The insurance industry is undergoing significant transformation as the market seeks to balance profitability with the increasing demand for distribution. This shift is especially pressing for carriers who need to continually benchmark their underwriting, regions, and accounts to assess profitability.
As the market evolves, several key themes have emerged that are shaping the future of insurance distribution and innovation. Here’s what’s top of mind for carriers, brokers, MGAs and the broader insurance ecosystem.
Profitability in distribution and the rise of MGAs
Carriers today face mounting pressure to broaden their distribution channels without sacrificing profitability. To address this many are buying, or opening their own MGA, or supporting others with capacity to provide flexibility and more focused distribution channels for niche products.
MGAs have become a critical part of distribution strategies, enabling carriers to efficiently reach niche markets and align with the changing needs of customers. For carriers, MGAs offer a way to diversify their portfolios while maintaining tighter control over underwriting standards, helping them achieve that essential balance between growth and profitability.
Innovation as a strategic imperative
Innovation has become a central theme for brokers, carriers, MGAs, and others in the insurance sector, often via dedicated in-house ‘Innovation Labs’, dedicated to fostering new ideas and processes that add value across the supply chain.
Further, many are now recognising the need for their businesses to modernise their core platforms to embrace innovation more quickly, which in turn enables them seize new business opportunities more swiftly, maintain control of the development of their technology and support, and integrate emerging technologies such as AI and data via APIs. This means they have total autonomy and agility with their platform, eliciting partnership support from their vendor as and when needed.
This drive toward innovation will only accelerate with the anticipated BP2 plan set for 2025, which will bring new standards to the industry and spur further progress. BP2, when delivered, is expected to create substantial opportunities for brokers, carriers and MGAs alike to develop data-driven innovations.
Climate extremes and insurability challenges
The insurance market faces an increasing challenge with climate extremes becoming routine rather than rare. Secondary perils such as flooding are proving particularly troublesome, as despite their title, they cause more losses overall than the likes of primary perils, such as hurricanes.
These conditions strain policyholders and insurers alike, with many people unable to afford insurance coverage and carriers being reluctant to insure high-risk properties.
The wholesale insurance market is particularly impacted, as premium pricing and risk management become ever more complex. For insurers to navigate these challenges, it’s crucial to use high quality climate data to build resilience and effective risk management into their policies.
There are now many modelling firms to support carriers, from early stage Insurtechs such as Fathom, which provides specialist flood data, to established players like Moody’s RMS, covering hurricanes, etc.
The role of AI: hype or reality?
AI, including Gen AI, is one of the most talked-about trends in the insurance space, but it remains largely in the realm of ‘smoke and mirrors’ without the right digital infrastructure. While AI has huge potential, it can only deliver meaningful impact if insurers have robust digital architecture in place.
Recent industry events have underscored this reality, as AI-specific innovation remains sparse and the need for foundational digital transformation is clear. As the market advances, we can expect to see mergers and acquisitions focused on building these capabilities, with companies like Intellect AI and Intelligent AI setting examples in real-world applications.
Redefining talent and skills for the modern insurance landscape
The skillsets required in the insurance sector are evolving rapidly. Where data scientists were once highly sought after, the emphasis is now shifting toward innovation leaders who can drive change across every aspect of the industry.
Insurers are increasingly embedding innovation into their core functions, creating a culture that not only adapts to, but also initiates and anticipates change. This shift is essential for companies looking to stay competitive and responsive to market dynamics to support growth and profitability.
The rise of ecosystems built on cloud-native platforms
The rise of insurance ecosystems marks a transformative shift in the insurance industry, from underwriting and claims processing to risk assessment and customer engagement. This shift not only enhances the customer experience, but also fosters innovation, allowing insurers to respond more effectively to changing market demands and consumer expectations.
Building these insurance ecosystems on data-driven cloud-native platforms is essential for maximising scalability, flexibility, and efficiency. Cloud-native technologies enable the market to rapidly develop, deploy, and iterate on applications and services without the constraints of traditional on-premises infrastructure.
This agility enables the market to leverage real-time data, enhance analytics capabilities, and implement advanced technologies like AI and machine learning to improve decision-making and risk management.
By embracing cloud-native solutions, insurance firms can create a resilient and adaptable ecosystem that can easily integrate new partners and services, ultimately driving growth and ensuring long-term sustainability in a competitive market.
On July 19, 2024, leading cybersecurity vendor CrowdStrike released a software update, just like many enterprise software vendors do every day. However, things went haywire when the updated version of its software turned out to be faulty. Within hours, widespread problems started with the Microsoft operating system, one of business’s most ubiquitous software platforms. The faulty upgrade quickly impacted IT systems globally, causing outages and downed systems across every industry. International news outlets and social media were full of stories of grounded planes, shuttered businesses, and stopped markets. This software glitch has cost Fortune 500 companies approximately $5.4 billion in damages to date, according to insurance company Parametrix.
The days-long disruption sparked an influx of cyber and business interruption insurance claims and litigation by businesses impacted by the debacle. Last week, Delta Airlines announced that it is seeking legal action against CrowdStrike and Microsoft after the outage, which resulted in the cancellation of more than 7,000 Delta flights. The airline claims that the outage caused a direct revenue hit of $380 million due to refunds to customers for canceled flights and compensation in cash and frequent flyer miles.
There is an ongoing debate about whether this is a matter of Cyber, Business Interruption, or another line of coverage. Some experts say it’s a bit of both. Since the outage began with a botched software update and not a cyberattack, the non-malicious nature of the incident may limit the scope of coverage.
One thing is for sure. In this increasingly interconnected world of global business systems, where software ecosystems are dependent on various vendors playing well together, it’s more important than ever for insurance organizations to be better prepared for the next incident. Because there will be more to come in the future.
