Eventually, the connection between insurance carriers and the independent agents that sell their products will become simpler, but until the two sides agree on what’s best for each of them—individually and collectively—there remains a level of complexity in distribution management, according to Deb Smallwood, founder of Strategy meets Action (SMA). SMA recently conducted a survey of insurers and agents on distribution management.
“Insurers are offering portals, comparative raters, upload to agency management systems, email and PDF,” she says. “Depending on the line of business and the sophistication of the agent, some insurers allow agents to key data into their policy administration system and then upload it. They either upload to a comparative rater for personal lines or small commercial, or upload in real time to the carriers’ rating systems.”
The technology platform puts a strain on relationships between carriers and agents because of what Smallwood sees as conflicting priorities.
“When an insurer deals with many agents and brokers, they care about profitability, their combined ratio, underwriting profit, and underwriting guidelines,” she says. “When you flip over to the agent, there is just one of them and they deal with many insurers. Insurers are looking at agents with many different portals, but they want just one system.”
The one-to-many relationship of carrier to agents causes conflicts for the agents because they are focused on top-line growth, getting revenue out the door, and renewals, according to Smallwood. For the carriers, though, much of the automation starts with new business and doesn’t even focus on renewals.
“After digging into this for the last year or so it’s easy to see distribution channel in insurance is extremely complex,” she says. “The conflicting objectives almost become an anchor in holding the industry back. Insurers are pushing technology and it’s causing business to be more complex.”
Insurers need to identify the capabilities they need to provide and understand the agents and brokers, explains Smallwood. Insurers also need to recognize the maturity levels of their agents and the agency management systems, how the agents prefer to exchange information, and give them the tools, she adds.
“The drivers for growth are the agents and brokers and they need to have ease of doing business,” says Smallwood. “That’s a phrase we’ve been talking about for many years. Agents will push business to insurers that have ease of doing business. If carriers make it easy for agents the agents will send good business, if carriers make it difficult the agents will send not-so-good business. Agents know what business is profitable.”
Smallwood believes about 80 percent of personal lines business is uploaded directly into policy systems by agencies, but points out there still remains a great deal of re-keying of information into carrier portals.
“When insurers put portals out there it’s usually for data capture,” says Smallwood. “The minute you get an MGA in the middle of it with multiple systems, it becomes real complex.”
More carriers work through portals today, points out Smallwood, either building their own or buying a packaged solution. Many mid-tier insurers, she adds, are leveraging SharePoint or web technology to be able to build portals.
“I think the industry is immature in terms of portal technology,” says Smallwood. “When I interview insurers and talk about portals, they immediately reply that it’s for the agent or broker to use to key in information for a quote.”
Smallwood then asks whether the carrier has considered using the portal as a platform.
“The analogy I use is the iPhone with lots of apps sitting there, one of which could be data capture,” she says. “On a portal [carriers] should have what their risk appetite is, give the agents a view of their book of business and portfolio, loss ratios of their book of business, forms, and other applications sitting out there. Unfortunately, most insurers just think of the portal for data capture for a quote.”
Smallwood believes portals remain immature because carriers are not building a platform to do real-time upload rather than just connecting the upload to the policy administration or rating system.
“Why not have everything come through your portal?” asks Smallwood. “Why not let it be the hub that sits in front of your rating and quoting systems? Everything would come through that framework. Then, if the agents needed to do real time upload and add additional information that also could be done through the portal. I like to think of the portal as something bigger than data capture.”
The future capabilities for portals including social media, book performance, FNOL, bill payments, licensing, commissions, endorsements, according to Smallwood. “You can see when you look at portals today, it’s about inquiry and the ability to quote—simple stuff,” she says. “When you look at the future it means adding more functions.”