When transformation comes calling, will agency forces converge … · 2019-09-02 · When...

When transformation comes calling, will agency forces converge with digital forces?

When global insurers started the digital journey, it seemed only a matter of time before agents were replaced by digital apps. Yet, even with the rise of digital offerings, and the launch of digital insurers like Blue and Bowtie, the role of the agent still remains highly relevant in most Asian markets.

1When transformation comes calling, will agency forces converge with digital forces? |

However, while insurers can no longer solely rely on traditional customer engagement models, they also cannot forget their roots. Asia’s millennial insurance customers like the convenience of digital applications and online self-service when it comes to choosing the right product. However, many of them, like previous generations, still enjoy the intimacy of face-to-face interactions with an agent, often someone their family has known for decades.

Keep the best of both worlds by giving agents digital tools

Rather than completely replacing agents with direct digital channels, incumbents need to digitally enable or digitize agency channels and integrate them efficiently with the rest of the business. This can be done by overlaying legacy systems with customer-facing and agent-facing portals and apps, and by equipping the agency force with digital tools, such as iPads. This will allow electronic submission and straight-through-processing in the field, particularly for personal line products.

If agents can use digital tools to make onboarding far more convenient for customers, it will be wholly beneficial. Customers will get the convenience of being able to complete and submit simpler forms online whilst agents will be able to focus their time understanding customer needs and cross-selling other, more profitable products.

Leverage artificial intelligence (AI) to enable new agent capabilities

As agents become more adept at using digital tools, AI will enable them to recommend high-value products tailored to meet individual needs based on analyzing the profiles of similar past customers. Agents are welcoming digitization. EY’s research “The agent of the future” found that more than 77% of insurance agents would significantly value technology that automatically identifies potential opportunities within their existing book. Similarly, in “The broker of the future: Australia EY survey highlights the impact of digital and the need for insurers and brokers to work together”, 78% of intermediaries consider that an insurer’s ability to provide better online access and tools is more important than competitive commissions and other areas of support.1

As millennials start to dominate insurers’ customer bases, it’s clear that incumbents will need to reinvent themselves to survive the disruption of an industry which is well-known for its reluctance to change. Customers who have seamless, personalized experiences in other sectors are now less-prepared to go through insurers’ outdated sales processes or wait months for claims to be processed.

of insurance agents would significantly value technology that automatically identifies potential opportunities within their existing book.

77%

2 | When transformation comes calling, will agency forces converge with digital forces?

2. “Advanced analytics for insurance,” Undiscovered Opportunities, ©2013 Ernst & Young, Australia.3. Ibid.4. “The agent of the future,” ©2017 EYGM Limited.

Improve decision-making with agency analytics

Digital enablement will also allow insurers to profile agents to:

• Make recruitment more effective: With 3% of top agents contributing more than 20% of total first year commissions as indicated in “Undiscovered Opportunities: Advanced Analytics for Insurance Distribution”2, insurers will be able to isolate winning characteristics and identify applicants who are statistically more likely to succeed. Insurers can also use AI to address attrition rates. Currently, 20% of agents leave in their first year and more than 89% of those under the age of 30 only stay in the role for a few years, increasing recruitment and training costs. At the same time, female insurance agents are more likely to remain in the role for longer in comparison to their male counterparts (59% vs. 41%), as per “Undiscovered Opportunities: Advanced Analytics for Insurance Distribution”.3

• Match agents with customers: Insurers will also be able to leverage agent information and map the right agents to the right customer segments for selling the right products.

• Create a full-time sales force: Insurers in countries, such as Vietnam, Malaysia and Indonesia, with thousands of part-time agents, are seeking to consolidate their agency channels by converting their most successful sellers into full-time roles. Analytics will help insurers to identify those most likely to make the transition effectively, with digital tools supporting it.

• Optimize performance and drive retention with more appropriate compensation: Current incentives don’t always align with agents’ priorities or performance. For example, in “The insurance agent of the future: Digital-only players disrupting traditional channels? Agency model still the dominant channel in many markets and growing digitally”, only 19% of agents selling life insurance believe insurers understand them well. Meanwhile, in EY’s research, “The agent of the future: EY survey reveals the need for digital sales tools and closer collaboration with insurance carriers”, it was found that more than 55% of insurance agents4 would consider a lower commission to shift some of the servicing burden to the carriers. Analytics can also help insurers to understand their top agents, determine and correct any mismatches between compensation and performance, and create new compensation models to increase retention.

• Determine behavioral gaps: Monitoring agents’ behavior will yield important insights, such as ensuring whether agents are taking on the right customers or selling them the right products.


Understand the challenges

This is not to suggest that the path to digital is easy for incumbent insurers, who will still need to deal with a raft of issues including:

• Invest in digital tools to support hybrid models: Digitally enabling agents and customers implies investing in end-to-end digital tools. Customers should be able to find the right products, access easy-to-digest policy information, manage their policy, lodge claims and receive settlements online.

• Advanced data management capabilities: Digital sales will allow agents to develop and store customer data from daily interactions, leading to cross-selling opportunities. At the same time, insurers can leverage customer data to offer bespoke products for individual clients. But these benefits will only be possible if both agents and insurers have access to reliable, standardized customer data, and analytical tools and capabilities — not to mention the ability to protect sensitive data, and comply with privacy and cyber security regulations.

• Multi-channel conflict: Insurers must invest in digital without alienating existing agency channels, where agents fear being replaced by technology. For example, in “The agent of the future Korea: EY survey highlights need for customer-centric innovation and personalized sales support”, while two-thirds of Korean insurance agents think it’s important for insurers to improve digital channels to direct customers, only half are positive about the move to online channels.5

• Role of the agent: As the rise of insurtech (e.g., Blue and Bowtie) introduces new models, where agents are removed from the insurance life cycle, agents will need to add more value to warrant their continued involvement. Their role will need to transition from one purely relationship based to that of a proactive advisor, spending less time on servicing and more time leveraging insurers’ digital and analytical tools to provide sales and advice.

• One size doesn’t fit across Asia: With different agency-force sizes and activity ratios across Asia, an insurer’s agency strategy needs to be tailored to the market. For example, in markets with a high percentage of part-time agents, such as Indonesia, the focus is on shifting a part-time, “on-the-side” workforce into an efficient, full-time sales operation. Some countries may even require different agency strategies depending on the local market. For example, a global insurer recently found digital uptake in Thailand to be very high for up-country agents, where it solved a pressing need. However, across its Bangkok agent base, digital uptake was much lower.

of agents selling life insurance believe insurers understand them well.

19%

of insurance agents would consider a lower commission to shift some of the servicing burden to the carriers.

55%

4 | When transformation comes calling, will agency forces converge with digital forces?

Will technology hamper or accelerate agency and digital convergence?

As technology rewrites the rules of business, digital transformation is fundamentally changing the insurance industry. However, with 40% of top Chinese insurance agents questioning their readiness to meet the needs of the next generation (see “The agent of the future: EY survey reveals the need for digital sales tools and closer collaboration with insurance carriers”), insurers may have an uphill task preparing their agents for a digital future.6

The other big factor is generational. The digital journey will certainly be slower if the field force predominantly consists of agents of an older generation and whilst millennial agents are more inclined to use digital and analytical tools, they still only make up a minority of the agent base.

Incumbents will therefore need to engage their traditional channels more effectively , taking agents with them on the journey toward digitization. Digital can offer agents significant benefits, including greater visibility into current and prospective customer data that will help to drive growth, improve service and increase loyalty. However, it will be up to insurers to showcase these opportunities and ensure they complement their agency force across the distribution lifecycle.

Discover how to implement potential strategies to digitally support agents, simplify distribution operations, deploy analytics and help implement new distribution technology.

6. “The agent of the future,” ©2017 EYGM Limited.


Contacts

David KY ChenEY Asia-Pacific Digital Insurance Leader

[email protected]+852 2629 3978

Dustin BallAsia-Pacific Financial Services Advisory


Joel S. LimEY Asia-Pacific Digital Technology Leader


Timothy HungAsia-Pacific Financial Services Advisory


James LinAsia-Pacific Financial Services Advisory


Ben AssanasenAsia-Pacific Financial Services Advisory


Jamie WolfsonAsia-Pacific Financial Services Advisory


EY | Assurance | Tax | Transactions | Advisory

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The better the question. The better the answer.�The better the world works.The better the question. The better the answer.

The better the world works.

February 2019

Undiscovered OpportunitiesAdvanced Analytics for Insurance Distribution

Agenda

Looking Behind the Numbers1

New Insights with New data2

Getting Started3

4

9

17

Section

What is going on0 4

Understanding the agent has never been as easy and yet too complex…

THE CAPABILITY REQUIRED ACROSS THE AGENCY LIFE-CYCLE (A.A.E.R) :

AGENTS HAVE EVOLVED

Agency lifecycle contact strategy:

TARGET AGENTSAGENT VALUE PROP.

AGENT PROFITABILITY

GENCY MANAGEMENT

STRUCTURED AGENCY LIFECYCLE APPROACH

Improve decision making through Advanced Distribution Analytics (ADA)

Agent Acquisition

Enhance productivity

Agent Retention

Business Optimization

Issues

“We don’t know which type of agents to recruit is most effective given product strategy, target client base and market competition”

“We want to understand the unique factors drives sales in the market and how to help our agents to be successful in their career”

“In our efforts to retain agents we are not always taking into account sales quality, ability to influence and value of the sales”

“How can we optimize bottom-line performance at same time offers the most optimal compensation to intensify our agents”

Solution

Find the right type of agent and offer them the most relevant and attractive offer

Identify qualitative and quantitative insight as well as provide modern IT platform to enhance customer experience and efficiency

Take proactive actions to retain valuable agents and extend the agent’s lifetime value

Optimize agent structure and provide market comparable non-linear resource allocation and compensation program

Looking Behind the Numbers

1

Who are your top agents, what do they sell and how productive are they?

How can you further optimize compensation for the next phase of growth?

Who is leaving us and why?

What factor leads to long term consistent performance?

Are more layers associated with more production… or more problems?

What questions can we answer with the data you already have?

Do we know who the top sellers are and why?

Top Producers

Who are they? What they sell? How productive?

• Significant amount of sales comes from the few top agents - 3% of top producers contribute more than 20% of total FYC.

• The productivity gap between top producer and low producing agents is large –only 20% of total FYC is from 70% of low producing agents.

• Higher producing agents sells more Long term life policies, as opposed to Accident & Health.

• Linked and Universal policies are much more prominent in top agents’ product mixes, contributing around 20% of their FYC.

• In most instances, single case sizes were not the main driver – Many top agents have modest average case FYC, but high number of cases and consistent performance.

• Group with the highest performance as a whole are junior level managers with long service.

Distribution of Manpower, FYC and Bonus by productivity Product mix by personal FYC level Compensation effectiveness on production

Correlation between productivity and service length

Can we understand the impact of compensation and structure?

FYC from Leavers

FYC from joint leaver (Producer)

FYC from joint leaver (Manager)

FYC from sole leaver

Adviser Departure Rate by previous Year FYC and Production Concentration

• Seasoned agents (denoted by yellow dots), in contrast to new joiners (denoted by grey dots), cluster above certain thresholds, providing significant evidence of agents tuning their performance to meet specific compensation requirements.

• Presence of extreme low performers suggests inefficiencies in monitoring scheme.

• High productivity agents with concentrated production have highest probability to leave (indicated by (dark) red).

• Significant whole team departures to competitors are observed while new joiners mostly come solely.

• Productivity loss with manager departure can be notably aggravated through whole team departures.

Compensation Optimization Leaver Profile

Distribution of production bonus and Simulation of payment under peers’ compensation scheme

Comparison of FYC from sole leavers and joint leavers

And who is performing…. And who is leaving?

Consistent Performance Agency Structure

Production concentration by Number of good performance years in the last three years

Agency structure benchmarking

• Spread of production over the year likely leads to consistently good performance across different years - only a few high producing agents with good performance in three consecutive years have highly concentrated production (production spread less than 2 months), which is much more common case with occasional good performer.

