Key Takeaways:
- Why customers are turning to agents despite digital tools being more common than ever
- How agents themselves are able to sell and service more effectively with their own digital tools
- What the agent of the future will focus on
Nate Golia (00:10):
All right, so welcome into our agents track. This is our first session. This is something that I've been thinking about quite a bit this year as we've been sort of transitioning into a new era of InsureTech and about what are some of the old assumptions about InsureTech and how are those sort of playing out in the real world here after several years of innovation, we have Karlyn and John here. I'm let them introduce themselves in a second, and we're going to focus a little bit here on the small commercial line is sort of a case study in agents and preferences and the changing relationship between agents and carriers and customers to sort of establish our agents back. Did they never leave? Is it a slower transition away from there? So let's start by just having our panelists introduce ourselves. John, why don't you start? Tell me about yourself and your relation to this topic.
John Poucher (01:06):
Yeah, absolutely. My name's John Poucher. I'm the VP of Agency Distribution with Coterie Insurance. We are InsureTech, MG a focus on providing coverage to the small business arena. My career has been entirely serving the agent and the producer in the insurance industry. So I might come with a slightly biased opinion on this topic.
Karlyn Carnahan (01:32):
We had a little bit of a heated conversation while we were preparing for this. I'm Karlyn and I lead the insurance practice for Sell It for North America. We're an analyst firm. We provide research based advice to insurance carriers, to software vendors and to system integrators. Pretty much anybody who works in the insurance industry. My personal career includes having been chief marketing officer at two insurance companies responsible for agency management, but I've also done a number of InsureTech startups that included direct to consumer. And as an analyst, I spent a lot of time doing research on distribution management and on consumer behavior. So I'm super excited to talk about this. And by the way, welcome to California. I'm local, so this is my town. Hope you're having a good time. And John also in California, so we're delighted to have everybody here.
Nate Golia (02:17):
So let's start by just giving your view of the current dynamics between insurance agency customers. Again, I know you had some research specific to small business. Karlyn, maybe you could start by there talking about what you had learned there recently.
Karlyn Carnahan (02:28):
Yeah, so I mean this whole question started with is the agent dead? Is the agent gone? And I would say no, not dead, not gone, but running a temperature when it comes to small commercials. So I'll give you a little bit of data that I have seen in the data and then John is going to talk about actual experience here. So in 2020 we surveyed small commercial buyers around a number of topics, but around how they buy insurance and what they're buying. And we gave them two concepts at the time, 0% bought online and we said, would you rather buy online or would you rather buy through an independent agent, but it'll cost you a little bit more? And in 20 20, 60 5% said they would rather buy through an agent. They wanted advice, they wanted a human connection, they wanted somebody who would fight the insurance company for them, and 30% said they'd want to buy it online.
(03:19)
It'll be easier, faster. We don't think we need insurance. In 2022, we asked the same question and in 2022, 18% were now buying online. And 30% said that they were willing to buy through an agent, but only if it cost a tiny bit more. If it cost too much more, they wouldn't. And 60% said no. They wanted to buy online, they wanted to buy direct online, and they expected that it would cost more. So they've told us that they want to buy online, but what they tell us doesn't always translate to behavior. You can say you want, I want to lose weight. Is it really going to happen? God only knows, right? So what you say doesn't necessarily translate to the way that you behave, but we saw a behavioral change as well. We went from nobody buying online to 18% buying online. So when we look at the world of small commercial, the question is, is this point from zero to 18 a trend that will continue to rise? Is it a point that is plateaued or was it based on covid and will now drop either way? I would say that this view of being able to get insurance easily, quickly and cheaply is not going to go away. And if the question, if a hundred percent of small commercial buyers were buying online, my guess is every insurance company would be selling online. So somewhere between now and there is the tipping point.
Nate Golia (04:43):
John, did you want to?
