It's no secret to commercial lines insurers that the market is hyper-competitive and has been so for years. There is very little to suggest that this is going to change.

But there are other changes afoot, as evidenced by the new entrants, from the ranks of both traditional insurers and reinsurers as well as startups leveraging leading new technologies.

And these new entrants are changing the commercial lines landscape. The startup impact was especially noticeable at the InsureTech conference in Las Vegas in October.

While there are several critical success elements, few would argue that agents, brokers, and MGAs are front and center. Unlike personal lines, where direct-to-consumer channels are growing, commercial lines are still dominated by the independent agent and broker channels. And due to risk complexity and the need for advice, this is not likely to change soon.

At the InsureTech conference, Brian Duperreault, Chairman and CEO of Hamilton Insurance Group, and past CEO of Marsh and McLennan, emphatically made the point that consumers do not want agents and brokers to go away — they are critical to risk decisions.

Given the imperative of having a strong agent and broker network, commercial lines insurers need to understand what it takes to assure a successful outcome. Clearly, being easy to do business with is pivotal, and a key component of that is agency connectivity. To gain insight into what this means to commercial lines insurers and distributors, SMA conducted primary research. The recently released report "Agency-Carrier Connectivity: Commercial Lines Insurers" provides and explores the results.

Game changer

One thing was immediately clear. Ninety percent of commercial lines survey respondents indicated that by 2020 new capabilities for agency connectivity will be a game changer. No insurer can ignore a game changer, but the road to a successful business outcome is not necessarily an easy one.

Sixty-seven percent of survey respondents indicated that improving the agent experience is the number one business driver for investing in agency connectivity. Yet 4 out of the 7 barriers to investment revolve around a lack of business commitment and clarity. The good news about that result is that insurers are in direct control of these barriers!

Survey results show the majority of insurers would prefer an automated exchange of data and information with distributors, with limited phone, paper, or email pdf exchange. But legacy constraints, data mapping/inconsistencies, and a "spaghetti bowl" of processing problems stand in the way. It would be easy to believe the issue is technology, but survey results point in a different direction. In fact, they point directly at culture and focus.

Technology for connectivity is central to fostering incumbent loyalty and enticing the attention of a new generation of distributors. (Photo: iStock)

Arguably, the most troublesome problem is that culture — the idea that "We've always done it this way" — stands in the way of an automated process. Given the age-old belief that commercial lines are seen as art and not science, culture is a huge issue that must be recognized and addressed.

Acquiring new business is a serious problem in today's competitive commercial lines market. Per SMA research, the number one stumbling block to meeting production goals is quality and fit of submissions. Given this pressure, it would seem logical that investments would have been made to deal with this. But despite the fact that agency upload and download have been around for a very long time, commercial lines insurers still feel that their needs are either not being met at all or are met in only a limited measure.

Important processes such as quoting, binding, policy documents, billing, and risk management are either not being addressed through connectivity technology or there is neutral value attached to that technology. And with IT budgets stretched, technology providing only neutral value is tantamount to having poor value.

Technology for connectivity essential

More and more, agent's and broker's decisions about where they will place their business are being driven by who is easy to do business with, even though underwriting expertise and claims capabilities will always be very important. Technology for connectivity is central to fostering incumbent loyalty and enticing the attention of a new generation of distributors.

It's critical that all commercial lines insurers have a solid roadmap for investment around connectivity. Understanding what the potential barriers are and what peer company investments are being made will allow commercial lines insurers to move forward faster and with less over-all risk.

The commercial lines insurer report can be found here. Before the end of the year, the personal lines insurer view of connectivity will be published, as will the agent and broker view. So, stay tuned!

Karen Pauli is a principal at Boston-based SMA. Email her at kpauli@strategymeetsaction.com. This article first appeared on StrategyMeetsAction.com and is reprinted here with their permission. Opinions expressed in this article are the author's own.

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