• From benchmarking, the Company currently has more managerial layers than its peers do

• There does not appear to be significant differences in average productivity between those agents in a taller tree compared with a more branched-out situation, indicating additional managerial layers does not lead to more production

Productivity distribution by layers of mangers above

New Insights with New data

2

Why are top agents top agents?

Do different cities require different approaches?

Which recruits are most likely to succeed?

…

…

…

BUT… other questions are NOT so easy to answer

Why is it so hard to answer these questions?

Getting the data to answer the questions

• Structured and unstructured data• Database management & integration • Data quality and governance

Availability of resource

• Technical skill combined with business insight • Local market knowledge • Business unit inputs and overall project

management

The solution is not always straightforward or accessible. Here are the key challenges in implementing analytics to solve some other business questions:

Asking the right question in the

right way

• Understanding of industry issues• Organization process, culture and the human

element are just as critical as technology to realizing true value from analytics

Sourcing from a trustednetwork

Establishing a personal rapport with customer

Explaining insurance benefits

Policy differentiation

Competitive advantage price

Smooth administrative process

Understanding customer needs

So

urc

ing

& b

uild

ing

cu

sto

me

r re

lati

on

ship

Pro

du

ct

Fe

atu

res

Ad

min

% difference from average Tier 1 Tier 2 Tier 3 Tier 4

Most Top performers source from outside their network & don’t rely on family/ friends

Top performers believe that “customer focus” is the key to converting a lead

Personal rapport, understanding needs & explaining benefits about insurance are very important factors while selling

Top agents don’t waste time on discussing priceinstead focus on explaining the benefits

Smooth administration is desired but not the key to selling

WHAT DRIVES YOUR CUSTOMERS TO BUY INSURANCE?

Source: EY

SAMPLE

KEY DIFFERENTIATORS OF TOP PERFORMERS

Why are top agents top agents ?Conversion driver analysis: top performers know that price is unimportant — but personal rapport is critical

Low High

Low

High

Source: EY

Sales performance is achieved by higher quantity, not byhigher pricing

Top performers are effective in Generating leads Converting clients

Need for comprehensive lead generation & management strategy to help lower performing agents achieve more

QUANTITY# policies per agent

per annum

PRICINGAverage value per policy

Why are top agents top agents ?Performance analysis: quantity drives performance – not pricing SAMPLE

QUANTITY VS PRICING MATRIX FOR ALL TIERS OF AGENTS

Coverage(agents per

million inhabitants)

Market Attractiveness

Region 4

Region 7

Region 6

Region 1

Region 2

Region 3

Region 5

Bubble size: Actual sales

Low

Low High

HighUndercovered

Overcovered-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280 290 300 310 320 330 340 350

P23

P22

P21

P20

P13

P12

P11P10

P9

P8

P49

P48

P47

P16

P46

P44P45

P19

P18

P17

P15

P14

P7

P6

P5

P54P55

P53

P52

P51

P50

P37

P36

P35

P34

P33

P32

P59 P58

P57

P56

P43

P42

P41P40

P39

P38

P4

P3

P2

P1

P25

P24

P31

P30

P29

P28

P27

P26

Need to drive recruitmentin these provinces

Note: P = Province; Market attractiveness is defined as the average of scores scaled to 10 for population, population density and population growth. Coverage is # of agents per million people. Source: EY

What is the geographic profile for an area ?Coverage analysis: recruitment targets need realignment towards market potential SAMPLE

Page 16M

EY Agency Effectiveness Analytics

ethodology & Samples - Strictly Confidential

• Branches are pressured to recruit aggressivelyand resort to easy-to-

recruit younger demographics – hence general intake is too focused on the young (<30) who do not tend to succeed in life insurance sales

• Gender does not matter in recruitment but does matter when it comes to matching agents with customers

Age Gender

19%

23%

38%

38%

32%

11%

9%

30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

“Survivors”

1%

General Intake

0%

<30 30 < x < 42 42 < x < 54 54 < x < 66 66 < x

44% 41%

56% 59%

10%

0%

50%

40%

60%

30%

20%

70%

100%

80%

90%

General Intake “Survivors”

Female Male

% of respondents % of respondents

SAMPLE

Who are those most likely to succeed at insurance sales?“Survivorship” analysis: identify key factors contribute to long term success

DEMOGRAPHIC PROFILE OF NEW RECRUITS (GENERAL INTAKE) VS AGENTS WHO STAY LONG TERM (SURVIVORS)

Source: EY

Jo

b D

esc

rip

tio

ns

% of Income from LI 0% 75% 100%25% 50%10%

XX%

XX%

XX%

XX%

XX%

XX%

XX%

XX%

XX%

XX%XX%XX%XX%XX%XX%

Potential touse data to profile agents before recruitment

X-XX% X- X% X- X%% of respondents

Full time employee with Government

agency/state owned…

Business owner

I am a full time life insurance agent

Full time employee with private sector

Part time employee with private sector

Retired

Part time employee with Government

agency/state owned…

Farmer

Teacher

Sales of other banking and financial products

XX%

SAMPLE

Who are those most likely to succeed at insurance sales?Segmentation analysis: break down the agency population by income derived from insurance sales WHAT % OF YOUR INCOME IS FROM THE SALES OF LIFE INSURANCE?

Getting Started

3

Begins with Asking the Right Questions

Market Insights

What our peers are doing Key trends & Industry

performance What works and what doesn’t

Vision & Strategy

What is our target growth Market management How to manage agents Retention strategy Product Strategy

Company Concerns

Compensation cost is too much Agents are not fully motivated

by current financing scheme Managerial structure is not

cost-efficient

Questions to be

solved

Top agents Product mix Retention Agency structure

Compensation effectiveness Agent motivation strategies Digitalization …

To be solved via performing analytics

and reshaping strategy

Ask

th

e r

igh

t q

ue

stio

ns

Pe

rfo

rm

an

aly

tics

Exe

cu

tio

n &

M

on

ito

rin

g

Gather internal and market data Conduct agent survey Apply data analytic tools Visualize analysis outcomes

Resources and matching skillset Design feasible options Scenario and what-if analysis ...

Integrated multi-channel execution Production pool targeting Agent value management Contact strategies and plans

Prosperity modelling Real-time decision-making Retention progress …

1

2

3

Gather Internal Data

Obtain Survey Data and Market Intelligence

Prioritize and Implement

1

25

Generate actionable business insights

4

Conduct Data Analysis

3

Data Request List

Financial and behavioral impact assessment

Proposed implementation timeline

Compensation simulation by component

Market intelligence from industry SMEs

Detailed diagnostics in productivity

High level positioning maps

Interactive dashboards

Key insights from applying statistical modelling and visualization tools

Key Steps in Your Analytics Journey Ahead

Implementation – make the analytics REALInteractive data visualization gives you an insight into what’s going on

Data visualization can provides users with a self-service analytical capability to explore data and answer questions quickly in a intuitive, drag and drop manner, whilst working across multiple platforms and devices.

What are the Benefits

Quick Turn

Around

Opportunity to save costs or improve processes through better understanding and insight of data

Queries multiple data sources without writing code and transform these into interactive graphical visualisations and dashboards.

Real time validation of hypotheses.

Quick addition of new key metrics to reporting.

Inspect trends and outliers and discover patterns that would not be practical using traditional methods.

Better understanding of data and trends across all business users.

Visualization of Complex Data Sets

Better Informed Decisions

and Outcomes

Higher Awareness

Insight Discovery

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About Ernst & Young

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The agent of the futureKoreaEY survey highlights need for customer-centric innovation and personalized sales support

ii | The agent of the future

The agent of the future is emerging as a proactive advisor in a digital world.

ContentsForeword

About the survey

Executive summary

Key theme 1 Digital concerns and expectations

Key theme 2 Need for standardized and personalized sales support

Key theme 3 Customer-centric innovation will drive improvement

Key theme 4 Expectations of a technology-based innovation sales model

Key theme 5 Agents seek new ways to meet changing market needs

Conclusion

EY contacts

2

3

6

8

10

12

14

4

16

17

Foreword

2 | The agent of the future

The changing role of agents in a multichannel distribution environment is one of the insurance industry’s most urgent challenges and one that impacts all stakeholders.

At EY, our global teams of professionals is helping agents and insurers adapt to the changing distribution landscape and seize the strategic opportunities it represents.

As part of our ongoing process of asking better questions, EY surveyed 300 captive and general insurance agents in Korea to understand their perspectives of the challenges of digital disruption and changing consumer preferences. Their responses offer insights into the potential future of distribution.

We asked agents to share their views on:

• The dynamics of the current insurance market• Their experience with the sales support provided by carriers• Satisfaction with business support systems and the tools provided

by insurers • The future of the insurance market and technology-based innovation

Their responses helped us answer the question about the role of an agent and how that role will evolve in the next three to five years.

We hope the findings in this report make a meaningful contribution to the debate about the future direction of the industry and, specifically, how it will develop in Korea.

Kunyoung Lee Partner, Financial ServicesErnst & Young LLP

3The agent of the future |

Foreword

About the surveyEY conducted a face-to-face survey of 300 captive and general agents in the later part of 2016. On average, agents had 11.4 years of experience, with the vast majority older than 40 years of age. Topics included the future of agents, digital ambitions, satisfaction with the value of service and sales tools that carriers provide, and expectations about how traditional insurance models will change. The findings focus on the insurance market in Korea.

300 responsesSurvey respondents included:

Life, property and casualty

Property and casualty

Life23%

22%

54%

Note: Figures throughout this report have been rounded to the closest 100%.


Executive summary

EY’s recent survey analyzes how sales agents view this change, based on their overall opinions and awareness. The findings provide important input for insurers to determine their strategy for face-to-face versus direct channels and highlight the sales support needed to increase future capabilities.

Technological innovation has led to significant changes in the insurance industry, particularly in channel, sales, product and customer management. Insurance agents that have sold through personal, face-to-face relationships for many years are concerned that the change to a direct channel may weaken their position. However, as technologies emerge, agents also need to rely on information technology (IT) for company-wide support of sales activities, customer management, and product or service enhancement.

In this report, we identify five key themes that emerge from our survey.

4

Digital concerns and expectations Until now, insurance sales depended heavily on the capabilities of agents and brokers throughout the process: products, customer needs, purchasing behavior and risk analysis. Due to the nature of the insurance-buying process, a significant number of agents believe that the development of the internet and digital technology are threats to the traditional distribution channel. They remain skeptical about replacing traditional methods with evolving new channels. A large number of agents agree about the need for insurers to digitize sales tools, and many already have implemented new technology for the sales process.

Need for standardized and personalized sales support Agents are mostly satisfied with the sales support systems provided by insurance companies. However, three areas for improvement were proposed: standardize business practices among different insurance companies to improve the convenience of the sales process, provide agents with sufficient information to support cross-sell and upsell activities, and develop marketing tools that are tailored to agents’ specific needs.

Customer-centric innovation will drive improvement Agents are proposing these improvements for themselves as well as for customer-centric innovation. They are seeking simpler and easier insurance product designs for customers and more efficient processes and solutions that reflect customer needs and expectations. Innovation tends to be greater for agents with higher profit margins, which supports the notion that customer-friendly products and processes are more effective in sales. Moreover, the trend toward innovation is expected to accelerate and intensify through digitization.

Expectations of a technology-based innovation sales model The development of IT and the integration of emerging technologies into the insurance industry are expected to bring vast changes in the market. Agents agree on the growth potential and benefits of digital and insurance technology products, such as usage-based insurance (UBI), telematics and wearable devices. They foresee a shift from traditional insurance business models with the expansion of these new products and other distribution channels.

Agents seeks new ways to meet changing market needs The insurance industry in Korea has grown mainly through traditional agent channels. However, insurance companies now face challenges from a low birth rate, an aging population and insurance market saturation. As a result, the difficulty of customer targeting strategies and securing new customers will increase. In neglecting these changes, traditional insurers tend to focus on new customer acquisitions, which is an effective strategy only in growing markets. The greater need is to focus on new business and underwriting, and finding an optimal midpoint between acquiring new customers and increasing the value of the existing book of business. Our survey findings show that agents with stronger performance are more likely to achieve this balance by developing new business methods.

