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Why P&C Insurers and Their Customers Should Be Thankful for the Bounty of InsurTech

November 21, 2017
By Eric Gewirtzman

Nov blog 4 image-194429-edited-265803-edited.jpgAs Thanksgiving approaches, insurers have some things to be grateful for, certainly more than the retail sector where over 6,500 store closings were announced this year.[i] According to Marcelo Ballve of CB Insights, this is what happens to an industry that fails to adapt.[ii]

Fortunately, insurers are recognizing the writing on the wall before reaching their own apocalypse. In a recent InsurTech study by PwC  <https://www.pwc.com/gx/en/financial-services/fintech/assets/fintech-2-0-insurance.pdf>, the 189 senior executives surveyed cited customer engagement as their number one priority right now.[iii] This points a glaring spotlight on the issue of digitally-enabled direct-to-consumer distribution.

Our survey of P&C insurance executives revealed that 73% are currently seeing demands for digital distribution, but less than a quarter are fully happy with their efforts to fulfill consumer expectations for digital engagement. PwC’s study reflects similar findings, with insurers revealing that only a quarter of consumers are currently using the digital channels they offer.[iv] The interesting thing is, they also expect up to 90% of transactions to occur through these channels in the coming years.[v]

That’s a lot of ground to cover in a very short time, but insurers are finding they have a lot to be thankful for as hundreds invest in InsurTech partnerships.[vi]

Focusing on Distribution

According to Robert Mozeika, Munich RE’s innovation executive, there are many InsurTech companies looking to partner with insurers.

“They’re not looking to be a carrier. They don’t have paper. They really want to come in and it’s a great opportunity for a partner,” Mozeika said.[vii]

The fact that a growing number of InsurTech companies want to partner is good news for insurers. As they turn their focus to becoming customer-first organizations, they need to develop digitally-enabled direct-to-consumer channels of engagement, and distribution is an area where the InsurTech movement is particularly strong.

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“If there is an area of the business that can be disrupted more than others it is distribution,” says Mark Breading, partner at Strategy Meets Action (SMA). “The InsurTechs see a more digital way to interact with customers.”

The problem for most insurers is they aren’t readily able to meet the customer experience standards driven by digital leaders like Amazon. Because customer information is spread across siloed policy admin systems, there is no way for insurers to deliver the streamlined buying and shopping experience consumers are expecting.

 This is where InsurTech partnerships are helping insurers transform into digitally-enabled, customer-first organizations.

Uniting Product Silos through InsurTech Innovation

Product silos keep insurers from gaining a single view of the customer, creating channel blind spots in their distribution strategy. A consumer may start a transaction online, but if they need to speak with an agent during the process, the consumer-facing call center doesn’t have visibility into what has happened through the digital channel.

The problem for insurers comes in uniting these massive policy administration systems to give insurers a single view of the customer and enable a seamless quote-to-issue process for multiple products.

“The issue is that so much functionality has been hard coded into the core policy admin system that trying to unpick it is simply too hard,” said Rick Huckstep, insurance thought leader at The Digital Insurer.

Instead of investing in core systems replacements that cost millions and take years to implement, Huckstep recommends a two-speed approach. Employing InsurTech platforms, insurers can capitalize on investments made in legacy IT systems by building the agility and responsiveness necessary for online distribution into the digital front end.[viii]

This approach enhances the customer experience by uniting product silos and providing the insurer with a 360-degree view of the customer delivered through a single point of access. Consumers receive a seamless cross-channel experience, and transaction speed and efficiency are maximized as multiple products can be quoted without the need for separate applications.

Partnering with an InsurTech on a platform that united product siloes, a top-ten insurer reduced its expense ratio and increased conversion rates 4% in a single quarter,[ix] proving that there is much to be thankful for with InsurTech innovation.

InsurTech Partnerships and Winning the P&C Insurance War on Price

Accenture recently conducted a study of more than 32,000 consumers, revealing that price plays a bigger impact on loyalty than any other factor. In addition, 42% of consumers who prefer to purchase coverage online consider policy pricing to be the biggest factor in selecting an insurance provider.[x]

To acquire and retain customers in this environment, insurers need to offer comparison shopping within their own online distribution channels, but this requires insurers to have access to multiple products of the same coverage type. It’s another area where InsurTech partnerships facilitate a more customer-centric environment.