John Poucher (04:45):
Well said. I'll start with found with Cory's history. So Coterie was founded by David McFarland and with an idea that the big E word was really going to emerge embedded that Cory was going to embed their products with other technology providers to provide insurance. And then as they went to market's fraught with challenges. There's a lot of unit economic challenges, there's a lot of distribution challenges. The partner you have that's not their core business. So that's a challenge. A lot of challenges you go to embed in embedded 2.0 might be different in our future. But what we found was that we had a great product, we were good at building an insurance product and we're going to switch up the distribution and went to agents and found wild success immediately. And so within our walls we found providing insurance for the SMB to all sorts of agents.
(05:45)
So now the agent landscape is also changing too. So when your customers say they're buying online, that might be through one of our partners that has a massive online presence that really is an agent in our mind. So they might be the same thing. There's some blending that can be happening here. Digital enablers. If you think of a company like Milo, that's basically a giant call center, but at the end that's an agent placing the business, helping the consumer have the confidence to buy this policy that's going to ultimately protect their small business, which for most small business owners, they're pouring their heart and soul into, it's their primary income. It's a big risk if they choose this or make a poor decision in this purchase.
Nate Golia (06:27):
One thing that I think is interesting is that we looked at the data that you had Karlyn in and when talked about, well again, trying to interpret, well what does this actually mean? And what was interesting about your perspective, John, is you're talking about being on the ground and here people are, you're reached directly with the customer. And one thing that came out in the selling data was that there were dissatisfaction ratings. They were in the agent channel, but I said, knowing a small business owner, my wife who owns a small business, that if they're small business owners don't like talking about insurance, they really don't. They don't. And so anytime they have to talk about it, it makes them feel bad and those that dissatisfaction. So I guess my question was like, can we do anything about that? Those satisfaction ratings by using digital can be leveraged digital to assist agents so that they don't have that so they can change the customer experience by leveraging digital.
Karlyn Carnahan (07:17):
And so it's only, let me dig into that data a little bit more. So we asked these buyers, how satisfied are you with the buying process? And then when you look at the buying process they use and the level of satisfaction, the most satisfying process was buying online. Well actually the most satisfying was what they called other, we don't really know what that is. That might've been payroll processing or affinity marketing. So it was a small portion, but the most satisfying was the online experience through an online agency, then through an online carrier. Then I think the phone through a carrier, then the captive agent where 5% said they were extremely dissatisfied. And then the independent agent where 12% were extremely dissatisfied with the process of buying insurance. So these buyers, first of all are saying they would rather buy online and they're saying they like that experience and they're saying that there are challenges with independent agency experience.
(08:12)
Now, when we asked them through the verbatims, when you dig through the verbatims to try and figure out why, the number one comment that kept coming up for those who were dissatisfied was they wanted more choice. They wanted more options. So here's how I think of that. This two years was Covid, right? And every small business out there was trying to cut their cost. And so they're calling their agent saying, what can you do? Now if I'm an independent agent and I'm selling to a small business, I got maybe 2000 a premium between a bob, a commercial auto, an umbrella, maybe a little more if there's workers' comp. But it's not a big policy. And if you assume 15% commission, there's maybe 300 bucks, the producer will get a hundred of it, the agency will get 200, and that has to cover all their costs.
(09:01)
They cannot afford to go portal by portal, by portal by portal to find those options for that consumer. And in fact, it, it's such a challenge for agents that many of the agents that I've spoken with in my agency surveys and agency interviews say if it's less than 40,000 a premium, I send it to the State Farm agent down the street, the producer doesn't get paid any commission, I can't afford it. So the agents are saying, I can't afford to do this. The customers are saying I want choice. And so they're moving to the online area to try and get more options. So the question becomes then what can a carrier do to help their agents keep that business? And this leads you to the world of working with the digital agents or working with the comparative raiders or the platforms, the marketplaces.
Nate Golia (09:50):
Donna, do you want to weigh in on that?