1

2

3

5

Many agents agree about the need to digitize sales tools, but others remain skeptical.

65%feel strongly about the role of wearables in the future.

33%intend to grow their business in the next five years through new insurer agreements.

50%of agents are positive that online channels will replace traditional business models.

69%think it is important for insurers to improve digital channels to direct customers.

40%believe highly tailored underwriting and pricing need to change in the next three to five years.


1Key theme

Digital concerns and expectations


In the traditional insurance market, it is difficult for customers to understand one’s own needs and fully comprehend the products. Consequently, the insurance purchasing process is highly dependent on an agent’s sales capability. The insurance industry is moving toward digitization and agents view that as a threat. In fact, online (direct) channel expansion is the major constraint on the growth of their business and 27% of respondents rank this within their top-three concerns (see Figure 1).

However, considering that digital technology enables agents to understand the needs of the customers in a timely manner and interact with them in a better way, digitization can be an opportunity to advance from the traditional distribution channel.

First choice

Online (direct) channel expansion

Inappropriate product

Excessive control

Lagging access to customer information and regulations

Restricted access to customer information

Regulations

Decreased investments in analyzing tool and automation tool

Restricted recruits and development

First + second + third choice

29% 28%

26% 24%

17% 29%

11% 23%

9% 40%

5% 23%

2% 15%

1% 13%

Figure 1

of agents are positive about the potential to replace traditional distribution models with online channels.

More than

50%

Major constraints on the growth of insurance carriers’ books of business


1Key themeKey theme

ImplicationsAgents perceive digitization as a major threat in acquiring new customers. Experienced agents are familiar with traditional face-to-face relationships and customer management tools, so they are more likely to be resistant to online channels. Those agents who utilize social media to acquire new customers are expected to continue to do so. Interestingly, of agents who apply social media, those who are the highest users have the most positive year-over-year results. The more efficient contractors (monthly average contract amount) also show greater performance.

67%

29%

1% 1%

25%

73%

1%

33%

66%

1%

19%

79%

2%

32%

67%

26%

74%

Important Neutral Not important

All General agent

Captive agent


Life, property and casualty

Life

Captive agentAgent type

Figure 3

Mixed views about online channelsMore than 50% of agents are positive about the potential to replace traditional distribution models with online channels. It is noteworthy that the percentage of affirmative responses from life insurance planners was significantly higher than that of non-life insurance planners. Moreover, the positive response rate is high among the more experienced agents — those with higher efficiency (monthly average income).

Survey findings show that the frequency of customer touch points throughout the claims process impacts an experienced agent’s reluctance toward the internet channel. It also influences the customer loyalty of more efficient agents. Among both property and casualty and life agents, 52% believe that a website can replace most face-to-face interactions (see Figure 2).

Agents need more support from carriersAgents perceive digitization as a threat to the traditional channel; however, they expect insurance carriers to provide more digital tools and support. Almost 70% of agents believe that insurers need to improve digital channels and support implementation of digital and mobile devices (see Figure 3). The percentages are even higher for captive and life insurance agents.

Agents’ usage of social media to acquire new customers is high. More than 50% of agents, especially those with less than five years of experience, are using social media as a channel to attract new customers. This compares with only 28% of agents who have more than 20 years of work experience.

Figure 2

52%

31%

16%25%

9%

44%

17%

32%

26%

66%38%

42%High Neutral Low

All LifeProperty

and casualty Life, property and casualty

Degree to which a website can replace most face-to-face interactions

Extent to which insurers need to improve digital channels to direct customers

2Key theme

Need for standardized and personalized sales support


Agents utilize infrastructures, such as processes, systems and data, provided by the insurer. From the user’s perspective, improvements are needed. Given that it is difficult to acquire new customers and that productivity is stagnating, there is a high demand for tailored infrastructure and standardized processes.

The online support that insurers provide is satisfactory (see Figure 4). However, the degree of satisfaction among general agents and non-life insurance agents is low. General agents have a tendency to select an insurance company based on the quality of online support, so it is necessary for insurers to improve and invest in digital channels. In fact, general agents see an enhanced business support system as the main area needed for insurers’ support. This tendency is higher among comparatively less experienced agents. In Figure 5, captive and general agents cite the top preferred means for insurers to support their businesses: improving proprietary products, tools and platforms; and offering competitive commissions.

69%

27%

4% 5%21%

74%

3%

33%

64%

4%11%

85%

5%

33%

62%

21%5%

74%

Satisfied Neutral Unsatisfied

AllGeneral agent

Captive agent


Life, property and casualtyLife


Figure 4

Captive

Improve proprietary products

Improve tools (customer relationship management, commissions management)

Competitive commissions

Improve platforms and access to third-party products

Sales operations support

Policyholder servicing support

Recruiting support General

30.0% 23.3%

14.7% 23.3%

20.0% 17.3%

20.7% 17.3%

8.7% 7.3%

5.3% 8.0%

.7%

4.7%

Figure 5

Rating the online tools that insurers provide to agents

Preferred method for insurers to support agents’ business

9

Key theme

The agent of the future |

2Key theme

Implications Agents are demanding more personalized sales support and standardization in the processes, systems and data provided. They are selecting insurance carriers based on the online tools they provide and proprietary products and services that differentiate them from their competitors. While leads and new business are important, agents are most concerned about developing the customer relationship. This will enable them to grow within their existing markets and expand into new ones.

Simple tasks should be standardizedSince general agents deal with various companies, diverse products and processes, there is a significant need for standardization. Convenience can be improved by analyzing business process gaps for each company, standardizing the business using leading practices and improving systems. Agents surveyed agree that value would be added if the workflow for simple tasks was standardized across multiple insurers.

From a sales perspective, there is also a need for advanced systems and customized information. Agents said customer relationship is the area in most need of improvement for market expansion (see Figure 6). In general, agents overall and those with more experience say that system and data improvements are crucial for customer relationship management.

More customer data and better marketing support neededCross-sell and upsell activities are cited as the key ways to enhance agent productivity. However, agents feel the information provided based on customer requests is insufficient. In fact, only 11% of respondents say that insurers always offer the data about a particular customer that is required for cross-sell and upsell activities. In contrast, 40% of agents say the data is offered sometimes and 32% say often. Insurers need to consider how to provide their agents with enough information about cross-sell and upsell activities to meet customer needs at the right time.

Agents responded that insurer-driven campaigns with pre-built components that could be tailored for an agent’s need are the most important attribute in supporting an insurer’s sales and marketing activities (see Figure 7). This signifies that marketing campaigns driven by insurers need to be customized to agents’ specialties and needs.

Insurer-driven campaigns with pre-built componentsthat could be tailored for my needs

48%

22%

20%

7%2%

1%

Improved customer relationship management tools

Improved lead distribution

Campaign tracking tools

Better direction for branding, language and visual identity

Resources to coordinate day-to-day marketing operations

Never

11%

40%32%

12%5%

Sometimes

Often

Always

Not applicable to my business

Captive

Customer relationship

Leads

New business and underwriting

Claims and benefits

Existing policies

Billing and servicing

Commissions tracking and payment

Commissions tracking and payment

Administrative (appointments, etc.)

Market intelligenceGeneral

26% 34%

10.7% 14.7%

16% 12.0%

4.7% 8.7%

14.7% 7.3%

14% 8%

6.7% 6.7%

2% 4%

.7%2.7%

4.7% 2%

Figure 7

Figure 6

Systems or data that needs to improve if agents are to expand their businesses

Degree to which insurers offer data about a partiuclar customer to cross-sell or upsell

Insurer support for agent marketing and campaigning efforts

10

Customer-centric innovation will drive improvement

| The agent of the future

Key theme

3

Agents of the future are looking to insurers to provide a customer-tailored product design system, as well as a wide range of products (see Figure 8). These areas of support were cited most by tied agents, property and casualty insurance agents, and high-performing agents. The response highlights the need for insurers to be more innovative in enhancing products and improving processes and systems that address specific customer segments.

Captive

Product range

Product customization,price, commission

Distribution services

Websites

Call center

Documentation fulfillment

SponsorshipGeneral

28.7% 29.3%

38.7% 28%

11.3% 14.7%

4.7% 5.3%

8.7% 5.3%

2.7% 6%

5.3% 11.3%

Agents expect insurance products to be simple, with many available features to address a wide set of needs.

Figure 8

Areas of support that agents expect from insurers


Key theme 3Key theme

The new products that agents desire most should be customized by price and commission, and offer a wide product range. Products that are tailored by price and commission have a simple design, require a minimum number of application questions and are customer friendly. Survey findings confirm that agents expect insurance products to be simple, easily understood by customers and offer many features to address a wide set of needs (see Figure 9).

ImplicationsAgents want enhanced support for themselves and their customers. In particular, highly efficient agents have a greater need to support customers with tailored processes and systems that include underwriting and pricing. In the future, agents want to offer products that are simple, easy to understand and convenient to purchase.

Highly tailored underwriting and pricing

Limited set of easy-to-understand features

Limited application questions

Many available features to address a wide set of needs

Suite of complementary products

37.7%

40%

40.7%

33%

26.7%

Figure 9

Products or product changes required to address the market

4Expectations of a technology-based innovation sales model

12

Key theme


Agents expect new insurance products that use digital devices to significantly impact their business (see Figure 10). Tied agents and life insurance agents, in particular, highly value the impact of new products for digital and mobile devices.

69%

29%

3% 2%

28%

70%

3%

29%

67%

29%

71%

5%

27%

68%

26%

74%

Positive Neutral Negative

All General agent

Captive agent

Property and

casualty

Life, property

and casualty

Life


Figure 10

65%of agents feel strongly about the value of wearable devices.

The impact of emerging technologies on business

13

Key theme


4Key theme

Most of the respondents are positive about paying a servicing fee to specific customers — and highly efficient agents responded positively. The role of agents will shift from managing existing customers and contracts to collaborating with IT to better meet customer needs and focus on sales and growth.

In fact, 65% of agents feel strongly about the value of wearable devices (see Figure 11) and 66% of agents are positive about the role of UBI (see Figure 12). They cite motor vehicle coverage, health and life insurance as opportunities to use UBI in the future. Interestingly, those same agents who are also positive about wearable devices and UBI, generally have the longest working experience.

ImplicationsAlong with banks and other financial services companies, the insurance industry is accelerating its collaboration with IT. Agents are positive about the impact of technology in servicing customers. They have high expectations for a new sales model that extends from the traditional approach that centers on product sales to one that will focus on customer relationship management and service. Emerging technologies, such as wearables and UBI, will play an important role in this new model.

65%

30%

5% 3%

33%

64%

7%

27%

66%

29%

3%

68%

3%

30%

67%

58%

42%

High possibility Neutral Low possibility

All General agent

Captive agent

Property and

casualty

Life, property

and casualty

Life


66%

28%

6% 5%

29%

67%

8%

27%

65%

28%

3%

69%

3%

33%

63%

16%

16%

68%

Important Neutral Not important

All General agent

Captive agent

Property and

casualty

Life, property

and casualty

Life


No

4%

33%

41%

19%

3%

Yes, would consider

Yes, would prefer Yes

Not sure

Figure 11

Figure 12

Figure 13

Perceived role of wearables in the future of insurance

Perceived role of UBI in life, health and other insurance lines

Give up part of agent’s role in servicing to free up more time for sales and growth

5Agents seek new ways to meet changing market needs

14

Key theme


Korea is experiencing the same demographic issues that Japan faced 20 years ago. Changes in the demographic structure will significantly impact the insurance customer profile. Faced with this demographic change, agents need products that reflect specific generations.

Agents express the most concern about about developing products that target specific age groups and reflect Korean demographics. In fact, 26% of agents want insurers to create products that ultimately attract baby boomers, Generation X and millennials (see Figure 14). More than 21% see a need to increase marketability as a distributor of innovative products.

