by Joshua Schneeloch, January 3, 2023, published in California Broker Magazine
As a business innovator, I am intrigued by artificial intelligence (AI), especially how it can help insurance agents and brokers grow — faster, smarter and bigger. As I speak with industry leaders and pioneers in the burgeoning insurtech field, everyone tells me AI —automation’s big sister — has the power to transform the customer experience and create tremendous value for ambitious agents and brokers willing to innovate in a traditional industry. The rapid evolution of the industry will be fueled by the continued and extensive adoption and integration of automation, deep learning, and external data ecosystems. That’s the new age of AI. That said, let me hasten to warn you that we cannot ignore the concerns and fears of customers who don’t want their private and personal information to be used to exploit them. As with all tools, the way we use them will determine results, meaning whether AI will be a boogeyman, confirming all consumers’ worst fears of misuse and exploitation, or more like a butler, who anticipates your every need and is always ready to serve you personally and predictably. In this article, I’ll share a few perspectives and approaches ambitious agents and brokers need to keep in mind, as well as what investors are looking for as more and more of them bet on the growing trillion-dollar insurance marketplace.
First, some basic trends at the intersection of AI and insurance: AI is merely one aspect of the technology's central reality — big data. With the onslaught of massive troves of data and the ability to analyze and apply it instantaneously, we have moved from the age of information into the age of intelligence and insight. Yes, we can see the future — an ability that creates enormous value when used smartly, or with the intelligent use of intelligence.
Insurance is, at its core, a data-driven enterprise, requiring the accurate calculation of risk and reward. According to a very recent McKinsey Report: Insurance 2030 — The impact of AI on the future of insurance, AI and its related technologies will have a seismic impact on all aspects of the insurance industry, from distribution to underwriting and pricing to claims. Advanced technologies and data are already affecting distribution and underwriting, with policies being priced, purchased, and bound in near real-time. Accordingly, data is fast becoming one of the most — if not THE most — valuable assets for any organization. The insurance industry is no different: how carriers identify, quantify, place, and manage risk is all predicated on the volume and quality of data they acquire during a policy’s life cycle.
The Future of AI/Insurance
Most AI technologies will perform best when they have a high volume of data from a variety of sources. As such, insurance agents and brokers must develop a well-structured and actionable strategy with regard to both internal and external data. Internal data will need to be organized in ways that enable and support the agile development of new analytics insights and capabilities. The experience of buying insurance will be faster, and more convenient than ever before, with less active involvement on the part of the insurer and the customer. Enough information is known about individual behavior, with AI algorithms creating risk profiles, so that cycle times for completing the purchase of an auto, commercial, or life policy will be reduced to minutes or even seconds.
In the area of distribution, auto and home carriers have enabled instant quotes for some time but will continue to refine their ability to issue policies immediately to a wider range of customers as telematics and in-home Internet of Things (IoT) devices proliferate and pricing algorithms mature. Many life carriers are experimenting with simplified issue products, but most are restricted to only the healthiest applicants and are priced higher than a comparable fully underwritten product. As AI permeates life underwriting, and carriers are able to identify risk in a much more granular and sophisticated way, we will see a new wave of mass-market instant-issue products.
As far as the future of underwriting and pricing goes, underwriting as we know it today will cease to exist for most personal and small-business products across life and property and casualty insurance. The process of underwriting will be reduced to a few seconds as the majority of underwriting is automated. These models will be powered by internal data as well as a broad set of external data accessed through application programming interfaces and outside data and analytics providers. Information collected from devices provided by mainline carriers, reinsurers, product manufacturers, and product distributors will be aggregated in a variety of data systems. These information sources will enable insurers to make decisions regarding underwriting and pricing, enabling proactive outreach with a bindable quote for a product bundle tailored to the buyer’s risk profile and coverage needs.
This is just a glimpse into the future of insurance in the new age of Big Data.
It Tool, Not a Solution
It’s crucial to understand that AI is a tool, not a “solution” in and of itself. It’s a piece of the puzzle that must be applied to specific business requirements, such as fraud detection or claims automation, usually in the form of software deployment. It’s the underlying AI that takes copious amounts of data, makes sense of it all, and allows the software to present something useful to the claims handler or even handle the claim without human intervention — to the delight of the policyholder.