Taking Stock of Your Current Technology Systems
Insurance organizations fortunate enough to escape this incident unscathed should use the Crowdstrike outage as a teachable moment. This is the perfect opportunity to assess your front, middle, and back office systems and ensure they’re up for the task if a global incident like this happens again.
For example, are you ready to scale up your front office interface and effectively support a wave of customer calls after a large-scale incident? As an agent or broker, are you prepared to communicate quickly and efficiently with your customers about the impact of such an outage? Can you provide a dedicated, secure customer portal or send text messages with claim status updates? Can your entire team access policies in force and actual coverage when serving the business? You need an updated back-end system to respond effectively. And you don’t want to discover this in the middle of a large-scale event when your customers need you the most.
A connected front, middle, and back office utilizing modern technology will enable your organization to respond swiftly and accurately to a surge in claims following a national or international incident. Remember that your customers will likely have coverage questions and need to file and track claims easily. Secure customer portals can handle much of this process. A self-directed customer service portal is crucial for policyholders to check on the progress of their claims.
This is a genuine opportunity to support your clients, but your technology systems must be capable of supporting both your staff and your customers.
The time is now to make the necessary changes and upgrades to your insurance management system. Our research shows that 75% of insurance organizations worldwide are planning to significantly change their current technology systems by 2025. The smart, strategic insurance players will spend the rest of 2024 and the first half of 2025 investing in their technology systems and streamlining their operations. The players who procrastinate when it comes to upgrading their systems risk being left behind by their competitors.
Ready to talk to an expert about preparing your insurance management systems for whatever comes next? Get in touch with a Novidea expert today.
ITC Asia has been a highly anticipated gathering this year for the insurance and technology sectors. This year, it places a ‘Spotlight on Digital Transformation in the Insurance Industry’, and brings together industry leaders, innovators, and stakeholders from across the region and beyond.
The event’s theme is very much in line with Novidea’s thinking, as we recognise that the insurance industry in Singapore is on the brink of a significant technological transformation. This is just one of the many reasons we launched there in late 2023, to support the local insurance industry – and global brokers – with a presence in the region.
According to a comprehensive global report commissioned late last year by Novidea, based on interviews with 330 C-level insurance leaders from eight countries, 63% of insurance respondents in Singapore plan to upgrade their core insurance management platforms by the end of 2024, driven by the desire to enhance customers experiences and respondents’ competitiveness.
Hot topics at ITC Asia 2024
The ITC Asia event will be a critical platform for discussing the latest trends, challenges, and opportunities in the insurance industry, with a strong focus on digital transformation and technological advancements. Here are my thoughts on some of the hot topics at the event…
Digital transformation and innovation
We will see greater emphasis on the integration of advanced technologies in the insurance sector, such as artificial intelligence (AI), machine learning, and data-driven solutions in the cloud.
Case studies on successful digital transformation initiatives within leading insurance companies will be watched with interest by experts not only keen to learn, but also to see what’s working.
Customer experience and engagement
This hot topic was very visible in our survey, with respondents from Singapore placing a heavy emphasis on onboarding customer-centric technology (70% compared with 41% globally).
Attendees will be keen, therefore, to learn about strategies for enhancing customer interactions and satisfaction through digital data-driven platforms that improve the customer experience and build loyalty.
Insurtech and insurer collaboration
Today, many are talking more about collaboration than disruption in the Insurtech and insurance innovation communities. As a result, the insurance industry seems to be steering towards buy over build.
ITC Asia promises to showcase the best local and global Insurtechs and their innovative solutions, to uncover opportunities for collaboration between insurers and Insurtechs to drive industry growth.
Data analytics and AI
More players will leverage big data and AI to enhance the underwriting, broking, and claims management processes through data-driven insights, as well as predictive analytics, risk assessment, and fraud detection.
Regulatory and compliance challenges
Navigating the evolving regulatory landscape for cross-border transactions and digital insurance products is vital to business success, as is ensuring data privacy and security.
At Novidea, we take these issues very seriously, and have both cross-border solutions and world-class Salesforce-backed security on our data-driven platform.
Emerging Technologies
AI will be the hot topic on everyone’s lips, including Gen AI, but also expect people to explore the potential of blockchain technology for transparent and secure transactions, and the impact of the Internet of Things (IoT) on insurance products and services.
Sustainability and ESG (Environmental, Social, and Governance)
The role of insurance companies in promoting ESG initiatives and responsible investing has never been more in focus, including integrating sustainability into insurance practices and products.
Also, on the environmental side, you can expect to see Insurtechs offering solutions from AI-driven predictive modelling to risk mitigation for the Nat Cat events the APAC region is increasingly affected by.
Novidea’s commitment to Singapore
The Novidea team will be out in force at ITC Asia, as we are seeing an urgent demand from the industry for change, including global brokers in Southeast Asia seeking to drive growth via a single integrated, global, cloud-based insurance management platform.
Others are embracing digital transformation in terms of insurance technology, and many businesses are seeking specialist digitalisation solutions to remain competitive and profitable.
Part of the issue is that there are many technology suppliers in the SE Asia region, however there are very few global insurance management platforms that support businesses across borders, while covering the entire customer journey, end-to-end, and with an integrated front-, middle-, and back-office.
So, whilst the initial demand for Novidea’s platform came from global brokers who need a more efficient way to integrate their operations, both worldwide and between markets, we also now seeing demand from regional brokers and larger MGAs looking to accelerate their growth, with a platform that supports multi language, currency, compliance, and workflows within the region.
The insurance industry in Singapore is poised for a significant digital overhaul, driven by the need to stay competitive and meet evolving customer expectations. Novidea’s global report underscores the urgency and scale of this transformation, highlighting both the challenges and opportunities that lie ahead.
As Singapore’s insurance market gears up for this change, Novidea remains committed to supporting this journey towards a more modern, efficient, and customer-centric future.