Create products that better address the needs of Gen-X and baby boomers

Increase marketability as a distributor of innovative products

Enable entry or further penetration into market segments

Create products that better address the needs of millennials

Reduce effort to underwrite

Reduce effort to sell

Connect with and support innovation efforts within my organization

Reduce effort to service

8.2%

9.1%

11.4%

16.9%

21.5%

26.0%

1.8%

5.0%

Figure 14

How product innovation could help grow the business

15

Key theme


5Key theme

ImplicationsIn a mature market, it is expected that the difficulty in securing new customers will gradually increase. However, agents in general are still focusing on acquiring new customers and contracts. In contrast, highly efficient agents are developing new methods of sales in response to changing market conditions and customers. The fact that 10% of agents cite they have no specific plans for growing their business in the next five years highlights opportunities in the insurance industry to better engage with customers and become more innovative.

Our survey reveals that agents prefer increasing existing customer insurance premiums and new customer insurance contracts as methods of sales. However, with stagnating insurance penetration and the low birth rate, it is not efficient to focus on new customers, particularly for those agents with less experience. Agents with more experience tend to keep an optimal balance of new customers and existing customers. Those with high profiles tend to develop new sales methods and acquire new knowledge to attract new customers.

Agents agree that new insurer agreements, acquiring new knowledge, and developing more structures and new products are the key areas of focus in the years ahead (see Figure 15).

New insurer agreements

Acquiring new knowledge

Develop new business structures

New product in new insurance market

Nothing specifically planned

20.3%

22.7%

33.3%

13.3%

10.3%

Figure 15

Steps to grow the business over the next five years

Improve agent

experience

Simplifydistributionoperations

Deployadvanced

distributionanalytics

Implementnew

distributiontechnology

Design next-

generationagent portal

Build agent advice

and sales tools

Potential strategies

Build agent loyalty and “wallet share”

Improve sales productivity

Reduce distribution operations complexity

and cost

Support policyholder experience

improvements

Distribution results

Figure 16

Our survey supports a number of carrier strategies that help improve distribution results.


ConclusionTechnological innovation will help the insurance industry develop strategies and operational processes by lines of business. However, it is more desirable first to define and prioritize a long-term, enterprise-wide strategy and then determine the direction and implementation to maintain a consistent innovative platform. From this perspective, EY has a track record with significant experience helping clients develop strategies for management, functions and operations, as well as providing operational support.

EY has worked with insurance carriers to execute potential strategies that help them support/help their agents, electronically simplify distribution operations, enhance customer and policy management through data and customer analysis, and help automate core processes such as underwriting and claims (see Figure 16). Our survey findings support the concept that insurers and the agent of the future will be stronger by working together.


Kunyoung Lee Partner, Financial ServicesErnst & Young LLP+82 2 3787 [email protected]

Jaehyung ChoManager, Financial ServicesErnst & Young LLP+82 10 2679 [email protected]

EY contacts

EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© 2017 EYGM Limited. All Rights Reserved.

EYG no. 03050-174Gbl 1612-2134350

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The insurance agent of the future

Digital-only players disrupting traditional channels? Agency model still the dominant channel in many

markets and growing digitally

For many insurers with a strong agency backbone, achieving active agency growth year on year can be a

challenge as non-agency channels become disruptive. Equipping legacy agency force to be digital-ready

is a greater problem given the speed of technology acceptance of policyholders outpace that of the

selling agent. EY surveyed top agents and found 40% of respondents question their preparedness to

meet the needs of the next generation.

The genesis of Agency Management began as early as 100 years ago in China where distribution was by

way of ‘individual agent’, i.e. an agent is assessed and rewarded on self-production. More often now we

see agency hierarchy from a manager leading 5 agents to district directors with army of 100-plus agents

many whom are managers-of-managers and in need of digital tools. The complexity here is shifting top

agents who are comfortable with traditional face-to-face sales interaction to a digital-friendly approach,

the proactive-advisors model.

The proactive-advisors’ needs

Insurance agent’s role is transitioning from a pure relationship-based role to a proactive-advisor role,

the more data an insurer can provide to the distributing agent through technology and analytics, the

higher the closing ratio of each sales opportunity.

A proactive-advisor in a digital world demands the following from insurers:

- More time on sales and advice, less on servicing

- Growth from new products and cross-selling

- Shifting from representative role to customer advocate

- Be an integral and key part of insurer’s omni-channel strategy

- Sharing control of customer with insurer

- Digital and analytics sales tools

The agent of the future is emerging as a proactive-advisor in the digital world, this is characterized by

more focus on the use of digital and analytical tools in the sales process and greater collaboration with

the insurer to deliver enhanced customer value.

On the operational front, the landscape of customer management is far from the traditional means of

paper-based selling, as insurance agents become ‘technologists’, with more than three-quarters of

boomers use handheld devices, and millennials the largest spendable customer group, agents indicated

that they need different tools and products to meet the needs of these groups to capture the ambitious

growth of insurers.

Understand your top agents

How insurance agents perceive their insurer’s overall distribution strategy is a key driver of agency-

stickiness. Survey findings reveal that agents who sell commercial lines understand the most about how

they fit into the insurer’s overall strategy, whilst personal lines and life insurance understands the least.

Only 19% of agents selling life insurance believe insurer understands them well. This is a prompt signal

for insurers to engage top agents into distribution conversations, and really understanding what an

agency needs, at the end of the day they are the valued partners who bring in the premiums.

Top agents are concerned how they fit into the overall distribution model as non-traditional channels

becoming the trend. The degree of threat is more apparent in property and casualty segment

anticipating impact of digital leading to direct distribution.

What does good look like for Agency Distribution Strategy?

The effectiveness of Agency Management model is the ability for an insurer to identify the right recruit

mix, ensuring the sales platforms are in place and products can be pushed to market quick enough for

the recruit’s client pool. The next generation of agency force will depend heavily on digital data to (1)

identify needs of segmented customers tied to product offering (2) identify and groom future agency

force (3) maintain persistency of in-force policies through greater knowledge about the individual client

with a 360-view.

Retaining quality existing agents and onboarding quality recruits has been a key performance measure

of life insurers in Greater China. Successful insurers have been able to better understand agency through

qualitative and quantitative approaches to derive key success factors to help improve agency

performance:

- New recruits survival analysis

▪ Identify current agents and potential new recruits most likely to stay long term and

succeed in the insurer given the product offerings

- Patterns of agency movements

▪ Identify through agency segmentation having the highest probability of departure by

their productivity and concentration level

- Leaver and inactive profile study

▪ In-depth analysis of attrition patterns, both in terms of leaving the insurer and inactive

agents, including demographic profiles, recent productivity and performance

- Market attractiveness benchmarking

▪ Build geographic profiles with segmentation strategy and highlighting attractive market

segments for both recruits and customers

- Product feature analysis

▪ Analysis of features of popular products and baskets across customer segments to identify recurring characteristics. Market differences would also be taken into account where relevant

▪ For cases of customization, analysis and categorization of the common requests to identify high demand features and options would also be performed

Insurers are looking for analytical tools to support their agency channel, but how?

Selling excellence through digitization is about reshaping agency distribution to support insurer strategies built around technology to calibrate with markets and tactical initiatives for each local business units for an effective agency operation. Typically, digital designs to enable agency business through:

- Developing an ideal agency sales journey ▪ Design an ideal agent experience to optimize the distribution model ▪ Review the agency sales journey alignment with the end-to-end customer journey

- Back office operation optimization ▪ Review all high impact functions such as underwriting and claims ▪ Optimizing these back office operation and processes to enable agents spending more

time on sales than administration - Performance management

▪ Review and enhance KPI monitoring tools for both agent and management to review and allow premium improvement of all business units

- Infrastructure capabilities ▪ Assess current agent support models including portals, self-service and in-field support

tools ▪ Identify opportunities for improvement in area of scalable technology amongst markets

Agents are concerned with digital capabilities of the insurer and tools that generate leads for them and

quality data points on customer needs for faster sales closing. This ties back to how close the

relationship is between the selling agent and the insurer, more and more agents are frustrated over the

online and mobile capabilities of their insurer. This sparks the need to rethink their digital offerings to

agents.

Evaluate and Strategize distribution models to support agents

A collaborative process will allow carriers and agents to interact and strengthen their relationship, extending this customer experience to the policyholder, this builds the agent of the future to be a stronger, more productive agency force through strong data analytics and distribution technology.

Many insurers seek help implementing potential strategies that digitally support their agents, simplify distribution operations, deploy advanced analytics and help implement new distribution technology. We have found listening to valued distribution partners (agents) can allow an insurer provide deeper, more robust experience and support agency management to rethink their commitment to the agency model.

“Timothy Hung Director, Transaction Advisory Services, Financial Services, Asia Pacific Timothy is a Director with EY’s Transaction Advisory Practice in Asia Pacific. He began his career in Property and Casualty Insurance (Large Catastrophic Insurance Claims) with extensive exposure to Life Insurance for over 20 years. He poses experience in the Financial Services Sector, with primary focus on Strategy and Integration work within Insurance, Pension and Bancassurance businesses in the Asia Pacific Region. He has significant experiences in process improvement, distribution, transformation, integration, and project management across 18 markets in the region”

“Alison Poon Senior Consultant, Transaction Advisory Services, Financial Services, Asia Pacific Alison is a Senior Consultant in EY’s Transaction Advisory Practice in Hong Kong. She has over five years of experience with a focus in the Investment banking and financial services industry. She specializes in providing transaction / M&A support to clients including strategic planning, due diligence, pre and post deal support“

“Stephanie Zhang Senior Consultant, Transaction Advisory Services, Financial Services, Asia Pacific Stephanie is a Senior Consultant in EY’s Transaction Advisory Practice in Hong Kong. She has worked on several cross-border transactions in both EMEA and APAC for financial service firms, including several Fintech transactions in Southeast Asia and the Middle East. She specializes in pre-deal commercial due diligence as well as market and target attractiveness study”

The broker of the future — AustraliaEY survey highlights the impact of digital and the need for insurers and brokers to work together

ii | The broker of the future

ContentsForeword

Executive summary

Key theme 1 Disruption is the new black

Key theme 2 Distribution models are under strain

Key theme 3 Optimize the value chain and improve collaborative service model

Key theme 4 Increase automation and improve digital tools

Key theme 5 Codevelop new products and services

The broker of the future

Survey methodology

EY contacts

1

2

8

10

12

16

18

4

19

20


1The broker of the future |

Foreword

The changing role of the broker in an increasingly multichannel distribution environment is one of the industry’s key challenges and one that impacts all stakeholders (for brokers, how to adapt and prosper in the future; for insurers, how to integrate brokers into their wider distribution strategy; and for consumers, how to get the most value from their brokers). Insurers who develop the optimal broker model for the future have much to gain.

At EY, our global team of professionals is helping both insurers and brokers adapt to the changing shape of distribution — and seize the strategic opportunities it represents.

To support this ongoing work, EY surveyed insurance brokers in Australia to understand their perspectives on the challenges of digital disruption and changing consumer preferences — and to paint a picture of the potential future of distribution.

We asked brokers about:

• Their experience with, and expectations of, insurers• The impact of direct channels and prospects for growth• The dynamics of the broker-insurer relationship• The future of insurance products and value propositions

Their responses have helped us to answer some key strategic questions: What will the broker of the future look like? How and where will brokers collaborate with insurers? What will be the future relationship between insurers and brokers?

At EY, we believe the better the question, the better the answer, the better the world works.

We hope this report helps to raise better questions in the debate around how the industry will develop in Australia, starting with the question:

How can insurers and brokers be stronger together?

Grant Peters Imran Ahmed EY Oceania Insurance Sector Leader EY Oceania Insurance Customer & Growth Solution Leader


2 | The broker of the future

Executive summary

The answers revolve around data, analytics and digital tools that are at the core of improved customer engagement, product innovation and underwriting excellence. These capabilities will help insurers and brokers clearly define the value they provide — more than just a solution to “underwrite” risk — and enable better risk identification and relationship, and customer and claims management with an outcome that benefits all.