InsurTech platforms capable of uniting product siloes within an insurance company also have the capacity to facilitate appointments from other carriers, allowing insurers to form ecosystems of insurance offerings. Through these strategic partnerships, insurers can integrate coverage from ecosystem carriers into their own online storefront. By eliminating the consumer’s need to shop around, insurers more easily maintain customer relationships, even when they don’t have an appetite for the risk or can’t meet customer pricing constraints with their in-house products.

A top-five insurer (by group), who wanted to establish lifelong relationships with its current customers, partnered with an InsurTech platform provider to facilitate ecosystem relationships of additional products. They added offerings from other carriers to their existing product line-up and drastically improved their capacity to meet customer needs. The evidence of a successful partnership came in the first ten months of the relationship as they wrote $70 million in new premiums.

Ecosystems also give insurers access to greater product diversity. By creating synergistic relationships around a variety of core insurance offerings such as home, auto, business or even pet and travel, insurers can fulfill more product needs, reducing the odds that a consumer will leave their online storefront to find another carrier.

Product ecosystems are a win for everyone. Customers gain access to the coverage they want without having to leave a trusted provider, and insurers gain a commission on policies sold from the product ecosystem, as well as the ability to maintain a more loyal customer. One insurer sold 1.6 more of their own products by offering consumers product choice.

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Insurers Realize the Value of InsurTech Partnerships

Insurers have a lot of ground to cover when it comes to moving the needle from the % of consumers who are currently willing to use their digital channels, to meeting the shopping preferences of the 73% of insurance buyers who currently want to purchase coverage online.

Watching the fallout in other industries as companies fail to adapt to the digital demands of their customers, insurers are seeing the value in InsurTech partnerships. According to Breading and research from SMA, insurer partnerships with InsurTechs now number in the hundreds and include billions of dollars in insurance company investments.[xi]

 “The positive business results from projects are encouraging, but the full impact will come in increasing measure over the next few years,’ says Breading.[xii]

McKinsey believes that early digital adopters will see the greatest rewards,[xiii] and Huckstep says InsurTech platforms that build on the significant investment already made in legacy IT put insurers in the “fast lane” toward early adoption of D2C distribution,[xiv] uniting product silos for faster, more seamless distribution of all the products insurers need to protect their customer’s assets and mitigate risk.

What do you think? What advantages could your company realize by partnering with an InsurTech company to gain digitally-enabled direct-to-consumer distribution and an ecosystem of offerings?


Eric Eric Gewirtzman | CEO at BOLT 

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[i] Marcelo Ballve. “Uh Oh Blockchain Token Fails.” Received by Kathleen Hesketh, October 27, 2017.

[ii] Marcelo Ballve. “Uh Oh Blockchain Token Fails.” Received by Kathleen Hesketh, October 27, 2017.

[iii] “Insurance’s New Normal: Driving iNnovation with InsurTech.” Gloable InsurTech Report 2017. PwC, 2017. Web.

[iv] “Insurance’s New Normal: Driving iNnovation with InsurTech.” Gloable InsurTech Report 2017. PwC, 2017. Web.

[v] “Insurance’s New Normal: Driving iNnovation with InsurTech.” Gloable InsurTech Report 2017. PwC, 2017. Web.

[vi] Mark Breading. “InsurTech and Personbal Lines: Threat or Opportunity?” ALM Media. Property Casualty 360, Oct. 13, 2017. Web.

[vii] Andrew G. Simpson. “Why and How P/C Insurance Carriers Should Work with Insurtechs.” Wells Media Group. Insurance Journal, Aug. 15, 2017. Web.

[viii] Rick Huckstep. “Digital Transformation Is the Strategic Imperative no Insurer Can Ignore.” The Digital Insurerer, Aug. 15, 2017. Web.

[ix] Progressive. “2017 Second Quarter Report.” www.progressive.com. (2017: 52). Web.

[x] “The Voice of the Customer: Identifying Disruptive Opportunities in Insurance Distribution.” Accenture, 2017. Web.

[xiii] Tanguy Catlin, Johannes-Tobias Lorenz, Christopher Morrison, and Holger Wilms. ‘Facing Digital Reality.” McKinsey & Company Financial Services, March 2017. Web.

[xiv] Rick Huckstep. “Digital Transformation Is the Strategic Imperative No Insurer Can Ignore.” The Digital Insurer, Aug. 15, 2017. Web.

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