John Poucher (09:51):
I agree completely. Back to your original question, if you're an agency that does not embrace the digital revolution that's happening, you will die. That will definitely happen. So finding ways to serve your customer in a more meaningful way is imperative to be around. And people are always going to find where there's value. If I find value and I've signed a similar premium, but you add a service to me, you make my life easier, I don't have to think about insurance, the customers will continue to come back. It's when they lose that value, that thought of value, that's when the customers are going to leave and go somewhere else and buy their insurance somewhere else. To Carolyn's point talking about, you're talking about how do you have a profitable agency and how do you run it on the new economics that makes sense for you. Remarketing is a, that's called remarketing what she was talking about within an agency is California itself right now is going under massive rate increases or non-renewals right now so that all the agencies are trying to figure out how to do that in an efficient manner. We talked about with some of our partners, our large partners about batch rating and different ways that we can help them in that so that they have an automatic renewal, reduce the load and the work and the expense of having to go through that. So if you're a carrier partner, you have to think outside the box of ways to be able to help your agency partners run their business more efficiently as well. And then those partners will find you as well.
Karlyn Carnahan (11:17):
By the way, when you're remarketing, it's because they want to lower price, which means the agent's getting less commission.
John Poucher (11:22):
Less commission, so!
Karlyn Carnahan (11:22):
It's costing them money to provide this customer service. This is not a good situation.
John Poucher (11:28):
And ultimately sometimes there's no other option. The market is what the market is bearing and you actually still have the best price, but I need to go show the customer four different options.
Karlyn Carnahan (11:35):
So then I did a bunch of work.
John Poucher (11:36):
Yeah, exactly. But I had to do all that work to keep that customer at that same price.
Nate Golia (11:41):
Yeah, I think it's one thing you said that I thought was really salesy. Agents have to be willing to embrace digital and find a home for it in their own business. I think we're going to talk about that a little bit more later. But this is a example. I just moved from Texas, South Carolina and in Texas, my insurance agent, I could text him and he would answer me in that channel, even though he would sometimes their office processes weren't great, but they were engaged in more channels for communication. When I moved to South Carolina, and I always call an agent when I'm moving because I know all the tricks of the industry now, and I know the best person to get me the answers I need is a local agent. But I called the agent, they had no way for me to reach them via SS M s. I called them and I got an old answer machine leave with the message at the beep style answering machine, not even a voicemail that they were going to get transcribed, which I thought was pretty funny. And I was like I said, sort of turned off by that. That's like a dissatisfaction, but not necessarily with the agency channel as a whole, but just with that particular agent.
John Poucher (12:41):
That particular agent.
Nate Golia (12:41):
That's one of those things that's trying to get to that point of can carriers or other partners come in and help and guide agents like, Hey, you got to upgrade. It's more than just getting nicer computers or something like that.
Karlyn Carnahan (12:52):
Yeah, but that is challenging. I've done a lot of work with independent agents. I walked into one agency one time, I was doing a consulting project for a carrier, had me on the road for a month interviewing independent agents and then followed up with a survey. I walked into this one agency in Texas and you walk in and there are files, files everywhere, shelves full of paper files. That reminded me of me being an underwriter back in the eighties. And I said, have you thought about going digital? And he said, I can't. The day I go digital, every C SS R and my team will quit and I can't backfill to get people trained now. So I'm sort of stuck. I can't upgrade my agency management system, I can't digitize the paper. I'm just stuck. And so this is an area where insurance carriers could help agents because insurance carriers know how to digitize things in a way and they understand change management more effectively. And so there is I think a role for insurance carriers to help their agents become more digital. And certainly there's all the work a carrier can do on the portal and automating and making it simple to place business. But if you think about part of your role being bringing your agents along with you, there are services that you can offer. Your question has to be, does it make sense? Where should you apply that?
Nate Golia (14:07):
John, you must have some experience with that!
