Pandemic-led digital transformation turbo-charges the reshaping of insurance landscape

We look at how different parts of the insurance industry are adapting work practices to the new digital environment

by | June 8, 2021 | bobsguide

Unsurprisingly, the pace of digitalisation throughout the insurance industry accelerated during the pandemic as everyone was suddenly forced to work remotely. Now, having acclimatised to the speed and efficiency gains, online trading has become the new normal for insurers, brokers and MGAs.

“On 17 March 2020, RSA moved almost overnight to having 4,500 people working remotely. There would have been some downtimes, but the view overall is that [the move] has been hugely successful: the business has continued to run really well and people [to be] productive,” says Steve Watson, Managing Director, London Market, at RSA.

According to Aviva’s head of SME commercial lines and digital trading, David Hockey, the pandemic-led acceleration of  digital strategies resulted in the “increased adoption of e-trade platforms delivering brokers more efficient and flexible trading options to help adapt their business models and the placement of insurance. As a result, Aviva has seen an increase in both revenue and customer growth in this time period.”

Moreover, according to Watson the pandemic has speeded up the cultural shift to a more flexible and dynamic way of working in the London market. He believes face-to-face trading will still take place, but underwriters won’t need to be in London five days a week, as they will be able to carry out administrative tasks from anywhere.

“Your time in London will become focused on important face-to-face engagement with brokers and customers. It will drive more discipline in how people organise their working week,” says Watson.

Darren Sharp, group head of IT at Tokio Marine Kiln, agrees: “When restrictions are lifted, TMK, like many other organisations, will be working more flexibly, with staff in many different locations, so working digitally will become the norm.”

The insurance industry was on a digital path even before the pandemic, as one major catalyst for electronic trading was Lloyd’s 2018 mandate that a certain percentage of syndicate business had to be traded electronically.

Sean Neal, chief commercial officer at SchemeServe, a veteran insurance software provider, believes that having more of the information from businesses on platforms like SchemeServe coming into Lloyd’s in an electronic format, and being able to integrate that into Lloyd’s smoothly, has helped drive the overall increase in digital trading at Lloyd’s.

SchemeServe operates a white-labelled administration, distribution and underwriting SaaS solution for those operating delegated authority schemes business in both personal and commercial lines.

“The technology is simply more widely available and used by brokers. From Lloyd’s perspective, therefore, having information and data now being presented in this way creates massive efficiencies – no need to process those armfuls of paper folders anymore,” says Neal.

Last November, Lloyd’s set out its vision of where the market will be in two to three years in its “Blueprint Two” programme. This includes end-to-end modernisation of business models, practices, process and systems – from risk submission, to claim settlement and risk renewal.

Lloyd’s initial focus is on the London market’s electronic placing platforms – third-party placing systems that allow brokers and insurers to quote, negotiate and bind business digitally, with Placing Platform Limited (PPL) representing about 95 percent of the market share. Another platform, Whitespace, is a relatively new entrant.

“Whitespace currently has a much better user interface, and that great user experience and better integration and connectivity are key parts of the next generation of PPL, which is coming early next year,” says Nick Williams-Walker, COO of Gallagher’s speciality business, who is also on the PPL board.

“Like in all technology, it’s good to have competition as you force the pace of innovation,” he adds.

TMK’s Sharp says he expects to see multiple software houses providing these services, which will provide benefits through greater competition. However, he cautions: “Once we have many platforms I foresee practical issues (logging on to many systems), and hence the need for us to use our own technology to take that pain away and make it a slick experience for our underwriters.”

Current electronic-placement systems still operate on a standalone basis. “In future you want them to integrate with the insurer’s own systems,” says Watson.

“If we bind a deal on, say, PPL, the holy grail would be we do it once on PPL, and then PPL would integrate with our own internal systems such that it could talk to our booking system, debit the premium, and produce our documents. In that sense, we are not there yet.”

Williams-Walker agrees: “The real benefit comes when you can take a core data record from beginning to end, including the accounting and settlement.”

“At the moment we rely on contracted insurance – the MRC slip – that contains more data than most of us have in our core systems. The key is to digitalise that contract and pull out the core data in a standardised way; then use that data later on in the process to automate payments.”

“This will provide a much better client experience in terms of speed and production of documentation and billing, and reduce query rates. However, this will only come when broking and carrier software can integrate with platforms like PPL.”

“The problem is that the broking software market has really fallen behind and hasn’t got the APIs (application programming interface) and all the things you associate with digital platforms.”

According to Sharp: “Things have moved on with the launch of Lloyd’s ‘Blueprint Two’. The strategy now is about agreeing data standards and approving a growing list of suppliers that can provide placing solutions that comply with those standards. That approach makes it easier for the brokers and carriers in terms of configuring our systems to talk to those platforms.”

SME market

Meanwhile, digitalisation has been even more marked in the small- and medium-sized enterprise (SME) insurance market where technology is present in more of the transaction chain than in the London Market.