Some of my network may have seen that I made a trip over to Hong Kong at the beginning of December last year. With the run-up to Christmas and the New Year kick-offs out of the way, I thought it would be a good time to reflect on the experience and share some thoughts now that the excitement of travelling has calmed itself.
In the fast-paced world of insurance technology, gaining insights from diverse markets is an invaluable opportunity; one not to be missed. My recent journey to the InsurTech Insights Asia conference in Hong Kong provided a unique perspective onto the challenges and prospects of the Asia Pacific insurance landscape.
The decision to attend
Picture this – a regular team meeting where the chance to attend the InsurTech Insights Asia conference emerges. For someone entrenched in the London and UK insurance markets, the allure of exploring the nuances of the Asia Pacific market was irresistible.
Questions arose – are the challenges similar to those in London? Can strategies successfully applied in the UK be replicated in the diverse Asian market? I re-count this moment well, reflecting on my eagerness to grab the opportunity with both hands, particularly as I had previously experienced Asia, many moons ago.
Happily, I soon found myself on a plane to Hong Kong, propelled by a mix of professional curiosity and my personal connection to the city. The agenda set the stage for a whirlwind experience – from late-night flights to battling jet lag and immersing in the conference proceedings at the Kerry Hotel in Kowloon.
Conference highlights
Spread across two meticulously organised floors of the Kerry Hotel, the InsurTech Insights Asia conference showcased a thoughtfully curated selection of sponsors and exhibitors. I applaud the event organisers’ streamlined approach, avoiding the over-saturation common in similar gatherings.
Being a sponsor allowed for meaningful interactions with delegates and offered a chance to introduce Novidea to a new audience. The bustling foot traffic, however, sadly limited the opportunity to attend sessions and panels, despite there being many fascinating topics being presented by local and global industry leaders.
The good news, however, was that I gained many ‘real-life’ insights into the Asia Specific market.
Discovering opportunities in Asia Pacific
Naturally, the primary reason for Novidea’s presence at the conference, was to explore opportunities in the Asia Pacific insurance market. Armed with the technological advantage of having an end-to-end, born-in-the-cloud platform, built on the Salesforce tech stack, our team sought to better understand the market’s local needs, challenges and opportunities.
Drawing parallels between the Asia Pacific and UK insurance markets, beyond the cultural connections, there are many technological and operational similarities. Legacy tech stacks, operational inefficiencies, and the push for cost-saving solutions are common threads.
At the same time, truthfully, there still seems to be a divergence in the understanding, willingness, and ability to transform within the Asian market, which was somewhat surprising. At the conference, Insurance firms there tended to take a cautious approach, waiting to see success stories before embracing innovation. Again, this may have been a small subset of the reality and may not reflect the entire view of the market, but it was still an interesting notion to hear. With our strong track record, including traction with some big-name brokers in the region, the potential for Novidea to make a significant impact in the region quickly became clear.
Despite there being many established tech vendors with a keen focus on the region, the solutions tend to be localised, not catering for firms with operations across the region or indeed globally (a strength of Novidea’s with over 100 broker, MGA, and carrier customers in 22 countries, worldwide).
Market dynamics
I had expected to see a plethora of cutting-edge solutions, as this is, to many in the West, ‘Brand Asia’. Somewhat surprisingly, however, I didn’t see too many other Insurtech service providers like us, despite much talk of transformation.
Novidea, with its 14 years of experience and a global client base, set about challenging the status quo, urging the Asia Pacific market to embrace change and move away from legacy systems. Insurance firms across the value chain can wake up to new possibilities to reshape their business and optimise their opportunities for operational efficiencies and accelerated growth.
Embedded insurance and shifting dynamics
As an interesting aside from our core business, it became clear that there is a fascinating exploration into embedded insurance unfolding in Asia, highlighting the evolving landscape where some vendors are effectively transitioning into brokers. My view reflects conversations at the event about the consumer’s increasing reliance on vendors for insurance coverage, unwittingly surrendering the ability to choose insurers or negotiate deals.
This paradigm shift poses both challenges and opportunities for the insurance industry. It will be fascinating to see how this pans out in the years ahead.
Novidea is ready
Now home, I have had time to reflect on the transformative experience of attending InsurTech Insights Asia. Despite the changing face of Hong Kong and other Southeast Asian countries since my previous visit, years ago, the city remains a symbol of growth and opportunity, one which I was very grateful to see in person.
Looking ahead, I cannot wait to embrace the opportunity to navigate the intricate world of insurance technology in Asia Pacific and discover how Novidea really can make a difference in this dynamic and exciting market in 2024 and beyond.
Late last year in London, as part of a TINtech breakfast meeting, over a dozen seasoned insurance industry veterans convened to discuss Blueprint Two at The Gherkin. The group consisted of a diverse mix of brokers and insurers. The main topic was the broker’s level of readiness to adopt phase one of Blueprint Two. Every single London market broker will need to be ready to adopt phase one services by 1st July 2024. Amongst the group, the consensus was mixed – with some not feeling ready, others not convinced it will happen by the mandated deadline, and others feeling confident their organization will be prepared.
The open forum allowed for a productive dialogue where concerns and opinions were openly shared. The first phase of Blueprint Two will have a great impact on brokers in the London Market and requires a proactive action plan, as well as a thorough understanding of the implications. The group also shared best practices on how their organizations are preparing.
Brokers Rely on Tech Vendors
One key point which was unanimous amongst brokers is that they will rely on their technology service providers to help with the move to Blueprint Two. This broad opinion demonstrates the critical role technology plays in the insurance industry, and the strong relations between tech vendors and brokers, where brokers expect software providers to manage their operations, help build integrations, and ensure they implement all the newest go-to-market capabilities. Even executives from the largest, most reputable insurance organizations in the world expressed reliance on their relatively smaller tech providers to help their organization through this transformational change. Without a doubt, the success of Blueprint Two depends on close cooperation between brokers and vendors.