John Poucher (14:09):
Yes, absolutely. I mean I've helped agents scan. I mean it is crazy. Some of the things I've done in the past to help some agencies out the mid two thousands into the 2000 tens, that was a big thing with agencies digitizing. I mean you go into old agent's office, it's stacks up to the roof, it's daily of paper files. And even one of the first MGAs I worked for, we were just finishing digitizing all of our file files. So it's been a long road, but there are crazy tools now to an insurance agent starting agency now from scratch can build the thing completely online, have all kinds of data transfer happening with Ivans that controls a lot of the market and be a really lightweight agency where 20, 30 years ago you had to be brick and mortar, you had to have an office, you had to file cabinets, you had to have all this hard expense to even start an agency, which now you don't. So I think to keep agents going too, what's lacking as well to talk about the agency channel is bringing in that new talent to sell this career lifestyle that it is. You can be your own owner, you can be your own business owner. It's a pretty lightweight start. Now, the first couple years suck because you aren't going to have enough commission to really eat. So you got to have a couple years banked up to be able to build up a business. But once you do, I mean that business can run for forever.
Karlyn Carnahan (15:40):
But you brought up something that I think is worth commenting on, which was the younger agents and the changing generation. So in 2020, department of Labor said 28% of all employees and insurance agencies in North America were over the age of 55 in 2022, 11% were. So those folks, 18% of the agency employees are gone replaced with this younger generation who work very differently. And on the one hand you think, oh, they really want more technology and they do. But we also did a study where we asked the agents, how do you prefer to engage with your insurance company? Option one, I just want to use the technology. Don't make me talk to someone. Option two, I want to use the tech and then pick up the phone. And option three, I just want to talk to a human being. And the surprising thing was 29% of Gen Z and millennials just want to talk to a human being.
(16:32)
And the older you get, the less they want to talk to people. And I don't know why, but I think it's because they don't understand insurance and they want advice. And so this is where something like generative AI could be used to help provide advice. If you've got 18% of people who don't need to talk to somebody gone replaced by 18% who want to talk to humans, you're probably getting more calls through the call center. So the question then is how can you build something that provides advice to an agent and could that then be used down the road? Should the online presence, this online, small commercial continue to increase? You could repurpose it. So I'm curious, how do you think about John, how do you think about providing advice to the agents and are you seeing more folks calling?
John Poucher (17:13):
We are, as our company has scaled, we are overwhelmed with inbound calls and we are looking at all kinds of things, including LLMs, to help provide those answers to those calls that are being inbound. And a lot of 'em have to do with, so to back up, I think the theory of my theory on why the younger generation is calling in to get answers is ones actually placing the business. So the agency owner brought the business in, they're actually working it and placing it and they have questions around appetite, class codes, payrolls, exposures, all those nitty gritty details that they want to talk to an underwriter and make sure they're placing, getting everything, all the coverages to the carrier. Because a lot of the times they have the best intentions. So being able to provide those answers in a really effective manner really helps your placement and gets business in the door.
Karlyn Carnahan (18:06):
So the key then I think is how do you make it so simple for an agent to place business that they don't have to ask the questions? Can you do data so they don't have to think about what goes in there or eliminate the questions? Can you put an advice engine? Hey, restaurateurs in Florida typically choose the $20,000 MedPay limit. Whatever you can do to eliminate those questions helps them but also clearly helps us.
John Poucher (18:31):
We are doing all of what you just said. Yeah. We bring in from multiple third party data sources bring in into the underwriting application process and we start with two questions but the same address. That's it. And then we go out to the market, we suggest NS and then bring everything in. So to simplify that process as much as possible so that way when we're getting questions in, it's a real selling question or a buying question so that it will place the business.