AI, Yes, BUT Don’t Forget the Human Touch
In virtually all sports, eye contact is key to winning. Keep your eye on the ball, said the athlete. In business, the consumer is the ball. As I’ve learned — having sold technology, programming, security and now risk management — a commitment to your customer, your end user, the actual consumer of your product or service is essential to sustained success. My best advice to you as you delve into the world of AI is to avoid becoming tech-centric, or product-oriented, but rather be consumer-centric. Keep your eye on your customer. Think of how you can use AI to anticipate customers’ needs and help them to prepare for the future, as opposed to getting caught in the weeds of tech talk. This means empathizing with them, and gaining their trust, like being a trusted butler — loyal, discrete, quiet, non-obtrusive — not merely a bill collector. The human touch in insurance is a huge strategic differentiator and one I embrace in my company.
Everybody in the industry agrees that the future of insurance will be data-driven and analytics-enabled. But tomorrow’s top-performing agents and brokers will also excel at making human connections and applying the personal touch at the right time. To a large extent, this is about empathizing deeply with customers. That means dedicating people and teams to understand not only what customers might buy from you but also how they feel and what they value most in life.
According to David Connolly, EY Global Insurance Technology Leader, in a recent conversation with Chetan Kandhari, Nationwide’s Chief Innovation and Digital Officer, at the EY Insurance Executive Forum, research shows that consumers value a sense of feeling protected. To deliver that powerful outcome, agents and brokers will need to retrain customers who tend to focus on price, thanks largely to billions of dollars of industry advertising. Appealing to higher-order needs may give agents back some pricing power.
That level of empathy is critical if agents and brokers are to address one of their biggest barriers to innovation: lack of consumer trust. Consider all the deeply personal information consumers are comfortable sharing with their wealth advisors — all of their financial data and hopes and dreams. Now think about what insurers could do with such data — precision risk profiling, targeted pricing, lifetime customer value modeling, and tips for better living. Insurers that can dial-up trust with their customers will have a huge competitive advantage during a period of substantial change and intense competition. Today, a more nuanced and interdependent human-tech dynamic has emerged. The consensus among forward-looking executives is that human talent is every bit as important to future success as AI, machine learning, and modernized processing platforms.
The Role of the Agent in the Future
The role of insurance agents is changing dramatically with the evolution of technology and data analytics. The number of agents is declining substantially as active agents retire and remaining agents rely heavily on technology to increase productivity. The role of agents and brokers is becoming less sales-oriented and more solutions-oriented. Solve, don’t sell is my watchword. Agents will become more like process facilitators and product educators. And the better you are at anticipating clients’ needs, the more successful you will be over the long term, creating life-long relationships. I call it the “butler model.”
The agent of the future will be able to sell nearly all types of coverage and add value by helping clients manage their portfolios of coverage across experiences, health, life, mobility, personal property, and residential. Agents will learn to use smart personal assistants to optimize their tasks as well as AI-enabled bots to find potential deals for clients. These tools will help agents to support a substantially larger client base while making customer interactions (a mix of in-person, virtual, and digital) shorter and more meaningful, given that each interaction will be tailored to the exact current and future needs of each individual client.
I can hear an independent agent or broker saying, “that’s all well and good but how can independent agents and mid-sized brokers like me tap into AI and other hightech tools?” Insurtech companies, like White Wing, are creating amazing performance platforms designed to plug you into the power of data analytics, automation, digital data marketing, and smart decision-making. As the industry takes its time adapting and adopting new technology, thousands of agents and brokers are partnering with tech-solutions enablers to accelerate their businesses and compete at a higher level.
Next week, I will be attending the Money 2.0 conference where I will receive a leadership award for innovation, and where I will moderate a panel of the industry’s top wealth creators on this same topic: “AI and the Future of Insurance.” In next month’s publication, I will share their insights and strategic recommendations for agents and brokers seeking rapid, sustainable growth in a rapidly evolving digital landscape.
JOSHUA SCHNEELOCH is the founder and CEO of White Wing Insurance Solutions and White Wing Wealth and the author of the upcoming memoir, “The Favored Son, How a Black Orphan Conquered Europe on His Way to America.”
Check out Joshua’s previous articles