Digital may be the frontline in the battle between traditional insurers and InsurTech disrupters. But back-office technology could win the day.

Though client-facing technology creates the consumer experience that customers increasingly desire, insurers—whether they be startups or stalwarts—must place business quickly before potential clients move onto competitors. So, efficient back-end operations technology that enables automated onboarding, licensing and appointment is essential.

However, the nation’s largest insurance carriers are ill-equipped for the fight for customers in that regard. They have focused their resources on giving agencies and agents client-focused technology, such as the abilities to quote, bind and service business online while essentially ignoring the back-end onboarding process. The onboarding process forms the first impression that agency partners and producers have of firms.

In surveying leaders of large carriers about distribution onboarding in the digital era for a 2021 market study sponsored by RegEd, Perspexion found:

• Onboarding practices rely on a semi-digital toolset, supported by extensive human intervention.
• Most onboarding transactions are manual.
• Lack of integration complicates workflows.
• Unit cost and cycle time reflect traditional systems and processes rather than digital ones.
• Automation, data reuse and integration are on carriers’ wish lists.

Pressures to reduce costs and increase competitiveness are pushing carriers to improve their onboarding of agencies and agents, which is one of their biggest weaknesses and greatest vulnerabilities in the digital age. The study further indicated that major carriers give their onboarding solutions a dismal -38 percent net promoter score, meaning that carriers rated their systems more poorly than positively, based on the Perspexion study sponsored by RegEd.

From this research and ongoing discussions with large insurance clients, it’s apparent that carriers want to be better channel partners. To that end, they are improving onboarding for agencies and agents to attract top producers and speed the placement of compliant business. Carriers are particularly focused on improving digital experiences for agency partners and agents.

A May 2020 survey by McKinsey & Co. showed that 44 percent of agents rated agent digital tools and customer tools as the top investments that insurers could make to support them as they prepare for the next distribution model. Investing in digital distribution will increase agent productivity and help insurers quickly respond to current and future customer and agent demand, McKinsey says. Licensing and appointment systems that reduce the time producers spend entering data and addressing compliance needs give agents more time to add and work with clients.

Customers appreciate the convenience that purchasing insurance online provides. For example, nine of 10 consumers are open to buying auto insurance online, according to the J.D. Power 2020 U.S. Insurance Shopping Study.

Direct-to-consumer disrupters have capitalized on consumers’ willingness—or often preference—to shop online by simplifying the selling and purchasing of transactional-based property/casualty insurance products. Though traditional insurers still dominate personal lines markets, they could gradually lose market share if they do not become technology players that make it easier for agency partners to place business and receive commissions faster.

Accelerating Digital Transformation

Old-line players must innovate and adapt to meet the new buying patterns of consumers who want an Amazon-like experience. Consumers want what they want and they want it fast.

InsurTech companies have grown by streamlining the customer journey from inquiry to enrollment, using technologies like artificial intelligence to reduce repetitive processes and customize products to consumers’ needs. Such efficiencies have helped the bottom line as well.

Digital-first companies have expense ratios that are almost 40 percent less than those of traditional property and casualty insurers. Reshaping operations to automate as much as 50-60 percent of back-office operations could also help insurers reduce time to market, make more investments, lower prices and improve profitability, McKinsey says.

Onboarding and licensing are areas of distribution operations in which carriers have made little improvement and still have far to go. In studying the licensing processes of insurers and agencies, Celent found that while many carriers still use internally built licensing systems, some use built-for-purpose technology to automate onboarding as well as licensing and appointments.

Built-for-purpose licensing solutions provide efficiencies like automated appointments, straight-through processing and continuous data synchronization that ensures agent credentialing and demographic data is current with the official filing office record. Carriers can often give their agency partners tools to self-manage as well.

Early adopters of improved onboarding tools have positioned themselves for growth by being “easy to do business with” for agents and customers, Perspexion says, based on its survey of large carriers. Carriers have also reduced unit cost and cycle time in the process.

Today’s cycle times of three to 14 days will disappear as channel partners experience near-real-time digital experiences in other aspects of their lives, Perspexion says. And carriers will reap substantial savings by reducing the current unit cost of $52 per agent, particularly if they get it to $5 or less.

Licensing and Appointment Becomes a Differentiator

Though licensing has not traditionally been viewed as a competitive advantage, insurers have come to see it as such as turnaround times have become more important to consumers, and thus to agency partners and agents that serve customers. Real-time processing of agencies, agents and business is essential to winning customers in the digital era.

Already, leading carriers place business faster with digital technologies like straight-through-processing, which speeds transactions by automating workflows. Adoption of straight-through processing will expand even further as insurers demand still greater speed and consistency.

While much goes into validating purchases on the back end, onboarding and licensing technology speeds the compliant placement of business by confirming that agents are properly credentialed in real-time.

Insurers that invest in advanced technology to facilitate seamless onboarding, licensing and appointment have an advantage in their quest to attract top producer talent. Agencies and agents want to do business with insurers that enable them to bind policies quickly and compliantly.

Modern onboarding and licensing technology could help insurers on the frontlines of their battles with InsurTech startups. In fact, in improving speed to market, increasing agency and agent satisfaction and maximizing the opportunity for revenue generation, they may even win the war.