We’ve all heard the corporate mantra, “The customer is at the center of everything we do.”

While admittedly cliche, it’s not a mantra to be taken lightly by companies in the insurance industry. When organizations use this tagline, what they often fail to acknowledge is that the customer’s needs are not fixed. Whether it be innovation, growth, changes in buying behaviors, new challenges—a pandemic, for example—or even just a tweak to day-to-day operations, customers are constantly evolving. Insurance companies must evolve with them to provide the products and services they need at all stages of growth.

My personal journey from commercial insurance underwriting at a large, well-known insurance carrier to a smaller InsurTech company specializing in small business customers took a considerable adjustment—not only in job KPIs but in mindset as well. Moving from a 40,000-plus employee organization to one with approximately 500 (only 20 in the U.S. at the time I joined) forced me to rethink true customer needs.

At the time of the company’s foray into the U.S. commercial insurance marketplace, my employer, a digital insurance agency, was a leading commercial insurance provider in the UK. When I joined the team in 2018, what immediately became evident was that the company had not entered into the U.S. with a preconceived understanding of who the customer was and what their needs were. The approach was instead one of learning to engage with online prospects that were searching for commercial insurance and to better understand these prospects and their needs.

For example, before we engaged with our first insurance carrier, we learned that many early seekers of commercial insurance were construction contractors looking to protect their newly formed businesses in the event they cause a loss to their customers. This knowledge helped us better understand our customer’s intent, in that they were seeking insurance to help protect and properly serve their own customers.

As a digital insurance agency, our customer is both the insured as well as the insurance carriers we represent, and it is our job to properly serve both. My team is responsible for managing the relationships with our insurance carriers. To be successful, it’s equally as important that we educate ourselves on a carriers’ needs, particularly when it comes to product development, as it is our understanding the insured customer’s needs when it comes to the policies that protect them.

Carriers today are engaged in what I like to refer to as a technology arms race. Typically, micro-small commercial customers are relatively profitable but expensive to acquire and serve, resulting in a lucrative segment in the commercial insurance marketplace that is largely underserved and growing. Last year, more than 4.3 million new small businesses were launched across the United States, a 24.6 percent increase year over year. The pandemic has likely accelerated small business startups in the U.S., yet a key question remains: What is the best way to reach those customers as an insurance carrier?

Traditional independent agents and brokers are critical distribution partners for carriers, but frankly it’s difficult to make customer acquisition of insureds with under five employees financially viable for brick-and-mortar agents to acquire and serve. This dynamic drives the technology arms race that carriers are faced with. To successfully compete, they need to digitize their product for either their own direct-to-consumer purposes or develop application programming interface (API) technology to offer their products on external distribution websites in order to reach these potential customers.

The costs of acquiring customers digitally is no less of a challenge than what the traditional agent faces in attempting to acquire micro-small commercial customers. The digital advertising costs in the insurance industry are among the highest across all industries in the U.S. A 2020 review of digital ad trends found insurance companies pay a $17.95 cost-per-click (CPC) on average. These are expensive customers to acquire directly as a carrier. As a result, carriers have to continuously invest in their APIs in the areas of speed, modularity (i.e., breaking out appetite, rate, quote, bind, payment, issue, etc. into modular APIs), up-time and on-going maintenance. Or do they?

The companies succeeding in the micro-small commercial space are the ones removing the technology arms race from the consumer buying equation. This ultimately allows carriers to do what they’ve always done best: develop and evolve insurance products to meet the needs of an ever-changing customer base. The most effective approach removes the technology burden by building and hosting the carrier’s appetite, rates, rules and forms directly on a digital agency platform; allowing the customer to experience a consistent and seamless buying journey, regardless of the carrier’s stage of digitization. This leads to the holy grail for carriers: rich, unbiased, actionable data on how their product is performing based solely on the product itself and a partnership founded on rapidly iterating that product. Armed with this data and insight, carriers can make and implement rapid, informed product enhancement decisions to meet the needs of prospective customers.

When we take the technology race out of the equation, it is a win-win for both our insured customers and carrier customers. The carrier wins when we capture the data of prospective insureds, the coverages they seek, what they value and how they make their purchasing decisions in a consistent online environment. The endless data points derived from customer feedback better inform a carrier’s next steps, helping them to enter new geographies, iterate into new coverages and have a better understanding of the end customer. The small business owners benefit by getting the coverage they need, saving time in receiving a variety of policy options from leading insurance carriers in one place and at a reasonable yet competitive price.

In InsurTech, the customer must be the center of everything we do. Determining the needs of insureds and empowering carrier customers to develop products to meet these evolving needs is central to InsurTech companies and their customer’s success.

Like any other industry, technology is the key to bringing the historically antiquated insurance industry out of the stone ages to keep pace with the evolution of the insured customers and carrier customers by way of using data-driven product evolution.