According to Amanda Walton, CEO of Enterprise Centres of Excellence at Marsh Commercial: “You’ve got algorithms that are matching clients’ needs to particular products. Once you actually start the process of e-trade, a good 70 percent of the time you never need to speak to the insurer: you can take the customer’s information, find the right policy, bind the cover, issue the documentation, and have a full audit trail. From a regulatory perspective, it’s great because there’s the full end-to-end transparency of the journey.”

The pandemic has led to a significant rise in brokers arranging cover for SMEs through digital broker/insurer portals. James Hibbert, SME strategy & implementation director at RSA, puts this down to brokers recognising the efficiencies of trading small premiums electronically.

“Digitalisation wasn’t high on many brokers’ agenda prior to the pandemic. But having seen the efficiency gains in small-premium business, many are now wholeheartedly embracing the new digital environment.”

“For brokers it’s all about speed of response – getting a price and a response as quickly as possible.”

“You can get a quote for a piece of business for, say, £500 in five minutes, and a document, as opposed to having to send an email to a host of insurers, waiting for a response back, and then having some dialogue. There’s been a recognition that you can get faster solutions in small-premium business through an online system.”

RSA is heavily invested in SME technology. For instance, the firm is about to deploy its new LiveChat system, which will improve the broker experience by driving quicker responses from its operations team.

There is a wide choice of software houses supplying broker management systems, such as Acturis, SSP and Open GI. Some provide a market trading platform hosting various insurer products that enables the broker to obtain several comparative quotes.  The Acturis SaaS platform, for example, is the UK’s leading commercial insurance e-trade platform.

Some brokers also choose to invest in their own digital front-end platform to differentiate themselves in terms of proposition and customer journey.

“It is quite a strategic decision for a broker [that of] which route to go down and how much they want to invest in their own technology,” Hibbert tells us.

“It comes down to the broker’s appetite for cost: do they want to buy expensive software; or use a comparative panel that has an industry standard question set on it; or trade via individual insurer extranets; or set up a digital front end offering themselves.”

“All RSA’s products are on both a software house comparative marketplace platform and on our own extranet, so we give the broker a choice of where they can select their product from.”

What does a broker with carriers all using different e-trading platforms do? “It’s hugely inefficient for the broker and it’s an area that’s set to change,” according to SchemeServe’s Neal.

“The majority use software houses. Insurers have developed their own systems because of control and cost – they pay a fortune to legacy software houses, but this is inefficient for the broker.”

“This can and needs to change,” Neal argues. “Insurers need platforms that still give them aggregate products but in a way that gives them more control and at a fraction of the cost and that works for brokers.”

Meanwhile, more types of risk are now being traded electronically.

“Whereas it would have taken insurers six to 12 months to put a new product on a digital platform, they are getting new products out much quicker, and driving as much as they can into the e-trade environment,” says Walton.

However, Hibbert – who was behind developing RSA’s professional indemnity products – explains that some risks are too complex for sufficient information to be captured by an online question set, and hence for being able to rate the risk this way.

“There are a huge number of factors to take into account when underwriting professional indemnity, depending on the activities the customer is engaged in. We can write up to revenues of £2m. However, when you look at revenues of £5m, for instance, these are people working on large projects. So you need to delve into that risk in much more detail than an online question set allows.”

During the pandemic, many businesses have had to adapt in order to survive. For example, restaurants have transitioned into takeaways, which adds different risk exposures. In the future, Hibbert expects to see technology that can adapt to such changes in businesses.

Several insurtechs are developing technology specifically for SME business.

“When insurtechs first arrived, the market thought they would compete with insurers. However, over time there has been recognition that actually the position of an insurtech is as a partner in the value chain, providing the technology expertise, to help the insurance industry progress,” adds Hibbert.

“There are great examples of some insurtechs, such as Zego, which we work with, taking a different view on how to trade SME business.” They offer usage-based policies to delivery, courier, or trade van fleets through Zego’s technology.

Other brokers have invested heavily in their own capability, like Marsh Commercial, which has a full digital team based in Silicon Valley. “For us the digital evolution is so important that we invested in that capability out in the States, which is going to put us in a very strong position,” Walton tells us.

The digital agenda for brokers is focused particularly on improving the client experience.

“SME customers want to be able to manage their policies much more flexibly. For instance, we at Marsh Commercial are looking at different payment methods, for example whether we can move to Apple Pay for some of the smaller-type policies,” says Walton.

Meanwhile, Gallagher is focusing on technologies that enable clients to have more direct access to information and data, like portals and dashboards, to facilitate how they do business.

Overall, RSA’s Hibbert expects data to play an increasingly important role in the future. “Insurers’ main product is data and it’s about extracting more value from that data, and how that helps the customer. More technology-led [data] capability is coming, which is good for both insurers and customers.”

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