Digital Insurance Rating

5 Q&As on Modernizing Specialty Insurance Product Development & Distribution

The digital ecosystem era has fundamentally redefined what it takes to run a successful business. The leaders of tomorrow are those who are embracing the opportunities and challenges of today’s new realities, whether it’s the rise of high-growth market niches, mainstreaming of alternative capital, or the emergence of digital-first operating models and consumer-centric ecosystems. Many leading insurers are already participating in some or all of these vectors to reinvent themselves.

Keeping these trends in mind, there’s little question that hyper-specialized strategies for segments, products, and distribution are essential for success. These strategies have to be launched rapidly and modified on an almost constant basis, while also ensuring operational efficiencies.

However, Specialty Insurers in particular have been adopting modern technologies at a relatively slower pace compared to their Insurance peers. To be specific, Specialty Insurers are especially lagging when it comes to the persistent reliance on manual or legacy approaches to Rating and Process (i.e., Rate-Quote-Bind-Issue). As a matter of fact, Excel Spreadsheet Raters (also known as Legacy Raters) are often the only operational tools that Specialty Insurers leverage to do business. Although such raters were adequate in the past, today’s realities requires a modern approach to rating to fully capitalize on the opportunities opened up by the digital era.

How can leaders at Specialty Insurance organizations modernize their technologies so that they can develop innovative products quickly, capture market opportunities in an evolving marketplace, and drive profitable book growth? Based on our work helping insurer clients prepare for success in the digital and ecosystem era, here are five key questions and answers to help Specialty Insurance leaders achieve business agility by modernizing insurance product development and distribution.

Key QAs for Modernizing Product Development and Distribution in Specialty Insurance

Q1: What disruptive forces does my organization need to keep abreast of in order to grow our Specialty Insurance business? 

Relative to other insurance verticals, Specialty Insurance requires an especially keen focus on new disruptive forces that emerge and shape the marketplace. Without such focus, a Specialty Insurance organization will be less equipped to capitalize on opportunities to create new products, services, events, etc.

The three main disruptive forces to keep an eye out for include:

  1. The emergence of new, hyper-specialized niches
    Fueled by digital ecosystems, the Freelance & Gig-Economy Sectors (also known as Micro Small Businesses) are some new niches that are attracting new Capacity providers and Insurance specialists like Program Administrators and MGAs.
  2. The need for hyper-specialized strategies for products and distribution
    As the above niches become increasingly viable markets, Specialty Insurers must adapt quickly to seize new opportunities for products and distribution. This may mean coming up with new innovative products as well as modifying existing product offerings. In any case, having the capabilities to rollout new products quickly and integrate with new channels for distribution is key.
  3. Innovations in data and analytics
    Today, underwriters are able to get increasingly granular views of risks to make more informed decisions (e.g., information about hazards associated with a given location and property). This allows them to customize products to meet the specific needs of a customer segment.

Q2: How can I position my Specialty Insurance business to capture market opportunities as they arise?

Insurers constantly follow the needs of their chosen segments and niches. In the digital era, insurers should also identify and track partners that can provide complementary value. With technology advancements, insurers can partner and collaborate with others in the market to add more value to their products and services and provide comprehensive and seamless experiences for their customers. For Specialty Insurers, two opportune channels to embrace are:

