For the last couple of years, many of us have been nervously anticipating what effect InsurTech will have on our businesses. Researching this phenomenon for the last three years to better understand this risk, I came up with the following 5 ways intermediaries can thrive in the age of InsurTech.
1. Client relationships are key to your success
Without the client, InsurTech is only a nicely packaged piece of code. As an intermediary, you own this last piece of the InsurTech puzzle.
The banking industry was the first to pave the way for clients to interact with financial services through technology. Today, clients prefer technological interaction above human interaction for most of the services they use.
Disruptive technology is scalable, which means it’s less dependent on the constraints of human capacity.
The key is to recognise and embrace the influence of technology on our sector, and as intermediaries, take advantage by utilising the right platforms and partners to help you improve your level of service and quality of your advice.
At this stage, you are controlling the relationship with your client, and your main competitor is computers. Who has the upper hand?
2. Understand the insurance value chain
The middleman is always the target in any process of disruption. It’s called a value chain for a reason; measuring costs versus adding value between the provider of a product and the consumer thereof. The strategic challenge is to reduce friction in the chain.
Above is a very simplified view of a value chain from the insurer’s perspective. Traditionally, insurers focused on investment income and the performance of the underwriting book [profit] by targeting a 50%-60% performance range.
The remaining 40% is spent on administration processes, such as underwriting, binder agreements, policy issuing, claims and policy administration fees, and client acquisition cost.
The industry collects R120 billion premium annually. Therefore, the remaining 40% amounts to approximately R50 billion and is the apparent target for all stakeholders. In their quest to improve fairness and inclusivity and reduce inequality, regulators aim to reduce the cost of insurance.
Due to economic pressure and regulations, insurers are looking at operational efficiencies to improve profitability. Innovators are focused on disrupting established industries where incumbents are complacent and are coming up with new methods to perform similar functions with fewer resources, putting pressure on traditional business models.
In short, the revenue that intermediary businesses were traditionally earning is increasingly put under the microscope by regulators and clients through regulatory communication, insurer efficiencies, and technology - giving clients more transparent access into the cost structure of his insurance.
3. Experiment with new things
Albert Einstein defined insanity as “doing the same thing over and over again, but expecting different results.”
With increased pressure from regulators, insurers and technology innovators on the distribution cost of insurance, intermediaries need to improve their service offering to justify their rightful place in the value chain.
In an age where access to information is available more freely, intermediaries can no longer provide solutions through limited insurers or include exorbitant admin fee structures without adding significant value to the process.
To increase your value offering to your client, you need to procure the best cover at the best price from a variety of suppliers.
You need to continuously improve your knowledge, as well as providing a wider spectrum of advice, such as ensuring that insured values are updated through business interruption assessments, valuations and enhancing the security and stability of your client’s organisation through resilient risk management practices.
4. Add value through education and training
To provide value, you need to improve quality, reduce delivery speed and add simplicity to your customer’s interaction with your company, as well as provide expert advice.
The introduction of FAIS and TCF has pushed intermediaries in the right direction, but many are still seeing the requirements as a compliance tick box exercise. Intermediaries should see this as an opportunity to increase their knowledge and to increase the quality of the service they are providing.
This is the opportunity to increase your staff or agents’ knowledge of peripheral cover and additional services that will increase the value to your service delivery.
Learn about and collaborate with other experts such as risk management consultants, and introduce services such as valuations, business interruption and alternative risk transfer to your client to manage their risk profile. This additional level of service will help you differentiate yourself from your competitors.
5. Choose the right partner
Reducing delivery speed and adding simplifying processes are two key components that can add immense value to your service delivery.
A major focus area for technology innovators has been the introduction of new user interfaces to improve traditionally slow and cumbersome service environments. Currently, independent intermediaries are dealing with a myriad of challenges, which include a ton of paperwork and documents, mostly that still need to be filled in by hand. Thank goodness, we are no longer queuing for a fax machine.
Terminology such as UI (user interface design) and UX (user experience) creates products and services that provide meaningful and relevant experiences to users.
Think about how banks, such as FNB and Medical Aid providers like Discovery have completely revolutionised the experience for their customers.
As an independent insurance intermediary, you might not have the resources to compete with big insurance companies or technology innovators to create similar experiences. However, choosing the right partner to change the way you work can foster innovation and collaboration, as well as improve your service offering, without needing to spend exuberant amounts of money or giving up your independence.
At RXNET we incorporated these five methods into our business model and invite you to be part of the future of risk solutions, today.