Tech, Youth, Diversity Critical To Success

Top Safeco official urges agents to take advantage of data-driven 'revolution'

Proclaiming that insurance is "on the verge of a revolution because the technology and data available to us today gives us power like never before," a top Safeco official said the industry must embrace high-tech, youth and diversity to survive and prosper in the emerging market.

"By using risk-to-rate models and segmentation," both made possible through modern technology, Safeco has "gained a significant amount of market share," said Michael LaRocco, the Seattle-based carrier's president of product, underwriting and claims.

"The use of data technology has been critical for our growth. Huge cycles we previously did not understand how to sustain can now be leveraged and we can give more consistent support to customers," added Mr. LaRocco in a speech earlier this month in New York during the National African American Insurance Association's annual conference.

Access to data is the key to successful use of the risk-to-rate model, he explained. "The challenge of getting this [concept] will be greatest for smaller companies because they don't have the data, and will be difficult for larger companies because it will change the way they rate customers," he said.

In the short term, these changes could result in a severe dislocation in terms of account turnover as premiums are set more according to risk than to the whims of the market, according to Mr. LaRoccoa--who said Safeco was able to weather the adjustment relatively well with customer retention at 80 percent.

However, despite the initial growing pains, he said, "this is a people business, and if policies can be rated more accurately, we need to step up and do the right thing."

Mr. LaRocco also pushed for independent agents to use Internet technology as an additional marketing, sales and service channel.

"Today, we see aggregate agencies that represent four or five companies under one umbrella," he said. "If you do not have customer e-mail addresses, you are missing out on opportunities to cross-sell, up-sell and re-approach them to make future sales. There is no reason the independent agent can't be powerful online."

Some at the conference, however, remain hesitant about the wonders of the World Wide Web. "Technology is great," said Samuel Dunston, president and CEO of the National Allotment Insurance Agency in New York. "But I've been in the business for 50 years. I think the Internet is good for supplementing your business, but personally, it's not for me."

On the other hand, it was not difficult to find Web backers among the younger agents in attendance.

"The Internet is cost-efficient, expedient and can help agents be more effective with clients," said Michael Simon of the J.P. West Insurance and Risk Management group in New York. "For example, having a rating structure on the Internet allows customers to get products rated at faster speeds and gives companies wider reach at a low expense."

Independent agents can take advantage of Internet efficiencies and opportunities at virtually no cost or effort, U.S. Allianz Regional Vice President Gazelle Pettway Jr. noted during the conference.

"An independent agent who wants to go with technology but does not know how to do it can link up with the major carrier he already works with," he said. "The independent agent can have his personalized page as a link within the larger site of the carrier. It's great because it serves both parties--the independent agent gets the carrier's system, and the carrier gets PR."

Along with technology, Safeco's Mr. LaRocco encouraged attendees to recruit more youth for the energy they can bring to the industry, and to channel the new generation's drive and technological savvy into the advancement and modernization of the business.

A group of young professionals at the NAAIA conference said the lack of young people in the industry is due to uninformed perceptions of insurance as a boring field. They proposed an intensified outreach to students on issues they are concerned about, such as training, competitive salaries, professional opportunity, people incentives and everyday relevance.

"My experience was that there were no insurance companies coming to school to recruit," said Aviesha Palmer, a 22-year-old property and international practice professional from Marsh in New York. "We also have to talk about the competitive salaries. It's not just in banking that there is a lot of money to be made--this is a trillion-dollar industry."

Another young attendee, Maurice Thomas of Marsh in St. Louis, added, "When I was a student, I thought of insurance solely as something I needed in case I wrecked my car."

In addition to conveying that "insurance is a part of everyday life," Mr. Thomas said that "young people tend to pursue careers they've been trained for. So an outreach that includes professional guidance, like a training program, could be very effective."

He added that "baby boomers are retiring, so within the next 10 years there will be a big gap and an increased opportunity to move up [in insurance]."

Age, however, is not the only demographic shift with which the industry must cope. "I recently attended a naturalization ceremony where 59 people were inducted with 26 countries represented," said Mr. LaRocco. "Diversity is a powerful characteristic of the U.S. population. As the industry steps up to fill the void for people...embracing diversity is perhaps more important than ever."

Taylor Mitchell is a freelance journalist in New York City.

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Tech, Youth, Diversity Critical To Success

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