  • The new breed of Insurance-specific distribution partners
    These organizations are hyper-focused on the insurance industry, and provide additional, distinctive value beyond just Insurance Coverage (e.g., Software, Business Services IT Solutions, Financial Advice, etc.). As a result of their intimacy with the industry niche, many insurers are embracing them as distribution partners.One example can be seen in the Marketing Design Professionals segment. Within this segment, there may be technical consultants that advise marketing professionals on best security and privacy practices for websites. These technical consultants, due to their deep knowledge of emerging risks, take up the position of trusted advisors. As advisors, they can also propose liability coverage options and become distribution partners for specialty insurers. Similar arrangements can be observed in various other segments.Another example can be seen in home insurance. Digitally connected home ecosystems are becoming integral to the life of homeowners in managing the risks in their homes. Given the volume of data that these connected homes generate, home ecosystem providers are equipped to leverage data to rapidly derive insights. Such data can even be used to intelligently suggest insurance protection to the homeowner at the appropriate time. In other words, partnering with such ecosystem players can enable insurers to seamlessly acquire new, non-traditional channels for producing business.
  • A new cohort of digital-native insurance agents
    The Insurance Agency market has been going through tremendous shifts. Over the last two decades, the total number of independent agencies has decreased by over 10%. At the same time, generational shifts are also occurring, with the children of Baby Boomer agency owners taking over. These digital-native agents are coming in with a very different set of expectations for the insurers that their agencies do business with. With stronger digital expertise comes higher expectations for digital touchpoints and low-touch/ self-service channels. Insurers that want to win the hearts, minds, and business of the new generation of insurance agents must set up modern interfaces and friendly, engaging user experiences.

These new distribution partners and insurance agents will have the industry know-how and digital can-do to rapidly respond to both opportunities and threats, thus making them critical players in any Specialty Insurer’s play in the digital ecosystem.

Q3: What capabilities does my organization need to leverage new distribution possibilities for our products?

Organizations looking to grow their Specialty Insurance business by leveraging new distribution channels must be able to do the following:

  1. Rapidly launch differentiated products
  2. Build and equip specialized distribution outlets to produce business at scale
  3. Streamline rate-quote-bind-issue processes by leveraging automation and cutting-edge data and analytical services
  4. Possess the ability to modify hyper-specialized products and process settings at an almost constant basis.

Accomplishing the above requires that specialty insurers move beyond their current Excel/Spreadsheet Raters, as they are not built to support such needs. Additionally, if APIs are important for Rating and other services such as Quoting and Account Service, these integration capabilities are also not supported by Legacy/Excel Rating technologies.

Q4: How do I assess the readiness of my rating capabilities?

When assessing your rating capabilities, some key questions to ask include:

  • Are my rating capabilities securely accessible for use by the following?
    • Globally distributed teams of Underwriting assistants
    • Data Entry analysts
    • Agents
    • Partners
  • Is the right level of Governance & Controls possible for various versions and variants of my Raters? In other words, are all Proposals at different offices consistently generated off the correct version of Raters?
  • Can my raters enable partner developers to rapidly build their own transactional front ends?
  • Can my raters easily integrate with systems within the IT landscape?

Q5: How do I assess the readiness of my rate-quote-bind-issue process?

When assessing the efficiency and effectiveness of your rate-quote-bind-issue process, some key questions to ask include:

  • Does my process support a simplified quoting process that can speedily get quotes out the door?
  • During the rate-quote-bind-issue process, are agents consistently applying the right set of validations thereby reducing errors and price leakages when quoting accounts?
  • Can agents easily access 3rd party information as needed for underwriting and rating, and apply this information contextually and seamlessly into their processes?

Overcoming the challenges of the digital era

Meeting the needs of digital customers is essential for growth, especially for Specialty Insurers whose competitive edge is dependent on how well they understand and respond to the demands of their niche markets. As digital ecosystems continue to take shape, it becomes increasingly imperative for Specialty insurers to embrace new technologies, modernize insurance product development, and tap into emerging distribution channels.

Since a key part of the Specialty Insurance business is how the insurer underwrites and rates the business, modernizing the insurance raters—which is often an Excel spreadsheet—is a good place to start. Replacing these legacy raters will undoubtedly inject speed into product development and market launch; bring automation into the rate-quote-bind-issue process; and make is possible to leverage APIs to expand the distribution and partnership network.

Staying abreast of the disruptive forces in your industry is one thing. Making the right technology investments to position your organization to capture the market opportunities emerging from these disruptive forces is another. If you want to win in the digital ecosystem era, embracing the latter is nonnegotiable.

Ready to take your rating capabilities to the next level? See how Bizdynamics can help get you there!