While insurers have the financial strength and scale to invest in sophisticated digital and analytics capabilities, they have not traditionally had depth in customer data to leverage this. Many have minimal or fragmented customer data. Conversely, brokers’ long-standing, integral role in managing customer relationships and building trust can generate quality customer data and insights; however, brokers do not always have the tools to mine this. Given these dynamics, we believe that insurers and brokers will have to collaborate in different and new ways in the future, in order to optimize the value chain and leverage their respective assets for mutual benefit.

It is only by working together that insurers and brokers can best serve their customers, giving both parties renewed relevance in a market that is increasingly exposed to disruption.

Digital disruption is reshaping the entire insurance industry and intermediated distribution channels are no exception. Online price comparisons, new entrants and InsurTech start-ups, and online direct-to-consumer propositions continue to shake up personal lines, and technology is likewise enabling the commercial value chain.

EY conducted a survey of Australian brokers in 2016 as part of a multi-country study into intermediated distribution of insurance products. The findings reveal that these fundamental shifts pose key strategic questions about the future role of brokers — for both insurance providers and intermediaries:

• Which client segments will continue to rely on brokers?

• How will client expectations of brokers change, and how will brokers meet this need?

• How best may insurers and brokers collaborate to create optimal outcomes for their clients?

• How will the existing insurance value chain transform — and who among insurers and brokers will capture the most value?

41 2 3 5

Disruption is the new black

Distribution models are under strain

Optimize the value chain and improve collaborative service model

Increase automation and improve digital tools

Codevelop new products and services

In this report, we identify five key current and future state themes that emerge from our survey:

Executive summaryData, analytics and digital tools are capabilities that will help insurers and brokers define the value they provide.

75%think innovation around product bundling could help grow their business.

81%

More than 40%of brokers see direct-to-consumer channels as a significant or major threat to their business.

43% are unhappy with the consistency of interactions with insurers.

More than 80%would significantly value technology that automatically identifies potential opportunities within their existing book.


of brokers expect support from insurers around product customization.

1Disruption is the new black

Key theme


Industry disruption is here. Online comparisons have improved pricing transparency in the market, new entrants are threatening disintermediation and many insurers have significantly grown their digital, direct-to-consumer channels — a move perceived as a threat by the vast majority of brokers. Investment in InsurTech is booming, more than tripling in 2015 to approximately US$2.6 billion — with the strong potential to threaten traditional insurers and brokers alike.

Innovation has greatly disrupted the personal insurance market — with the prospect of value comparison websites, robo-advisors, social brokers and peer-to-peer insurance on the horizon, as investment in InsurTech ramps up. Now, the less complex end of the commercial market is likely to go the same way.

Industry innovators: InsurTech start-ups

Embroker Cloud-based platform that provides commercial clients with a dashboard, identifying potential risks and means of securing coverage, coverage gap analysis, risk advice and claims support

Coverwallet Mobile app that provides commercial insurance advice and a single view of existing commercial policies; facilitates free quotes through a range of major insurance carriers

FinanceFox Mobile or tablet app that provides a single view of insurance policies that may be purchased or cancelled through the platform; offers chat-based service (including claims reporting) and option to use your preferred broker

Knip Mobile solution that aggregates existing insurance policies, compares and identifies gaps or duplicate cover, and provides access to brokers to assist in maintaining comprehensive coverage


1Key themeKey theme

Fear of the unknown: direct threat fades when brokers understand their role Intermediaries expect the disruption already occurring in personal insurance to make its way into commercial lines, starting with the small and medium-sized enterprise (SME)market, and specifically micro businesses. More than two-thirds of commercial brokers (69% vs. 42% of life brokers) see the market shift toward online and direct as a major constraint to their growth.

Across all types of brokers, nearly half of intermediaries consider the direct-to-customer channel as a significant or major threat to their business (see Figure 1).

Unsurprisingly, many question the quality of the client experience in the channel, seeing it as slower, less responsive and less tailored to customer needs.

of commercial brokers see the market shift toward online and direct as a major constraint to their growth.

69%

Figure 1Figure 1:

Significant threat

Major threat

Some threat

Slight threat

No threat

22%

21%

31%

17%

10%

The extent to which the insurer direct-to-customer channel poses a threat to business

Notably, however, those brokers with a strong understanding of where their business fits into the insurers’ distribution strategy are less concerned about the move to online:

• Only 39% of those who understand their place in the strategy view direct-to-consumer as a significant or major threat to their business — vs. 46% who claim to not understand how their business fits in.

• Intermediaries who are clear about their position within the insurers’ channel strategy feel insurers’ improvements to digital direct channels are notably more important than those with less clarity around their position (42% vs. 13%, respectively).

In fact, moves toward multichannel create new opportunities for insurer and broker collaboration, including new market revenue and sharing business plans and investments. The future broker who collaborates and co-develops with insurers will be better placed to capitalize on this shift.


1Key theme

Industry disruption: participate or lose What does the future hold for brokers? Beyond expanding their core businesses via organic growth and new customer acquisitions, 58% of intermediaries (including 74% of medium-to-large brokers) plan to drive growth through new insurance products over the next five years. Almost half expect to enter into new insurer agreements to help grow their businesses as 45% pursue acquisitions.

In this environment, doing nothing is not an option. Intermediaries relying on business as usual will find it hard to sustain market share and margins. Brokers need to consider how to participate in the disruption facing the industry. For example, first movers potentially could create — and control — Australia’s first online broker-based site.

Another breakthrough will be the first to offer robo-advice to the lower end of the market. Robo-advisors will not replace human advisors, but will augment them. Supported by robos, a single broker can service many more (low-complexity) customers — fundamentally changing the cost structure of the broking process for this market.

Those adopting this technology will significantly improve their advice quality, conduct risk and broker productivity. Currently, 60% of brokers believe the effort spent on administrative tasks is a major growth constraint (see Figure 2). Investing in automation will free up human resources to focus on growth, and lower organizational costs. This is a critical area where insurers and brokers must collaborate and work together to ensure their systems communicate seamlessly.

Figure 2:

60%

51%

43%

43%

36%

23%

23%

63%

Market shift toward online and direct

Effort spent on administrative tasks

Reducing premiums

Regulations

Recruiting and development of sales talent

Accesss to quality prospect and customer data

Size of investment required for analytics or automation

Inadequate or stagnant products

Figure 2

Major constraints on the growth of brokers’ businesses


1Key theme

Top five disruptive themes for the insurance industry

Disruption — whether digital, macroeconomic or geopolitical — is fundamentally changing the world in ways that would have seemed unimaginable a few years ago. Artificial intelligence and robotics have the potential to reinvent the workforce. Drones are beginning to transform supply chains and logistics, and changing consumer preferences and expectations — most notably in the millennial generation — are altering purchasing behavior and demand for everything from cars to real estate.

EY identifies these top five disruptive themes:

Disruptive theme Potential impact and implications for insurance

Rapid adoption of technology Integrating technology within an evolving insurance marketplace creates opportunities for fundamentally different business models.

• Start-ups offering digital, all-in-one insurance solutions for commercial and specialty risks will enable greater self-service and price competition.

• Customers expect sophisticated data analytics and risk management services.

The Internet of Things (IoT) Emerging technologies such as telematics, wearables, autonomous vehicles and connected homes

• Changing risk profile• Opportunities for new forms of coverage and

means of delivery • Real-time information on risks (assisting with

risk mitigation and management) and claims• Customers expect personalized solutions that

meet their specific needs, given the volume and real-time nature of available data

Advanced analytics Ability to analyze big data and social media to gauge immediate demands, risk preferences and impact of life changes for customers

• Customer expectations for more tailored product design, accurate pricing and better claims adjudication and management

• For insurers, actionable insights into customers’ mindsets to help improve offerings, customer service, better risk-pricing strategies and growth

• For brokers, enhanced capability to justify value to clients and retain customers

Evolution of the insurance ecosystem Industry players need to develop strategies to collaborate with data providers, device manufacturers and other ecosystem participants.

• New ecosystems will allow insurers to offer new services, reshape the customer experience and team with others to enter new markets.

• Successful players will need to critically assess existing and planned future capabilities to decide where and when they will seek to lead, follow or collaborate.

Increase in customer expectations Dramatic changes due to increasing transparency, mobility and the rise of millennials

• New technologies enable service at the lowest possible cost with ease, convenience and low intrusion.

• Consumer potentially can control their own data. Critical assessment of customer needs (by insurers and brokers), consumer demand vs. capability to self-manage, and the ability to collaborate can empower customers and add value.

1

2

3

4

5

2Key theme

Distribution models are under strain

Strategy disconnect: smaller brokers left out in the cold Some intermediaries are seeing signs of changing times, with almost a quarter of brokers surveyed feeling that insurers are either neutral about the value intermediaries bring or believe they are unimportant. One in 10 report that they do not have a good understanding of where they fit in their insurers’ distribution strategies.

Our survey shows that 56% of intermediaries who do understand their place in the insurer’s strategy are more likely to be medium-to-large organizations. Tellingly, it is the smaller brokers who are feeling disconnected from the process. Of concern, these are often the specialists whom insurers will need to play an important role in developing and selling customized insurance as the market fragments.

Furthermore, there is a clear correlation between how valued brokers feel, with their understanding of their place in insurers’ broader channel strategy (82% vs. 52%, respectively — Figure 3).

Clearly, keeping brokers informed and reassured around insurers’ broader distribution strategies and future plans is important to maintaining strong healthy relationships and a precursor to successful collaboration.


Market disruption is pressuring existing distribution models. In their efforts to get closer to customers (and reduce costs), insurers’ strategies are evolving, leaving brokers uncertain about their role and some confusion and duplication of effort in the value chain.

Figure 3:

Intermediaries who do not feel valued (insurers value the intermediated channel as very unimportant or unimportant)

0

20

40

60

80

100

Neutral

Intermediaries who feel valued (insurers value the intermediated channel as very important or important)

Partly or fully understand their fit into insurer’s strategy

Don’t understand their fit into insurer’s strategy

82%

12%6%

52%

26%

22%

Figure 3

Intermediaries’ perception of feeling valued by insurers, by their understanding of how they fit into insurers’ distribution strategy



This difference of opinion over roles and responsibilities in the value chain suggests the industry is currently inefficient — creating the potential for rationalization to substantially improve value chain efficiency and effectiveness.

To achieve growth plans, and remain relevant to customers in the future, both insurers and intermediaries will need to work together to adapt successfully to industry disruption and address the key strategic questions posed earlier: How and where will brokers collaborate with insurers? What will be the future relationship between insurers and brokers? The survey identified these key themes as necessary for future success.

Mixed messages: intermediaries divided on who should serve clientsOur survey highlights polarized views in the broker community. When it comes to providing customer services, 44% of brokers consider their relationship with insurers to be of a collaborative nature. By contrast, another third see sharply divided responsibilities, with insurers left to handle the service, claims or benefits behind the scenes, while leaving the customer relationship entirely in the hands of the broker. The remaining 14% prefer a “hands off” approach and are happy for the insurer to handle the interaction entirely, although the majority of these still want to remain informed.

of brokers consider their relationship with insurers to be of a collaborative nature.

Yet another

44%

33%want insurers’ hands off their customers.

10

Optimize the value chain and improve collaborative service model

| The broker of the future

Key theme

3

Shifting roles and responsibilities Brokers have mixed views on whether (or how) their roles may change in the future. More than half (56%) responded positively to the idea of giving up some of their role in servicing to free-up time to focus on sales and growth — and a quarter viewed this as preferable or essential (see Figure 4).

Unsurprisingly, when it came to accepting reduced commissions or willingness to pay to offload some service burden, far fewer were keen to do so. Nevertheless, a significant segment of brokers would consider or prefer these options to be available (22% for reduced commission and 27% willing to pay).

would consider or prefer the idea of giving up some of their role in

servicing to free up time to focus on sales and growth.

