Small commercial lines has the potential to be a large and profitable book of business for carriers, but it suffers from a heritage characterised by inefficiency and low revenues. Digital processes may well come to its rescue, but only if channels are used intelligently and the customer journey designed with the customer in mind.
Ahead of this year’s Commercial Lines Innovation USA, Jim Dwane, chief revenue officer for New York-based insurtech bolt, walks us through the major steps towards greater efficiency in the notoriously difficult small commercial lines marketplace.
“We have an obligation to be ahead of the curve—but to be only about five steps ahead of where we think the industry is.”
What are the main challenges of handling small commercial lines business?
Even back when I entered the business in 1989, people were lamenting that small commercial lines and personal lines insurance were both difficult to manage cost-effectively. It was tough to make money.
More than 30 years later people are still complaining about the same thing. It doesn’t appear that a whole lot of progress has been made. Between margin and cost efficiencies, one of the biggest challenges is doing this cost-effectively—to such an extent that several brokers will disincentivise their producers from managing commercial lines below a certain value.
Even when they’ve thrown a lot of technology solutions at the problem, they’ve still struggled with it. It can be problematic.
How should carriers and brokers be prioritising their digital investments?
It may be a profound statement of common sense but they need to be focused on two key factors. One, that of normal process optimisation: can you achieve a quote with fewer clicks, calls, screens or steps? Within a small commercial account, you want to make that as efficient as possible.
Second, lots of people are trying to push the work to customers themselves in the form of self-service. That certainly lowers the cost for agents and brokers but this is where the system falls down.
It becomes what I call the ‘myth of the digital journey’. Conventional wisdom says that we need to keep driving towards a state where customers are completely self-service or at least getting their quotes that way. And, for certain lines, that has become ubiquitous: renters’ insurance for example.
However, smart companies have figured out that there’s a balance. It’s all about nuance between the digital journey and human intervention.
The reality is that the consumer wants a human to carry them across the finish line. Smart companies are looking to optimise at what point in the digital journey they should reach in and carry that customer across the line. By doing that, you meaningfully increase conversion and revenue. Companies that pursued implementing blanket self-service actually found that conversion suffered.
What does an optimised digital journey look like?
This is the exciting part—it can happen in multiple spots and it’s dynamic, not static. Carriers have to ask where the customer is when they get to a point where they want intervention. That can depend on the user, the risk, the line and the geography. There are so many different points where a process could get stuck and hit a speed bump. The skill is in understanding where those bumps are.
An interesting area to explore is behavioural characteristics. That is to say, how many seconds a potential customer is lingering on site before the algorithm determines that it’s time to launch a bot or offer a call centre number. This analysis works in tandem with the mechanical customer service levers, and analysing them together is a powerful tool.
As an example, take property valuations. You can go through the quote stages and an automated tool suggests your commercial property is valued at $500,000. But the customer is shocked—they paid $800,000. That is a place which is ripe for the human to intervene in the process. Consumer research can identify the static points—the common barriers—where people are ‘dropping the basket’. But on top of that is the behavioural data that shows how customers are behaving across their individual journeys. You have to take both on board to optimise effectively.
When it comes to investing in yet more technology, how do you advise customers to spend wisely—and vendors to develop pragmatically?
As a technology company, we have an obligation to be ahead of the curve—but to be only about five steps ahead of where we think the industry is. That way, we can be ready for our customers when they are ready to move forward. From a practical perspective, it wouldn’t be prudent for us to be, say, 25 steps ahead.
You have to have a good understanding of where the market is in terms of its desire but also where it is ready to be, from an investment, sophistication and even customer perspective. You can’t throw a solution at a customer base that isn’t ready to receive it. We all have to think about ‘where I am going to invest?’ and ‘what do I define as success?’. A lot of vendors have made the mistake of outrunning their customer base.
What will be one of the key takeaways from your session at Commercial Lines Innovation USA 2021?
Don’t be afraid of technology. The insurance industry is notorious for being behind the rest of the financial services world in terms of technology sophistication. There are many practical reasons for this and, recently, we have seen some pretty dramatic acceleration.
But people have to continue to challenge themselves to find technologies that help them operate more efficiently. Don’t be afraid to try new things.
Jim Dwane will be speaking at Intelligent Insurer’s Commercial Lines Innovation USA Virtual Event (May 18 to 20). The event is free to attend for insurers and brokers/agents, but you must register in advance. Sign up to access the content live and on demand here.
bolt, Commercial lines, Insurtech, Insurance, Reinsurance, Jim Dwane, North America