Information & Communication is Lacking in the Market
Discussions surfaced another common theme – the frustration around a lack of communication and information being disseminated from regulators. The participants hoped to receive more frequent updates and requirements to enable them to fully prepare their organizations. Many said they need to actively seek out the information they need from multiple sources. This perceived lack of communication and transparency is causing uncertainty, especially with the deadline rapidly approaching.
The Future Will Bring Improved Work Methods
The group discussed how the Blueprint Two requirement will fundamentally change the market by improving the way brokers, insurers and their customers interact with one another. Generally, most of those in attendance agreed the changes will move the market forward, improve transparency and increase efficiency.
Blueprint Two will transform the industry and collective knowledge sharing forums like the TINtech event last month, which was hosted by Novidea, are a great way to keep everyone informed and moving successfully toward phase one.
You can learn more about Blueprint Two and CDR: How Brokers Can Prepare and What it Means for the Lloyd’s Market, in this webinar with Paul Evans, London Market SME, Novidea, Mike Winterle, Senior Product Marketing Manager, Novidea
The insurance industry, with its vast, complex network of policyholders, insurers, and intermediaries, heavily depends on precise and efficient communication of data. The sheer volume of data that needs to be processed necessitates that this data be presented in a standardised and easy-to-understand format. Two terms that play a crucial role in this standardisation, but are often confused, are the Core Data Record (CDR) and the Market Reform Contract (MRC). These concepts, while distinct, both contribute significantly to insurance processing and contract documentation.
Understanding Core Data Records:
CDR refers to a structured, consistent set of essential information about an insurance policy. The data contained in a CDR typically includes crucial information such as the policyholder’s name and contact details, the policy number, the type of coverage offered, the period of coverage, and other pertinent details.
The standardisation of this information in a CDR format ensures effective communication of data to automate processing within the Joint Venture (DXC / London Market Bureau). It forms the backbone of any insurance operation, offering clear, concise information that can be universally understood and actioned by all stakeholders.
Decoding Market Reform Contracts:
While the CDR is an all-encompassing concept, the MRC or Market Reform Contract, is a more specific element tied to the London Insurance Market. The MRC is a particular type of insurance contract documentation that aims to provide clarity and certainty in the contract formation process.
Introduced as part of the broader London Market Reform initiative, an MRC clearly outlines the terms and conditions of an insurance contract. This document also includes a contract data section that gives a comprehensive summary of the insurance coverage offered under the policy.
The London Market Reform aimed to modernise and streamline the procedures in the London insurance market. The implementation of MRCs marked a significant milestone in this initiative by ensuring clear, transparent, and efficient documentation of insurance contracts.
The Difference Between CDR and MRC:
The primary distinction between a CDR and an MRC lies in their scope and application. CDR refers to a set of essential data for premium processing and Lloyd’s regulatory reporting, presented in a standardised format. On the other hand, an MRC is the contract documentation used in the London Insurance Market, providing an overview of the policy’s terms, conditions, and coverage.
While both serve the essential function of streamlining communication and processing in the insurance sector, the MRC goes a step further by offering a comprehensive look at the contractual aspects of an insurance policy.
Conclusion:
As we delve into the intricacies of the insurance industry, understanding key concepts like the Core Data Record and the Market Reform Contract can be invaluable. Both these concepts underscore the industry’s commitment to clarity, transparency, and efficiency, promising a smoother insurance experience for all stakeholders involved.
Novidea is committed to supporting the continued transparency and standardisation of the insurance industry. Helping insurers, brokers and policyholders stay better connected benefits everyone. The Novidea platform is built to better connect every stakeholder in the insurance value chain and make it easier for them to share information. Novidea knows the value this brings to the market and is ready to help brokers and insurers embrace these changes to help them deliver greater value to their customers.
You can watch the ‘CDR – How Brokers Can Prepare and What it Means for the Lloyd’s Insurance Market‘ Webinar here with Paul Evans, London Market SME, Novidea and Mike Winterle, Senior Product Marketing Manager, Novidea to learn more about how the CDR standardisation will enable the Lloyd’s market to significantly improve operations, reduce the cost and effort of doing business, and deliver a better service to customers.
Certain brokers, MGAs, and coverholders become the most valuable partners of commercial line carriers in an ever more competitive market. Here is how!
While it’s true that combined ratios have improved in commercial lines over the years, much of that is due to the higher rates of the hard market since 2018? The flip side of that hard market — lower capacity — seems here to stay for the foreseeable future.
As a result, offering greater value to capacity providers is more vital than ever for intermediaries. Indeed, in order to achieve the required outcomes, brokers, MGAs, and coverholders should look to advanced and emerging technology to help deliver the very business results, insurers want.
This article examines why scarce capacity is increasing the pressure on brokers, MGAs, and coverholders to provide ever more value to capacity providers. It then examines the challenges facing capacity providers in a rapidly evolving commercial lines market before highlighting how intermediaries can help to solve those challenges, thereby becoming trusted and valuable partners and beating their competitors in the war for capacity.
Thanks to the recent hard market, many insurers have returned to profit in the last couple of years. This is partly due to a reduced risk appetite and “through focusing on their core sectors, which they understand in depth and know from experience and data that they can underwrite profitability over the long term,” according to Towergate.
In other words, carriers continue to be selective with the risks they decide to underwrite. This means that intermediaries must be able to provide clear value — and prove that value — to compete for less capacity.