More sophisticated broker segmentation and treatment strategiesGiven the survey revealed mixed views on customer service roles, insurers and brokers need to work together to redefine the future value chain. The focus should be on the mutual aim of optimizing the customer experience, in light of a shifting ecosystem and new technologies. This has the potential both to take costs out and improve quality.

Insurers will need to work harder to understand the views and behaviors of intermediaries — and build this into their broker segmentation and account management structures. Just as the industry has moved to more sophisticated segmentation of end-customers, insurers must also apply behavioral and micro-segmentation to brokers, rather than simply relying on traditional product or size factors.

Figure 4

Would you ...?

56%

Figure 4:

NoYes, would consider

12%

13%1%

Give up parts of your role in servicing to free up more time for sales

and growth

77%

19%1%

Accept a reducedcommission in exchange

for shifting some servicing burden to

insurers

71%

22%

3%1%

Be willing to pay to offload servicing for

certain clients

31%

43%

2%1% 2%

Yes, would prefer

Yes, this must be available in the futureNot sure/don't use



Improve communication and closer working relationships, enabled by technologyCurrently, many brokers are dissatisfied with the quality of their interactions with insurers. One in five rate insurers as very good or excellent in terms of meeting brokers’ needs; 43% are unhappy with the consistency of their interactions. Interestingly, those who prefer to deal with insurers online rate insurers marginally higher for consistency and meeting needs compared to those who prefer to interact via email or phone (consistency 22% vs. 15%, meeting needs 22% vs. 18%).

Part of the solution will be enabling closer working relationships between intermediaries and underwriters. More than four in five respondents indicated that working more consistently with the same underwriters, providing more direct access to underwriters and making underwriters more relationship focused are keys to improving communication between underwriters and intermediaries (see Figure 5).

Respondents also want process-driven changes to help improve communications, such as limits on turnaround times and an appeals process for decisions (see Figure 6).

27%

25%

22%

21%

20%

18%

17%

17%

13%

7%

7%

5%

5%

10%

2%

2%

49%More effective communication with agent/broker

More effective communication with customer

Better agent/broker online tools

Better agent/broker call center

Fewer forms/paperwork

Faster turnaround and response time to claims

Better customer online tools

Better customer call center

Simpler products

Better staff training and education

Better management of claims

Give more authority to brokers on claims

Hire dedicated and experienced staff for claims — no call center

Do not use offshore call centers for claims

Do not actively try to decline claims

Nothing

Simpler claims processes

87%

81%

80%

80%

77%

38%

Consistently work with the same underwriters

Allow more direct access to underwriters

Shift the underwriter’s role away from transaction-focus and toward a relationship-focused engineer of solutions for customers

Create service-level agreements (SLA) that limit turnaround time

Formalize or improve the process for appealing/reviewing a decision

Reduce the number of products that must be underwritten

Figure 5

What could insurers do to enable more responsiveness to claims and benefit needs?

Figure 6

Facilitating better communication between brokers and underwriters

4Increase automation and improve digital tools

12

Key theme


Digitizing back office and service operationsAcross the board, brokers agree that insurers should be providing better online access and tools to support their clients and businesses. Improved platforms and access to third-party products are more important than providing competitive commissions, and improved digital tools (customer relationship management (CRM) and commission management) are highly valued (see Figure 7).

In addition, more than two-thirds of brokers are also looking for increased support for sales operations and in servicing policyholders, indicating that the majority expect insurers to provide support across the value chain.

All of these areas can be enabled digitally to increase efficiency and improve service levels. Previously, some insurers may have hesitated to digitize large parts of their back office or broker support operations to avoid significant investment in new IT infrastructure. But recent advances, such as robotic process automation (RPA), are now making the business case for digitizing back office and service operations far more compelling.

Figure 7

How could insurers better support you and your business?

RPA may be deployed across legacy systems to cost effectively create a virtual workforce of software robots that emulate human execution of existing tasks. For example, software “bots” are ideal for executing frequent insurance processes, such as claims verification and lodgement, and automatically issuing a letter to a third party. Because RPA

can be deployed through existing interfaces, it avoids time and expense in legacy system and process changes.

These findings suggest that, global brokers aside, most intermediaries are continuing to seek a symbiotic relationship, where brokers add value and insurers support them.

Figure 7:

78%

77%

73%

71%

68%

67%

38%

26%

Improve platforms/access to third-party products

Improve tools (CRM and commissions management)

Recruiting support

Succession planning support

Improve proprietary products

Sales operations support

Policyholder servicing support

Competitive commissions

13

Key theme

The broker of the future |

4Key theme

Figure 8

Rating insurers’ performance on online tools provided

The quality of online broker tools is a game changerIf customers are to have positive, brand affirming experiences at every touch point, sales and service channels need to be integrated. To take digital across their intermediated value chain, insurers need to help their distribution partners develop digital capability by sharing resources and expertise; for example, providing brokers with digital analytics and tools to improve customer segmentation, sales and promotional targeting. Providing brokers with digital tools to improve efficiency across all insurer and client interactions is a strategic imperative.

Intermediaries clearly want this, with a significant 78% saying that the quality of online tools — good or bad — directly affects their choice of insurer. This finding was true, irrespective of size or type of business, or preference to interface with insurers primarily via phone, email or online.

Case studyDigitizing highly manual and paper-based business processes for a global carrier

The insurance carrier wanted to deliver a digital agent experience. The current end-to-end process was monitored from the time an application was sent to the insurance company through issuance or decline of the policy. Multiple channels were evaluated: paper, mail, fax, email and e-submission. This evaluation resulted in a deeper understanding of the pain points that customers, brokers, insurance company data processors and underwriters experience throughout the process. These pain points drove specific, digitally focused solutions that insurers could implement in the short and long term.

As a result of this process, a capability model was developed for document management that can be leveraged across other lines of business and use cases. This will speed the data entry process and create a new digital online application that eliminates the need for manual data entry.

Only 30% of intermediaries rate current performance with online tools as very good, and just 4% as excellent. More than 80% of brokers surveyed say that new business or underwriting, claims or benefits and servicing systems all require improvement to drive growth.

of brokers say the quality of online tools, good or bad, directly affects their choice of insurer.

Intermediaries appear to be relatively satisfied with online marketing materials, training and digital policyholder tools — with administrative processes such as commission statements and billings receiving the highest ratings. However, insurers need to improve their online account management, sales leads and application tools and digital onboarding — and integrate them into a single portal login. Currently, almost two-thirds of brokers have to login to multiple systems to use online tools with the same insurer. Not surprisingly, those who only have to login via one system report higher levels of satisfaction with the tools provided.

78%

Figure 8:

Online tools provided to you by your insurers

Commissions and statements

Billing and collections

DigitaI policyholder and policy management tools

Training

Marketing materiaIs and knowledge management tools

Reporting

DigitaI account management tools

Homepage and dashboard view

Event management

Digital onboarding tools

Sales leads and application tools

1 — Poor

2

3

4

5

6

7 — Excellent 4 6 15 41 30 4

3 3 21 32 26 86

6

5

26304 6 10 18

2 7 14 22 26 24

10

2

6 8 20 29 1710

2 7 16 26 26 18 5

3 10 16 21 28 19 3

2 8 16 21 31 20 2

5 4 13 25 32 19 3

12 7 18 22 25 14 3

4 7 19 22 35 12 2

20 16 19 18 17 8 2


4Key theme

New business and sales functions ripe for innovationIntermediaries place significant value on innovation that facilitates new business and sales. More than 80% regard a system that identifies opportunities within an existing book as highly valuable. Insurers should seek to improve their sales leads and application tools, as well as digital onboarding tools, as a matter of priority, as these are areas of low satisfaction but high importance. The attributes of online tools are shown in Figure 9.

Figure 9:

Low satisfaction,high importance

Low satisfaction,low importance

Sales leads andapplication tools

Digital onboardingtools

Homepage anddashboard view

Marketing materialsand knowledgemanagement tools

Training

Reporting

Satisfaction

Impo

rtan

ce

Attributes of online tools, importance vs. satisfaction (%)

Digital policyholderand policymanagement tools

Event management Digital accountmanagement tools

Commissions andstatements

Billing and collections

High satisfaction,high importance

High satisfaction,low importance

Figure 9

Rating attributes of insurers’ online tools


4Key theme

Intermediaries need to “get onboard” with online toolsAlthough the vast majority (97%) of intermediaries use online tools, more than half (54%) would prefer to communicate with insurers via phone or email. This could be a real challenge, given the potential for industry platforms to drive substantial efficiency gains by enabling insurers and intermediaries to automate many back-office processes, including policy approvals and renewals. In fact, 29% of brokers prefer to interact with insurers using online industry platforms, compared to small percentages that rely on text applications or messaging.

By doing business on an industry platform, intermediaries and underwriters can significantly reduce transaction processing costs and improve responsiveness. Customer information is processed once and updated to both the insurer and intermediary’s back-office systems, eliminating multiple handling and reducing possible data entry errors. Thus, staff may be redeployed in more value-adding roles.

To play their part in process automation, intermediaries need to work on staff appetite for and capability to use online tools and industry platforms.

of brokers prefer to interact with insurers using online industry platforms.

29%

5Codevelop new products and services

16

Key theme


Figure 10

New products or product changes required in the next five years

Intermediaries hold considerable amounts of customer information and insurers typically hold more investment capital to invest in tools and technology. All parties will benefit from closer collaboration. This will ensure the industry as a whole evolves and innovates, to develop new products and services to address the fast-changing needs of both end-consumers and commercial customers.

Growth opportunities: cyber, product customization and usage-based insurance (UBI)Intermediaries are exploiting new growth opportunities presented by digital. Cyber risk has the greatest potential (86% of respondents), especially by brokers at medium or large firms who almost unanimously (99%) expect growth in these insurance products.

Brokers also expect increasing demand for product customization (81% expect support from insurers in this area), leading to a diverging and polarizing market that will require differentiated solutions for diverse customer segments (see Figure 10).

Figure 10:

79%

79%

76%

73%

60%

13%

Highly tailored underwriting and pricing

Many available features to address awide set of needs

Limited set of easy to understand features

Suite of complementary products

Limited application questions

Other

17

Key theme

The broker of the future |

5Key theme

Case studyUBI: the new normal

The concept of pay-as-you-drive insurance, whereby drivers are charged premiums based on their individual driving behavior, is now relatively well established in countries such as Canada, France, Norway, parts of Latin America and the US.

The concept is now expanding into other segments, such as life and health insurance (pay-as-you-live). When a customer shows lifestyle characteristics that are linked to better health outcomes, such as regular exercise, a healthy number of daily footsteps and a healthy body mass index, their premiums, can be adjusted to reflect their reduced risk. This clearly benefits the customer through reduced premiums, but also benefits the insurer through better pricing, the broader community through reduced critical illness such as diabetes and the government through the reduced cost of health care.

EY believes that this will be a major area of innovation for life and health insurers and has the potential to disrupt an industry that has so far remained fairly safe from the digital disruption that has been seen in lending, motor insurance and payments.

UBI has the potential to innovate across the value chain and provide all parties with benefits — reduce claims costs, reduce policy administration, reduce acquisition cost and enable more effective pricing. Brokers can play a critical role in this industry evolution, by working with insurers and technology providers to codevelop new concepts and products, leveraging their strong client base.

Brokers see multi-feature products to address a wide set of needs and simple products with a limited set of easy-to-understand features. These simpler products will be bundled together to provide more basic customization and offered at a reduced premium (see Figure 11). One thing is certain — customers do not care about the traditional silos of health, life and general insurance, which are now blurring.

UBI (based on telematics, behavioral and social data) is seen as an important growth opportunity — more than 60% responded positively to this playing a significant role in the future of insurance. These innovative solutions will help insurers to better identify risk exposures, design differentiated products and put pricing control in the hands of their customers.