Nate Golia (18:57):
Yeah. Well it's interesting what you said, you know, got agent, new younger agents coming in is older agents are moving out or the employees. And I think that people who are towards the end of their career don't realize how much of their knowledge is really just driving through their own personal computer in their head. And a lot of these younger people are coming in, they are going to want to ask us, they are going to want to communicate. And that, like you said, is there a digital solution to that makes it so it's not a bottleneck where there's more replicability for an agency to be like, oh, I guy, I can give this content to my young person here, another over there. I think the other thing is also true of customers too. Whereas a little bit of buying insurance, if you've been a business owner for a while, you kind of understand the score and now you can move online because more comfortable you've learned online at the same time insurance. But even if you're a digital native young person like my brother who's 23 or something, he still doesn't know anything about insurance or if he had to get it, he would've no idea what to do. He had a lot of questions even though he could very adeptly navigate any sort of digital form, but he's going to have questions.
John Poucher (20:04):
Yeah, the words are funny, edinson law, what does that mean? What is the insurance?
Nate Golia (20:09):
Insurance terms get older every year!
Karlyn Carnahan (20:11):
Under insurance!
John Poucher (20:11):
What is co-insurance? Yeah, exactly. All of those things.
Karlyn Carnahan (20:14):
But the other thing that agents tell us that they really value is advice on cross sell. Because they work with so many carriers, they can't remember what you offer. So if you can say, yes, this restaurateur can buy the bot, by the way, we have a wine valuation endorsement, we have tip insurance, we have these other things that might be relevant for another $52. That kind of thing is extremely helpful for agents. And there are a number of carriers that do offer that where here's what you asked for and here's the quote, but here's additional prices for other things that we think would be relevant. Agents absolutely love that because they simply can't remember and it helps you drive the cross sell.
Nate Golia (20:53):
Last quick question because we did get started late, so we went over a little bit. I can see them making up the next panel and then I want to keep them on track. What's your timeline on generative AI seeing a, when do you think that's really going to start shaking things up? I didn't hear the beginning part.
Nate Golia (21:04):
What do you think is your timeline on general on generative ai? We saw a lot of it in the demos. We're seeing a lot of it on the floor.
John Poucher (21:10):
We're already doing some of it and we are going to have aggressive plans to expand upon it. We have early learnings thus far, and I think the rest of this year we're going to continue to play with it aggressively in 24, really probably plan to blow it out even more.
Nate Golia (21:27):
And Karlyn, what about maybe in other lines of business, anything? Anything that's more a better fit for that, for using that technology than, yeah.
Karlyn Carnahan (21:34):
I mean generally AI is interesting. We've been doing a lot of work in that area and we just did a SNAP poll last week. So we sent it out and got about 60 carriers responding. And the question was, are you using generative AI in production today? Are you testing it or plan to test by the end of the year? Do you let your people use chat GPT? What are you worried about? Where are you using this? What we found was that about 10% of carriers say that they are using generative AI in production right now today. And about 50% say that they expect to be doing this by the end of the year that they are testing models right now. Most are using it in the customer service area, not yet in decisioning or anything like that. About half of them do have some controls over the use of chat GPT, but about half of them.
(22:18)
And they're worried about a lot of things, accuracy and hallucinations, the regulatory impact, the ethical considerations. So I think that this is something that is moving extremely quickly. There are a number of vendors out there, I mean many here at this conference talking who have products in production right now to today. So I think for carriers, my advice would be think about those areas where you can provide, where can use this maybe not for data specifically yet. I think I would be using it for things that are a little softer and more gentler. If it were me and I write a carrier, I think I'd be looking to see is there a way that I can use this to help the agents because you have a little bit of, if you get it wrong, you've got a little bit of backflow on that as opposed to going directly to a consumer or making underwriting decisions. I think it's moving extremely quickly and everybody should be educated on this.
Nate Golia (23:08):
My wife has a new business, actually got a small marketing consultancy, it's a speciality for kids summer camps. And she had a lot of demand for clients and she said, I don't know if I can, I want the money, but I can't take on all these clients. I can't get the time. And then she realized how she could use generative AI to just give her something that was replicable across multiple clients. And she said, it's revolutionary. It's changing dagger to the heart every time, but still. Thank you everybody. We're bringing the next panel up now. Thank you to my panelists, Karlyn and John. Thank you.