According to Marco del Carlo, CEO of Capacity Place and Director of the UK’s Managing General Agents’ Association: “Securing capacity for MGAs, particularly new MGAs, remains a challenging process with a lot of pitfalls. Each capacity provider has its own risk appetite in terms of classes of business and territories they write… Capacity providers seek to avoid duplication and competing against themselves and are generally seeking MGAs with a track record of underwriting profitability.”
Of course, insurance carriers are no longer the only game in town when it comes to providing capacity. In recent years, many MGAs have secured investment from private equity firms and alternative capacity from reinsurers. At the same time, PE investment has driven M&A activity in the US and UK broking markets since at least 2019.
According to the latest figures, however, both these sources of capital are also drying up. Private equity investment is down across the board, thanks to rising interest rates increasing the cost of capital. As a result, in 2022, “deal volume decreased 26 percent to $2.4 trillion, while deal count fell 15 percent to just under 60,000,” according to McKinsey.
When it comes to reinsurance, despite balance sheets looking robust at the beginning of 2023, reported capital declined by 14% in 2022, and Gallagher Re reports “a conspicuous absence of new capacity, despite the potential attraction of much-tightened pricing and terms and conditions.”
This means that intermediaries are competing for capacity in an uncertain market in which commercial lines carriers face several significant challenges: “These challenges are exacerbated by tightening capacity in both traditional reinsurance capital and alternative capital markets, and the full extent and duration of the capacity squeeze are still uncertain given the strong hardening observed in January 2023 renewals.”
The brokers, MGAs, and coverholders best able to help solve those challenges are the ones winning the war for capacity in 2023. The most successful intermediaries will be the ones that embrace modern technology to achieve their goals. There are solutions that can help them better vet clients and prospects to find submissions to send to insurers that are aligned with their risk appetite and, therefore capacity.
Challenges facing carriers in 2023.
Commercial lines insurers are facing a rapidly changing market. As McKinsey puts it: “Commercial carriers find themselves at an inflection point as they face a continuing cycle of economic uncertainties, including inflation, geopolitical headwinds, environmental challenges, and capital constraints.”
With record levels of inflation, rising interest rates, post-Covid disruption to supply chains, and weaker-than-expected economic growth in China, the global economy is uncertain.
The regulatory environment is becoming more challenging to navigate, as “many commercial insurance players are starting to find the regulatory landscape more fractured and complicated than ever before.”
According to KPMG, commercial insurers now see regulation as a bigger risk than any other, including crime and cybersecurity. Making sure they are leveraging a modern, secure cloud-based platform is a great way to ensure security and compliance.
New technologies are challenging insurers to improve the way they do business, from everything from underwriting more accurately to paying claims more efficiently. Then there’s the impact of environmental, social, and governance (ESG) principles. This is threatening brand reputations thanks to increasing scrutiny from activists highlighting greenwashing activities while also representing an emerging risk — both for insurers themselves and a potential new line of business.
Mixed in with all these challenges are several emerging risks, the biggest of which McKinsey identifies as: “natural catastrophes (NatCats), the net-zero transition, and supply chain and cyber risks.”
On top of everything already mentioned, the expectations of commercial lines clients have also never been higher. In a post-Covid world, everyone has become used to excellent levels of online service, and customers now demand the same from their insurance providers. This rise in direct, self-service insurance means that intermediaries need to utilize modern technology to deliver the instant customer service consumers are demanding. According to a Forrester survey commissioned by KPMG, 83% of prominent commercial insurance decision-makers list their customer-centric strategy as “a high or top priority.”
The urgent question facing intermediaries in this market is how they can become more valuable partners for their capacity providers, so let’s take a deeper dive into that.
How brokers can increase their value to insurance capacity providers.
It’s clear that insurers are keen to work with brokers, says Bob Pottle, chief strategic operations officer at Philadelphia Insurance Companies: “The independent agent and broker is really the backbone of the industry. They’re the primary distribution channel for commercial property casualty insurance.”
We know that insurers value those brokers who can provide insights into customer needs and trends. In a challenging market where the price of premiums has risen, capacity has contracted, and insurers are being more selective with risk, brokers must do more to unearth and understand new customer segments to help insurers see the potential profit in those segments.
Brokers can take advantage of modern software solutions to gain instant access to dashboards and reports to help discover the strategic insights their insurer partners are seeking. This, in turn, is valuable in helping carriers to price existing risks more effectively while also helping them to innovate by developing new products and serving new segments.
Carriers also value brokers’ expertise and client networks in specialty lines and emerging risks such as marine, aviation, and cyber insurance, where the experience needed to do a good job is highly specialized.
Plus, of course, leading brokers build a loyal customer base by using their expertise to provide their clients with tailored guidance on the right risk management strategies for them and minimizing their exposure to potential risks. Carriers highly value this affinity with customers and are more likely to commit capacity to those brokers with an excellent track record of building a loyal base of repeat customers.
This means that those brokers who can build the biggest base of loyal commercial lines clients in order to:
● provide the best and most accurate market data around new client segments and emerging markets,
● offer the most accurate information, and
● help develop new and profitable products,
will find it easiest to secure capacity from grateful carriers.
How MGAs can increase their value to insurance capacity providers.
MGAs have benefitted to some extent from the hard market, as they have been able to specialize in underwriting new and emerging risks where commercial line carriers lack the necessary expertise. Yet, even though specialty MGAs can reduce the risk of market entry for insurers while also providing them with pre-existing underwriting specialist talent and bringing insurers profitable business at a fraction of the overheads of doing it themselves, securing capacity can still be a struggle.
The answer is for MGAs to ensure they can prove their value to capacity providers. According to Martin Hall, Chief Underwriting Officer of Pen Underwriting: “Access to distribution and expertise in niche classes of business are the two key advantages [for carriers of working with MGAs], but successful MGAs are also synonymous with the strength and longevity of customer relationships, robust performance monitoring, and investment in meaningful management information, all of which are highly valued by carriers.”