Figure 11

Types of product innovation that will support and grow your businessFigure 11:

80%

75%

70%

66%

65%

58%

58%

11%

Increase marketability as a distributor of innovative products

Bundling of products

Products that are simple and need little explanation

Reduced effort to underwrite

Products to service age demographics, i.e., baby boomers, millennials

Reduced effort to sell

Reduced effort to service

Other


The broker of the futureTo survive emerging waves of industry disruption, the broker of the future must adapt to the changing environment:

Increased specialization

Stronger relationships

Digitally savvy Using advanced analytics to improve risk management

Participate in more fragmented ecosystem

Clear value demonstration

As clients demand specialized products and services, the “broker as generalist” model is unlikely to be sustainable. We anticipate greater specialization as the insurance market becomes increasingly segmented. There will be a greater focus on risk advice, augmented by digital tools and analytics.

We will see an increasingly close relationship between insurers and brokers — one involving a clear delineation of roles and an understanding of the value that each brings. Brokers may align with fewer insurers, but partnerships will be characterized by a broader range of products and services.

Intermediaries will use technology to engage with and advise customers. They will be comfortable using digital platforms and tools to interact with clients and share information with insurers.

Brokers will build analytics and big data capabilities to help them price more accurately and understand and manage risks better or differently. They will increasingly look for opportunities to place risks where they previously may have lacked the necessary data.

Brokers will be part of a wider ecosystem, working with insurers and other third parties to offer new services, reshape the customer experience and enter new markets in collaboration with others. They will want simpler, more innovative products and will be willing to collaborate to codevelop new propositions.

Given fee transparency and a more savvy customer base with access to knowledge-resources, it will be more important for brokers to demonstrate the value of their advice to customers.

Survey methodologyEY conducted research among Australian insurance brokers as part of a multi-country study into intermediated distribution of insurance products in 2016. It consisted of 273 telephone interviews with individuals selling and servicing life or general insurance.


Type of agency/brokerage

IFA/Life

Brokerage

IFA/Life

MGA (managing general agent)

60%

13%

26%

Number of staff

Under 10

11 to 50

Over 5059%

17%

24%

Way of approaching insurers with new business

I am a tiered agent

I have one “primary alliance carrier” but can place business with other insurers

I have 2-5 “most favoredinsurers” but can place business with others

I have 1 or 2 insurers that I favor for each product

I place business with many different insurers

45%

5%

40%

3%4%

Type of agency/brokerage

Tiered agent

IFAFinancial advisorAuthorized representative

MGA (managing general agent)

Independent financial agentSingle office brokerMulti-office brokerNational brokerInternational brokerBroker

9%4%

12%

8%

26%1%

13%

17%

4% 4%


For more information or to schedule a briefing, please reach out to the EY Insurance Customer & Growth teams:

Grant Peters Oceania Insurance Sector Leader+61 2 9248 4491 [email protected]

Imran Ahmed Oceania Insurance Customer & Growth Solution Leader+61 2 9248 [email protected]

Shona Burns Author+61 4 2428 [email protected]

EY contacts


About EYEY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trustand confidence in the capital markets and in economies the worldover. We develop outstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing, we play a criticalrole in building a better working world for our people, for our clientsand for our communities.

EY refers to the global organization, and may refer to one or more,of the member firms of Ernst & Young Global Limited, each of whichis a separate legal entity. Ernst & Young Global Limited, a UKcompany limited by guarantee, does not provide services to clients.For more information about our organization, please visit ey.com.

© 2017 EYGM Limited.All Rights Reserved.EYG no. 04024-174Gbl 1612-2134350ED None


ey.com

The agent of the futureEY survey reveals the need for digital sales tools and closer collaboration with insurance carriers

ii | The agent of the future

The agent of the future is emerging as a proactive advisor in a digital world.

ContentsExecutive summary

Key theme 1 — The threat of direct-to-consumer and digital business models is driving insurance agents’ desire to use digital and social sales tools

Key theme 2 — Agents expect carriers to enable simple customer and agent experiences, which in turn will drive agent loyalty

Key theme 3 — The agent of the future is looking for innovative, customized products to meet changing market and customer demands

Key theme 4 — Agents see close collaboration with carriers (more access to underwriters, less servicing by agents) as driving future growth

Conclusion

EY contacts

3

6

10

12

14

16

17

About the surveyEY conducted a digital survey of 530 insurance agents in the later part of 2016. Topics included the future of agents, digital ambitions, assessment and perceived value of carriers and desired products. The findings focus on trends and differences in the United States.

530 responsesSurvey respondents included:


Small commercial

Life15%

27%

55%




Less paperwork, better sales tools and greater simplicity in processes from carriers will enable agents to be more responsive to customer servicing, claims and product development. Emerging technologies such as digital, wearables, telematics and usage-based insurance (UBI) are providing data sources for underwriting and analytical capabilities to better manipulate and interpret data. These are improving the way insurance companies manage back-office functions and detect cyber threats and other risks. The future is tied to innovation and product simplification, which represents bold cross-selling opportunities for carriers.

EY recently surveyed 530 P&C and life insurance agents to better understand trends, growth strategies and ways in which engagement rules have changed. They were asked about carrier selection, support and perceived value, as well as future growth engines and how they see their role as agents evolving in three to five years.

The direct channel has a major impact on the distribution landscape, as customers become the focal point for every transaction and sale. More agents consider the market shift toward online or direct sales a major constraint in the growth of their business. This concern is expressed by life insurance and property and casualty (P&C) agents across the board — whether selling commercial or personal lines.

Executive summary

In this report, we identify four key themes that emerge from our survey:

The threat of direct-to-consumer and digital business models is driving insurance agents’ desire to use digital and social sales tools

Agents expect carriers to enable simple customer and agent experiences, which in turn will drive agent loyalty

The agent of the future is looking for innovative, customized products to meet changing market and customer demands

Agents see close collaboration with carriers (more access to underwriters, less servicing by agents) as driving future growth

1 2 3 4


Digital and analytics sales tools

Growth from new products and cross-selling

More time on sales and advice, less on servicing

Shifting from carrier rep to customer advocate

Key part of carrier’s omnichannel approach

Sharing control of customer with carrier

The agent of the future … a proactive advisor in a digital world

As shown in Figure 1, the agent of the future is emerging as a proactive advisor in a digital world. It is characterized by more focus on the use of digital and analytical tools in the sales process and greater collaboration with the carrier to deliver enhanced customer value.

As agent roles evolve and become more relationship-based, they will need to focus more on customer-facing technology and analytics.

Executive summary

Figure 1

Most agents are positioning to be part of the digital future, though some are not.

40%question their preparedness to meet the needs of the next generation.

80%would consider giving up a role in servicing to focus on sales and growth.

50%highlight the need for new and innovative products to grow their business.

55%$would consider a lower commission to shift some servicing burden to the carriers.

47%would significantly value an app to guide them through a customer interaction and display advice or prompt for next best action.

63%would significantly value illustration tools to help them with sales.

77%would significantly value a piece of tech that automatically identified potential opportunities within their existing book.


1The threat of direct-to-consumer and digital business models is driving insurance agents’ desire to use digital and social sales tools

Key theme


Agents are concerned with how they fit into the trend of more direct-to-consumer and online insurance models; however, they hold differing opinions on the degree of impact. While half of life insurers see the direct-to-consumer channel as some threat to their business, 12% view it as a major threat and 8% consider it a full threat. Perceptions and expectations govern the relationships between agents and carriers, as shown in Figure 2.

15%

10%

18%

35%

32%

24%

31%

44%

40%

12%

12%

14%

8%

1%

4%

0% 20% 40% 60% 80% 100%

Life

Propertyand casualty

Smallcommercial

Extent to which the insurers' direct-to-consumer channel poses a threat to the agent's business

No threat at all Little threat Some threat A lot of threat Full threat

Figure 2


1Key themeKey theme

Effort spent on admin tasks

Size of investment required for analytics or automation

Recruiting and development of sales talent

Access to quality prospect and customer data

Inadequate or stagnant products

Market shift toward online or direct channels

Speed to access customer or policy data

Major constraints on the growth of carrier’s book of business

Life


Small commercial

42%

46%

40%

36%24%

29%

37%

28%

28%

33%

26%

24%

29%

19%

19%

19%

20%

24%23%

15% 19%

Figure 3

Moreover, most agents view the market shift to direct-to-consumer and online channels as the major constraint in the growth of their business going forward. Inadequate products, investment in analytics, administration and automation, and speed and quality of access to customer or policy data also are constraining growth (see Figure 3).

Agent perceptions of carriersWhile carriers begin to explore alternative distribution platforms, agents still believe they add value in the channel mix and want to be actively engaged with the customer. In fact, three-quarters of agents view intermediated business channels as important for carriers, with 22% neutral about the value; only 3% fail to see the importance of these channels. One questions whether these are agents who have given up on themselves.

Survey findings reveal that agents who sell commercial insurance understand the most about how they fit into their carrier’s strategy, while those who sell personal lines and life insurance understand the least. Only 19% of agents selling personal lines believe they understand it well, compared to almost 30% of agents in all other categories. On the life insurance side, those selling personal lines rate their understanding marginally higher than others.

of agents believe they understand very well how they fit into their carrier’s strategy.

22%


1Key theme

Figure 4

Small commercial


Life

44% 53% 49%

29%22% 25%

26% 22% 17%

1% 3% 8%

Agent preference between increasing number of customers and growing wallet share

I take a balanced approach

More wallet share and fewer customers

More customers with less wallet share

Not sure

Growth is a major concernAdditionally, the landscape of consumers is rapidly evolving from “traditionalists” to “technologists.” More than three-quarters of boomers use the internet, while Gen Xers are established in their professional work and are mostly married with homes and children. Millennials are the largest customer group in history — and a target growth area for most industries, including insurance. Agents indicated that they need different tools and products to meet the needs of these groups to capture this growth.

As long as agents continue to be engaged in the market, they look to balance new customer acquisition and cross-selling. Half of all agents prefer to use a balanced approach to increasing wallet share or number of customers. Life agents remain more unsure about their approach or prefer to acquire more customers, which is understandable given the difficulty in selling ancillary products.


1Key theme

60%

ImplicationsThe direct-to-consumer model is emerging as a primary threat to agents. In response, agents are looking to social media to help generate leads and grow business as less time is spent on servicing. They are using analytics-guided sales tools that can be viewed on a mobile device. The image on the tablet is helping the sales process by asking customers relevant questions about “how” and “why” they are making decisions. Carriers are also trying to create a seamless experience for agents and customers by owning client servicing and enabling agents to shift from a carrier representative to a customer advocate role.

Figure 5

of agents cite availability of better

tools affect their preference for using

certain carriers.

of agents cite availability of

better tools as a major reason for

switching carriers.

of agents want better CRM tools.

Survey highlights:

Agents currently value basic functionality (e.g., operations and sales); however, the agent of the future will be concerned more with digital capabilities and tools (see Figure 5). Quality of tools plays a large factor in the decision-making process. Life agents are less satisfied than P&C agents with the online tools that carriers provide. Our research shows that there is an opportunity for life insurance to improve its online and mobile capabilities.

While carriers are expected to maximize their digital platforms and enable smoother operations and servicing for agents, they also seek new channels such as social media to engage their customer base. Social media ranks high in importance for all agents. Personal life has lacked adoption compared to other lines, but presents opportunities to engage customers or prospects going forward.

Case study Agent experience design and tool selection

The insurance carrier wanted to deliver a digital agent experience, supported by straight-through modern distribution technology.

• Developed future agent experience journeys from recruitment, through appointment and licensing to ongoing agent management

• Identified potential technologies to support implementation of the vision and assisted in the selection of best-fitting distribution and portal technology

• Developed detailed implementation plan

• Helped client mobilize agent experience and technology workstream to augment ongoing policy administration and claims systems modernization

• Increased speed to premium volume by agent

Objective Services Value provided

35% 35%

2Key theme

Agents expect carriers to enable simple customer and agent experiences, which in turn will drive agent loyalty


90%

Today, 90% of agents tap into multiple carriers when thinking of doing business, which is forcing insurance providers to rethink their value proposition and ability to differentiate, as shown in Figure 6.

