentally, I see more action from them because they’re closer to the metal,” Albert said.
Another insurtech getting ready to stir-up the commercial lines market is Corvus Insurance based in Boston.
At the helm is Phil Edmundson, 30-plus year veteran and co-founder of William Gallagher Associates (acquired by Arthur J Gallagher). Edmundson was an active leader in both the Worldwide Broker Network and Council of Insurance Agents and Brokers.
Corvus is set up as a managing general underwriter, but Edmundson is quick to note that Corvus is not a traditional commercial insurance company.
Corvus leverages big data and Internet-of-Things technologies to put tools and insight into the hands of middle market brokers and their clients to help predict and prevent loss. Founded last year by Edmundson, Corvus offers an online platform called the CrowBar that gives brokers and policyholders on-demand access to policy information, claims reporting, loss prevention recommendations and business intelligence.
Corvus announced that Bain Capital Ventures invested $4 million in seed round funding in February.
Edmundson believes that Corvus helps everyone in the insurance chain: “For the underwriter who pays fewer claims, for the broker who brings powerful data to the customer and for the customer who has a way to visualize their risk.”
Corvus is operating in a “soft launch” and will begin accepting submissions for its Smart Cargo product this month. Argo Insurance will serve as the primary cargo carrier. Edmundson says different carriers will be selected for two future products to be released this year – Smart Cyber and Smart Commercial Auto.
What sets Corvus apart, according to Edmundson, is its use of big data in underwriting. For example, for its cargo product, Corvus utilizes data from sensors placed inside shipments for temperature control for decades, he said. “That kind of data gives us a really big data set and it’s through an exclusive contract with a sensor company. From that we can recognize good data and bad data, recognize anomalies and things that change over the policy year.”
The data for future products will come from other sources, he said. “In the case of our cyber product, it can come from web scans. For commercial auto, it comes from data of mobile phones of the drivers of a commercial organization. In other cases, it might come from social media or private big data sets. “But overall, it’s the same. We are taking new types of data that no one has used before to predict and prevent commercial insurance claims,” he said.
Edmundson believes his experience as retail broker provides good insight into the needs of retail insurance brokers of today and their desire to bring new, differentiated tech-enabled products to their customers.
“The policyholders see digital revolution in everything else that they work in but haven’t experienced a great digital platform or tech enable product from commercial insurance industry,” he said. Those customers are driving the industry to change as well as venture capitalists looking to invest.
“Commercial insurance is a huge market that is ripe for innovation and there’s a lot of investment interest. That stirs the pot and brings together insurance professionals with tech expertise and funds new ventures like Corvus,” Edmundson said.
He expects the industry will see many more insurtech startups focused on empowering brokers rather than those that want to displace them.
“We are not trying to disintermediate anyone,” he said. “We are trying to empower brokers because the present system moves a little too slowly in bringing tech-enabled insurance products to market.”
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