So, robust data around performance and the ability to present it to carriers is critical for those MGAs who want to stand out from the crowd and build stronger relationships with insurers. Having real-time, high-quality data processes and insights allows MGAs to make better underwriting decisions faster and scale without needing to hire many extra people. There are software solutions that can help brokers achieve this with real-time insights and actionable intelligence into the performance of their operations. With the correct management information (MI) to hand, MGAs can react more quickly to changing market conditions as well as adjust premiums, underwriting criteria, and coverage accordingly.
How coverholders can increase their value to insurance capacity providers.
Lloyd’s coverholders face very similar challenges to those of MGAs. According to Deloitte: “Delegated propositions and distribution that lack a niche will lose attractiveness to capacity providers and may prove ineffective or uneconomical to MGAs in the market.”
One way for coverholders to set themselves apart is to ensure they fully understand the risks they choose to underwrite — and can demonstrate that understanding to their existing or prospective capacity providers.
According to Charles Taylor: “Coverholders will need to prove they understand and are able to manage the risks if they are to convince their capacity providers they merit ongoing support. For the capacity providers, if they are in Lloyd’s, being able to evidence that understanding will go a long way should they wish to extend the scheme and increase the capacity. The primary market will also need to reassure their reinsurance partners they understand the business when it comes to their treaty placement.”[1]
As we’ve already seen, carriers want to know that their coverholders are bringing in the right business with the right margins, usually by leveraging the specific expertise that the carrier lacks. What they want most of all is proof that they can trust their coverholders to continue to underwrite risks profitably. This is part of the process when future-proofing a relationship.
How Novidea can help
The common thread in a lot of the challenges we’ve explored is data. Clearly, to help provide extra value to insurance capacity providers — as well as prove it — brokers, MGAs, and coverholders must be able to collect, cleanse, and analyze data to a much greater extent than ever before. For some, this will involve finding ways to digitalize existing processes and collect client and carrier data in one place where it’s possible to get a 360-degree view based on client, policy, insurance capacity provider, or line of business. This requires some level of agility within operations but also the internal flexibility to adapt practices to deliver on required revenue targets.
As Howard Lickens, CEO of Clear Insurance, puts it: “Brokers have data sitting in pockets all over the place and never being reconciled. There must be huge efficiency gains but also extra insights that can be gained from all this data. The chaotic way that commercial brokers have been managing their data should not continue. Tech is fundamental.”
Let’s take a look at the ways Novidea helps intermediaries to make better use of their data, which not only helps them to provide more value to insurance carriers but to prove it too.
❖ Integrates all data into one location.
With the Novidea platform and its modern, open architecture and robust APIs, companies can integrate all their customer, policy, and client data in one place. This includes being able to access data from CRM and the Insurance Distribution Platform. As a complete end-to-end solution, companies can integrate every part of the insurance distribution life cycle from quote to claim.
Because Novidea is a secure cloud-native platform hosted on Salesforce, this also means companies can flexibly access that data securely from any device in any location.
“There is a big advantage to collecting data in consistent ways and bringing it together. There are so many types of analyses that can be done that you can only do when you get the data organized first. When you have a really good data set at your fingertips, as a broker, you are then transformed, and your role becomes more valuable.” Ben Rose AON Inpoint
A single view of the truth – Novidea
❖ Optimizes performance management and profitability analysis.
The platform offers visibility into all key business metrics. This means that managers can track employee performance or underwriting performance, as well as the profitability of specific policies, clients, or business lines — all in real time.
Integration with Outlook offers automated time-tracking of customer hours, including meetings and travel. Companies can generate profitability reports based on salary costs, commissions, and customer analysis to prioritize resources effectively. The automated cross-sell and up-sell module suggests relevant product recommendations based on client needs.
“Novidea puts a lot of valuable insight information at our brokers’ fingertips, enhancing their ability to sell and advise customers in a way that is both efficient and lucrative for our business.” José Manuel González, Howden Iberia
Centralized insight at your fingertips – Novidea
❖ Boosts underwriting efficiency.
Novidea’s platform calculates premiums and assesses risk, and generates comparison quotes while also providing all necessary document management, workflows, and underwriting functionalities to take out the repetitive tasks involved with the process. This frees up underwriters to focus on what they do best — underwriting. The easy access to data also ensures that underwriters have all the information they need, never more than a few clicks away.
Novidea’s platform enabled us to streamline policy lifecycle management and provide unprecedented real-time visibility and control of every aspect of our business. It is a holistic solution that enables us to compete in an ever-changing, dynamic environment and grow our business. Shai Simkin, Managing Director, Howden.
❖ Offers excellent data visibility, transparency, and actionable intelligence.
Companies get real-time secure access to clients’ data at the point of need across the entire insurance lifecycle, along with analytics and dashboards for real-time insights into clients, policies, carriers, and more. So, they can see the bottom-line impact and value at a glance.
Data-driven analytics delivers personalized experiences, boosting leads and customer retention.
At the same time, pre-built report templates mean that brokers, MGAs, and coverholders can quickly and easily create custom reports from any data field across the entire platform.
“Novidea’s Brokerage Management Platform enabled us to revolutionize our working patterns. It has helped streamline the policy lifecycle management and visibility across every aspect of our business. It is a holistic solution that enables us to grow our business easily without growing in human resources.” Shay Simkin ACII, Managing Director, Howden Israel
Optimise employees’ working patterns via transparency and visibility – Novidea
❖ Helps improve customer service.
With easy access to client, policy, and carrier data, brokers can offer the best value and most relevant products to clients anywhere in real time. They can also launch products directly to clients using a self-service portal that tracks client activity, engages clients, and allows them to request changes to their accounts.
