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

But there are other changes afoot, as evidenced by the newentrants, from the ranks of both traditional insurers andreinsurers as well as startups leveraging leading newtechnologies.

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

While there are several critical success elements, few wouldargue that agents, brokers, and MGAs are front and center. Unlikepersonal lines, where direct-to-consumer channels are growing,commercial lines are still dominated by the independent agent andbroker channels. And due to risk complexity and the need foradvice, this is not likely to change soon.

At the InsureTech conference, Brian Duperreault, Chairman andCEO of Hamilton InsuranceGroup, and past CEO of Marsh and McLennan, emphatically madethe 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 brokernetwork, commercial lines insurers need to understand what it takesto assure a successful outcome. Clearly, being easy to do businesswith is pivotal, and a key component of that is agencyconnectivity. To gain insight into what this means to commerciallines insurers and distributors, SMA conducted primary research.The recently released report "Agency-Carrier Connectivity: Commercial LinesInsurers" provides and explores the results.

Game changer

One thing was immediately clear. Ninety percent of commerciallines survey respondents indicated that by 2020 new capabilitiesfor agency connectivity will be a game changer. No insurer canignore a game changer, but the road to a successful businessoutcome is not necessarily an easy one.

Sixty-seven percent of survey respondents indicated thatimproving the agent experience is the number one business driverfor investing in agency connectivity. Yet 4 out of the 7 barriersto investment revolve around a lack of business commitment andclarity. The good news about that result is that insurers are indirect control of these barriers!

Survey results show the majority of insurers would prefer anautomated exchange of data and information with distributors, withlimited phone, paper, or email pdf exchange. But legacyconstraints, data mapping/inconsistencies, and a "spaghetti bowl"of processing problems stand in the way. It would be easy tobelieve the issue is technology, but survey results point in adifferent direction. In fact, they point directly at culture andfocus.

Technology for connectivity is central to fosteringincumbent loyalty and enticing the attention of a new generation ofdistributors. (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 theage-old belief that commercial lines are seen as art and notscience, culture is a huge issue that must be recognized andaddressed.

Acquiring new business is a serious problem in today'scompetitive commercial lines market. Per SMA research, the numberone stumbling block to meeting production goals is quality and fitof submissions. Given this pressure, it would seem logical thatinvestments would have been made to deal with this. But despite thefact that agency upload and download have been around for a verylong time, commercial lines insurers still feel that their needsare either not being met at all or are met in only a limitedmeasure.

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

Technology for connectivity essential

More and more, agent's and broker's decisions about where theywill place their business are being driven by who is easy to dobusiness with, even though underwriting expertise and claimscapabilities will always be very important. Technology forconnectivity is central to fostering incumbent loyalty and enticingthe attention of a new generation of distributors.

It's critical that all commercial lines insurers have a solidroadmap for investment around connectivity. Understanding what thepotential barriers are and what peer company investments are beingmade will allow commercial lines insurers to move forward fasterand with less over-all risk.

The commercial lines insurer report can be found here. Before the end of theyear, the personal lines insurer view of connectivity will bepublished, as will the agent and broker view.  So, staytuned! 

Karen Pauli is a principal atBoston-based SMA. Emailher at [email protected].This article first appeared on StrategyMeetsAction.com and isreprinted here with their permission. Opinions expressed in thisarticle are the author's own.