Personal P&C agents are more likely to have two to five most-favored carriers, while those in commercial lines tend to favor one or two carriers for each product. Only 12% have one primary alliance carrier.

Agents consider aspects such as agent or customer experience when choosing where to place businesses, though the degree to which these aspects influence these decisions varies across insurance types. Of greater importance is how they rate a particular carrier. Nearly half of commercial and personal P&C agents consider customer and agent experience when choosing a carrier to do business with, compared with 27% of life agents.

26%23%26%12%13%

22%20%33%12%11%

19%21%28%20%11%

Small commercial Property and casualty Life

Captive or exclusiveI have one primary alliance carrier but can place business with other carriersI have two to five most favored carriers but can place business with othersI have one or two carriers that I favor for each productI place business with many different carriers

Carrier preference of agents

Figure 6

of agents tap into multiple

carriers when doing business.

11

Key theme


2Key theme

Case study

Digital experience strategy for a mid-sized personal lines insurance carrier

The board of directors realized that the company was losing ground because of a lack of a digital presence, investment and strategy.

• Developed digital capability framework, agreeing on different experiences across the insurance value chain

• Conducted competitive analysis, identifying foundational, competitive and market-leading capabilities for each experience among competitors

• Framed digital strategy, forecasting market-leading capabilities and scenarios

• Built investment model, determining high-level initiatives for each capability identified during strategy brainstorming session; modeled alternative investment scenarios

• The client received a comprehensive digital strategy for agents, policyholders and employees.

• Customer journey maps were produced, touch-points identified and technology needs assessed. Competitive analyses enabled development of a differentiation strategy.

• A technology road map was created with investment requirements and presented to the board of directors.

Objective

ServicesValue

provided

Agents need support from carriersWhen asked what carriers could do to ease the operational burden on an agency, respondents universally identified better communication, improved customer service and underwriting. Commercial agents also cited less paperwork and working with one underwriter in the top three, while life agents ranked speed to underwriting and access to underwriters as key areas for improvement.

Agents think simplicity is the key for carriers to improve the customer experience. Across product types, agents have different opinions of what carriers can do to improve their responsiveness to customer service or claims; 45% want fewer forms and less paperwork, while 35% propose simpler products and better customer online tools.

ImplicationsCarriers need to step up their game — improving agent tools and distribution management technology. These efforts will contribute to enhancing customer relationships and strengthening salesforce and service effectiveness. Maximizing digital platforms will enable smoother operations and servicing for agents.

More robust platforms and access to product-specific sales support were mentioned as major reasons for switching carriers. More competitive commissions, billing and collections, and reporting were also cited as top criteria for the selection process. Digital onboarding and account management tools, event management and sales lead applications were listed as needing improvement.

Better sales tools, technology and analyticsLife agents are more focused on systems that support new leads and better underwriting, representing an opportunity for improvement. While 65% of commercial and P&C agents rate current tools as very good or good, only 45% of life agents rank them as such. The larger the agency, the higher the quality rating.

While a third of respondents interact via a web portal, a quarter prefer to call.

5%prefer to connect by text messaging

prefer to connect through a smartphone app

Agents also prefer to stay involved with carriers by interacting directly with customers. This is most important for personal P&C agents who want to be actively engaged, not just informed.

10-20%

Agents feel constrained in their own ability to invest in infrastructure and are looking to the carrier for support. This presents bold opportunities to provide digital tools to agents.

12

The agent of the future is looking for innovative, customized products to meet changing market and customer demands


Key theme

3

Innovation will require product changeAgents agree that seeking new and innovative products and increasing campaigning activity are key areas of focus in the next three years (see Figure 7).

Across the board, investing in infrastructure seems to be a low priority for growth; less than 15% of respondents plan to invest in the next three years. Future growth will come by shifting from a “one-size-fits-all” agency model to simplified products that leverage technology, analytics and digital applications to be more responsive to customers’ servicing needs.

Product innovation will be a key driving factor behind the agent of the future’s expanded basket of products. All agents place significant value on innovation that facilitates new business. Nearly half of commercial agents perceive technology that automatically identifies potential opportunities within their existing book

of business as highly important. From an agency size perspective, companies with 200 to 500 employees perceive this type of innovation as significantly important. Smaller agencies of fewer than 10 agents and sole proprietorships place less value on this type of innovation.

Nearly half of all agents cite increased product customization as key to addressing changing market needs. In line with customization, 40% would like products with many available features to meet a wide set of needs.

The majority of agents believe that carriers could be more innovative by producing more simplified products that require less explanation and better address the needs of millennials. Only one-third view the needs of Gen Xers and baby boomers as the type of product innovation that will help them grow their business. This is in stark contrast to life agents, where more than half are considering the needs of this target audience.

Steps to grow the business over the next three years 50%

40%41%

Increasing campaigning activity

Pursuing new relationships with carriers

Increased sales trainingSeeking new and innovative products

Investing in infrastructure

50%47%

27%

Increased product training

51%38%41%

34%51%

40%

49%54%

49%

15%15%

11%

Small commercial


Life

Figure 7



Wearables and new technology present opportunitiesTechnology is viewed as an important factor in addressing the needs of a new generation of agents — and adding millennials to the salesforce will better cater to that market. As millennials continue to represent more customer market share, almost 40% of agents question their preparedness to meet the needs of the next generation.

More than half of commercial agents feel strongly about the role of wearable technology in the future of the industry, and 48% of personal P&C agents agree. Perhaps this is because of their experience with

telematics, which most respondents cited as meaningful. Life agents do not seem as convinced on the role of wearables in their industry — a finding that has raised eyebrows with our team given the market activity of at least one client with a major product launch.

Asked how strongly they feel about usage-based insurance (UBI), more than half of P&C agents say that it will play an important role in the future of insurance (see Figure 8). One in three personal life agents express the same level of confidence in UBI’s future role.

Implications Alternative distribution models are motivating carriers to rethink their commitment to the agency system. As our survey shows, the future is tied to product innovation. Carriers can support the agent through new and customized offerings (wearables, connected home and telematics). EY’s Pay-As-You-Live publications provide helpful supportive information. With growth from new products and increased cross-selling, new skill sets will be required for both agents and carriers.

Figure 8

Perceived role of usage-based insurance in the future of the industry

Play significant role

6

5

4

3

2

Play no meaningful role

Not sure

Small commercialProperty and casualtyLife

26%29%

17%

28%27%

15%

31%26%

25%

7%9%

17%

5%5%

8%

3%5%

11%Case study

Product innovation and launch for global insurance carrier

The insurance carrier wanted to launch a more engaging life and health customer experience, incorporating wearables.

• Defined business model, including product economics, loyalty scheme and required partnerships

• Developed customer value proposition, product design and customer engagemement architecture

• Assisted client with detailed product launch planning and technology integration

• Helped client make a general experience concept come to life in specific design

• Provided detailed execution program to achieve successful product delivery

Objective

Services

Value provided

4Agents see close collaboration with carriers (more access to underwriters, less servicing by agents) as driving future growth

14

Key theme


Agents seek closer working relationships with carriersThe majority of agents are open to the idea of reducing their role in servicing to focus on sales and growth (see Figure 9). One in four personal life agents would prefer this option, about 20% of all agents express skepticism, and 17% of commercial agents are satisfied

with their current servicing role. Half of respondents would be willing to accept reduced commissions in exchange for shifting some of their servicing burden to carriers, though 36% are opposed to this idea.

Agents want to be more involved in the underwriting process. They agree that carriers could improve underwriting interaction by allowing more access to underwriters, enabling agents to work with the same underwriters, and shifting underwriters’ transactional role to a relationship-focused engineer of customer solutions. More than one-third of agents want to formalize or improve the process for appealing or reviewing an underwriting decision.

Moreover, agents believe that carriers could improve customer communication by simplifying language, being more proactive and leveraging diverse channels to reach customers. Overall, frequency and number of communications is of less importance to agents. More than one in three in personal P&C or commercial insurance views this option as important to effective communication, compared with one in four in personal life.

12%

12%

17%

43%

63%

54%

25%

15%

22%

11%

4%

4%

9%

6%

3%

0% 20% 40% 60% 80% 100%

Life

Propertyand casualty

Small commercial

Give up part of agent’s role in servicing to free up more time for sales and growth

No Yes, would consider Yes, would preferYes, this must be available in the future Not sure

Figure 9

15

Key theme


4Key theme

Across all product types, nearly half of agents view increased customization as one of the main product changes to address the market’s future needs; this is especially important for those in commercial and personal P&C. In line with customization, 40% of agents view the ability to provide many available features to address a wide set of needs as key to meeting evolving market demand.

Improving the agent experienceStrengthening current customer relationships and achieving customer centricity in core operations have become strategic imperatives. As consumers embrace digital and other emerging technologies, insurers must rethink their distribution strategies, agency interactions and partner relationships.

Case study

Agent experience transformation for a leading personal lines insurance provider

Carrier wanted to define the next generation of its digital agent experience.

• Validated and enhanced existing user personas and future state user experiences to determine desired feature functionality

• Documented and identified ways to effectively measure agent sentiment and build an effective agent and user feedback loop to track user satisfaction

• Developed a capabilities matrix and vendor evaluation framework to support the review of available market solutions

• Defined a future-state technology architecture (with the desired integration and solution components)

• Enhanced personas and future state experiences: identified experience maps for vendor evaluation

• Agent satisfaction measures: identified existing agent experience metrics, gaps and customer KPIs; developed a scorecard

• Vendor evaluation framework: created evaluation criteria and synthesized client assessments

• Identified activities needed to transition to desired state across a timeline

Objective

ServicesValue

provided

34%want the carrier to have better communication with the agent or broker.

ImplicationsCarriers and agents will work together to make the customer experience seamless, reliable and easily accessible. Our survey reveals that tension exists between agents’ desire to have more direct contact with carriers and the need to streamline underwriting. This calls for some form of digital interaction between agents and underwriters rather than wasting time on the telephone. If agents can focus less on servicing, they can focus more on selling. Recruiting, training and retaining agents is essential to deliver enhanced customer value.

ConclusionEY can work together with carriers to help implement potential strategies that digitally support their agents, simplify distribution operations, deploy advanced analytics and help implement new distribution technology (see Figure 10). Listening to the “voice of the agent” can help carriers provide a deeper, more robust experience and support them to rethink their commitment to the agency system.

A collaborative process will allow carriers and agents to interact and strengthen their relationship. Benefits that accrue include reducing operational complexity and costs, improving sales productivity and supporting the agent and policyholder experience. Our survey supports the concept that insurers and the agent of the future will be stronger by working together.

Improve agent

experience

Simplifydistributionoperations

Deployadvanced

distributionanalytics

Implementnew

distributiontechnology

Design next-

generationagent portal

Build agent advice

and sales tools

Potential strategies

Build agent loyalty and “wallet share”

Improve sales productivity

Reduce distribution operations complexity

and cost

Support policyholder experience

improvements

Distribution results

Figure 10

Our survey supports a number of carrier strategies that help improve distribution results.



For more information or to schedule a briefing, please reach out to the EY Insurance Customer & Growth team:

Bernhard Klein WassinkInsurance Customer & Growth LeaderErnst & Young LLP+1 212 773 [email protected]

Melanie HendersonDistribution LeaderErnst & Young LLP+1 212 773 [email protected]

Mark HopkinsInnovation & Growth LeaderErnst & Young LLP+1 215 448 [email protected]

David BassiGrowth Analytics LeaderErnst & Young LLP+ 1 617 565 [email protected]

EY contacts


About EYEY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trustand confidence in the capital markets and in economies the worldover. We develop outstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing, we play a criticalrole in building a better working world for our people, for our clientsand for our communities.

EY refers to the global organization, and may refer to one or more,of the member firms of Ernst & Young Global Limited, each of whichis a separate legal entity. Ernst & Young Global Limited, a UKcompany limited by guarantee, does not provide services to clients.For more information about our organization, please visit ey.com.

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