“It’s important to us that we can keep up with our growth through the data that we are collecting, in conversations with clients, adding value as we bring new MI to our clients, reaching into the data to see opportunities to cross-sell or up-sell.” Lyn Grobler, CIO, Hyperion Insurance
Information management and customer portfolio analysis – Novidea
Brokers, MGAs, Coverholders: Are you ready to increase your value to capacity providers?
Many brokers, MGAs, and coverholders quoted in this article use technology to transform how they use data in their businesses, boost underwriting performance, offer unparalleled customer service, and track the impact on their bottom line. They need access to capabilities that have been future-proofed to drive growth and ensure the resiliency of their business.
All of this helps them to build more compelling and valuable propositions and flexibly manage portfolios of business based on the value generated by each book while increasing the amount of capacity they have access to safely in an otherwise difficult market.
An industry cloud platform is a collection of cloud-based or cloud-native solutions designed for a specific industry. Industry clouds differ from the broader, general-purpose cloud platforms like Amazon Web Services (AWS) or Microsoft Azure because they offer solutions, features, and capabilities that are customized to match the specific needs of industries such as healthcare, finance, logistics, retail, energy, agriculture and others.
The most significant benefit of an industry cloud is the ability to meet an array of specific needs with features like workflow automation, data storage and analysis, processing and auditing tools, self-service customer portals, and more. As Deloitte explains, “Industry clouds can help accelerate the development of industry-specific digital solutions to build a continuously evolving digital core, on top of which you can layer capabilities to help you modernize and innovate—one tech capability or business use case at a time.”
While the insurance industry has been slower than some to adopt these technologies, cloud platforms designed for insurance are starting to emerge. The digitalization of the industry is already underway. Which platforms will take the lead, and which businesses will take advantage of them first?
First and foremost—what are the potential benefits of an effective insurance industry cloud platform?
Enhanced operational efficiency
The right industry cloud solutions stand to revolutionize the way insurance companies operate, providing a scalable and flexible digital infrastructure for their systems. By migrating operations to the cloud, insurers can reduce the burden of managing on-premises infrastructure and focus more on core competencies.
Through integrations, a cloud platform can enable seamless collaboration, eliminating geographical barriers and allowing teams to access and share critical data and applications from anywhere, anytime, on any smart device. This allows for real-time communication and decision-making, enhanced by easy access to data and analytical tools.
Where human insight and decision-making aren’t needed, a cloud platform can also increase efficiency through automation. By automating repetitive tasks, insurers can free team members to focus on what they do best, increase service and processing speeds, and eliminate potentially costly human error.
Cost savings
It stands to reason that enhancing operational efficiency can save insurers by reducing labor costs and improving resource utilization. The scalability of cloud platforms enables insurers to quickly scale their resources up or down based on demand, further reducing costs. Additionally, cloud platforms can greatly reduce the need for physical storage, cutting costs associated with maintaining and securing on-premises data centers.
By leveraging cloud infrastructure, insurers can reduce capital expenditures on hardware and software, as cloud providers handle infrastructure maintenance and upgrades.
Moreover, a pay-as-you-go pricing model can allow insurers to purchase only the resources they use, eliminating overprovisioning.
Improved customer experience
An effective insurance cloud platform will equip insurers to create seamless experiences for customers, allowing them to interact through multiple channels, such as mobile apps, websites and chatbots.
Cloud-based customer relationship management (CRM) systems can give insurers a comprehensive view of customer lifecycles. Automated analysis of customer data can provide insights into customer preferences and behaviors, enabling targeted marketing, personalized offers, and more accurate risk assessments.
Additionally, cloud-based analytics and machine learning capabilities can allow insurers to quickly process vast amounts of data, improving the speed and accuracy of underwriting and processing and reducing the time and effort required for customers to file and settle claims.
All this stands to boost customer satisfaction and retention, as well as creating new opportunities for acquiring new customers.
Increased flexibility and innovation
Key to success in our industry is an insurer’s ability to quickly innovate and adapt to changing market conditions. The cloud platform can facilitate the rapid deployment of new products and services, helping insurers to stay ahead of the competition.
With the ability to scale resources in real-time, insurers can handle surges in demand during peak periods, such as open enrollment periods or after natural disasters. The cloud also facilitates integration with external data sources, such as weather data or telematics, enabling insurers to offer usage-based insurance and personalized risk assessments.
What’s more, cloud-based ecosystems and marketplaces allow insurers to collaborate with insurtech startups and other industry partners, fostering innovation and driving the development of new products and services. An effective cloud platform also enables insurers to experiment with new technologies—such as blockchain or artificial intelligence—to enhance their operations and create unique value propositions for their customers.
Data security and compliance
As promising as the digitalization of the insurance industry is, it is also creating new challenges regarding data security and regulation compliance. To address those challenges, an effective insurance cloud platform will provide advanced security measures, including data encryption, access controls, and regular backups, all to ensure the protection of sensitive customer information.
The right cloud providers will also invest heavily in maintaining robust security frameworks that comply with region-specific regulations.
Early adoption of an industry cloud platform can give insurers an advantage in the marketplace. It can drive innovation, boost efficiency, help meet evolving customer expectations and generate new growth opportunities. Insurers looking to get a head start should work with their CMOs, CIOs, CTOs and chief digital officers to assemble a clear picture of what exactly they will need from an industry cloud platform. They should question potential providers about the flexibility of their solutions and the level of support they can expect during and after implementation. And, crucially, they should ensure the platform is sufficiently modular to accommodate new solutions as our industry continues to evolve.
For example, an open API infrastructure is essential for insurance organizations that want to leverage an industry cloud. APIs are the facilitators of insurance technology ecosystems, enabling your technology and systems partners to connect and collaborate.
ITC Europe’s Digital Insurance Agenda was back in force at Barcelona. It was exhilarating to visit and spend three great days getting to grips with all the latest developments in the word of insurance technology – even if most attendees and speakers spent much of the time talking about generative AI!
To begin, there was a great mix of over 2,000 InsurTechs, MGAs, and insurers at the event, and so many insightful experts – more than 100 speakers over the three days – that it was hard to take in all the great content.
With that said, there were some clear takeaways that I got from the event to share with you that were both relevant and thought-provoking.
ChatGPT has opened up the AI agenda
Ever since the launch of ChatGPT at the end of last year, discussions about generative AI have dominated every tech event around the world. It was no different here.
There was a real buzz around the discussions; journalists were asking questions, attendees were looking for answers from speakers, and the excitement was palpable.
Taking a step back, it seems that there are few active use cases of generative AI in insurance in the public eye. But the buzz around it has definitely increased awareness of the possibilities and potential benefits. The feeling I got from the event was that industry executives who had previously been hesitant about AI are now much more open to discussions.
In terms of AI on the Novidea platform, Salesforce has its own Einstein GPT – the world’s first generative AI for CRM. Because Novidea is built on Salesforce, we’ll soon be looking into the possibilities offered by this technology and talking to our clients about potential use cases.
According to Salesforce: “Einstein GPT will infuse Salesforce’s proprietary AI models with generative AI technology from an ecosystem of partners and real-time data from the Salesforce Data Cloud, which ingests, harmonizes, and unifies all of a company’s customer data.
“With Einstein GPT, customers can then connect that data to OpenAI’s advanced AI models out of the box, or choose their own external model and use natural-language prompts directly within their Salesforce CRM to generate content that continuously adapts to changing customer information and needs in real time.”
We will be talking and publishing more about this as use cases come into fruition.
MGAs gaining appreciation in the market
MGAs have been gaining more importance and influence within the insurance market for a while now. What was clear from the DIA event was the extent to which MGAs are now accepted as mature market players. It’s not just about disruptive new InsurTechs entering the market with a commoditised offering. Carriers recognise the value that MGAs bring – especially those with niche expertise – as key distribution partners in the value chain.
Apinity
Munich-based Apinity was one of the sponsors at the event. This impressive company offers an open API marketplace, and it got me thinking about the potential for Novidea to develop something similar for our clients.
We’re always looking to improve our development and delivery processes, and this approach could help us to do just that. Something I was still thinking about on the plane back from Barcelona – watch this space!
InsurTech funding trends
Besides the hype around generative AI, any InsurTech event will of course be dominated by discussions of funding trends, and DIA/ITC was no exception to this as funding is a big topic for our industry.
InsurTech funding hit record-breaking highs in 2021, with 564 deals totalling $15.8 billion – more than the total funds invested in 2019 and 2020 combined.
Yet, even though that was less than two years ago, the narrative since 2022 has been much more negative, with inflation and rising interest rates stymying the traditional venture capital model and cutting off capital flows into the sector. Funding dropped by 50% in 2022.
It’s not all doom and gloom though. Deals are still being done and new startups and scaleups are still attracting investment. It’s all just a lot less exuberant. From the discussions I was privy to at the event, I picked up on a few interesting trends.
VCs are getting choosier about what business models they invest in and why. Funding is getting harder to find of course, but this is not news. It’s been that way ever since Silicon Valley Bank went bust, the listed InsurTechs in the US share prices plummeted and interest rates started rising dramatically.
With interest rates remaining high – and still increasing in some countries – investors are now much more focused on a route to profitability over pure growth, which was the previous obsession.
Apparently, valuations of InsurTechs have gone from up to 20x revenues to more like 2x revenues. This seems exaggerated but it does prove that valuations are way down and that young startups are finding it almost impossible in many cases to get funding compared to two years ago.
On the flip side, InsurTechs with a strong value proposition, top team, and clear route to profit can still get funding. Novidea, for instance, gained series C funding of $50 million earlier this year.
One result of this is that InsurTech MGAs are now becoming more popular investment targets than full stack propositions. This is partly because MGAs are more likely to either already be profitable or be close to achieving profitability, but it’s also because regulation on full stack propositions are seen as too cumbersome. It adds to the costs, it adds to the risk, and it takes longer for those companies to get set up.
The rise of stellar MGA performers internationally, such as ManyPets in the UK or Cowbell in the US, are two clear examples of the huge profitable growth potential for well-run MGAs who really know their niches.
Further, it’s notable that carriers have significant capital to invest, meaning we might expect more partnerships in the InsurTech space as insurers look to increase their return on capital by finding InsurTechs with great potential.
Start-up challenges
Discussions at the event with insurers suggested that early-stage start-ups are more difficult to integrate with. When they grow, they can struggle with culture, and that pressure leads to their downfall. Execution and culture are likely to play a huge part in which ventures insurers invest in.
For many insurers, the talk was around how many InsurTechs do not invest enough in product development. There was also a lot of discussion around how InsurTechs leverage their assets and customer-base to launch new products that are right for them and help them continue on their trajectory. Some felt that there was not enough of a conversation going on between the product teams and the end-clients.
The other trend discussed at the event was the noticeable increase in digital adoption amongst insurers post-Covid. Now that customers have become more used to relying on digital products and services, insurers are having to respond to this shift in customer demand and going all-in on digital.
What this means for Novidea and our customers
This was a really mixed event for us at Novidea. It’s exciting to know that we’ll be looking into use cases for Salesforce’s generative AI, while also looking into creating our own API marketplace equivalent. At the same time, it’s good to see that digitalisation is increasing across the industry.
Of course, the more carriers that go fully digital, the more onus there is on brokers, MGAs, and coverholders to keep up. Having a best-of-breed IT platform is becoming necessary for doing business with increasingly digitalised clients, partners, and carriers.
If you’d like to discuss your digitalisation or data challenges, feel free to get in touch to see how we could help.
