By: Roi Agababa , CEO and Co-Founder, Novidea
As we rapidly approach 2023, we can see that the insurance industry continues to evolve, adopting more and more technologies to grow their businesses. As CEO of a cloud-based, data-driven platform for brokers, agents, and MGAs, we observe on a daily basis the urgency insurance brokers and agencies face to accelerate their digital transformation initiatives in order to stay competitive in the market. Digitalization is widespread in almost all industries, such as healthcare and banking, but we now can see that insurance is now at a significant inflection point.
The next generation of tech-savvy, digital-first agencies, know as MGAs )Managing General Agent) has already stormed the gates, bringing VC-backed innovations. Some experts have referred to this new crop of MGAs as “insurtech 2.0.” Today’s MGAs are gaining traction across the insurance distribution ecosystem, serving as intermediaries in the same way as retail agencies and brokers. However, unlike retail and wholesale brokers, MGAs often have binding authority from insurance partners. Working with MGAs benefits insurers as it has the expertise that insurers may not have. It’s cost-effective, offers lower risk, and opens new business channels.
As a majority of retail insurance agencies moved out of their planning phases and into the implementation of digital, they finally have access to essential data about their customers and how their agencies operate. With this new knowledge, what will they learn? And how will these learnings impact the industry in the coming year?
Here are three predictions:
The Expansion of Retail Agencies to MGAs.
Without a doubt, retail agencies should be considering extending their business to include an MGA division. This could be accomplished by making strategic acquisitions based on product and line of business synergy. Startup MGAs are the ones driving the future trends in insurance, and it behooves agencies and brokers to build this type of growth into their business plans sooner rather than later.
The Focus on Doing More Business with Existing Customers. With the growing competition imminent, agencies, brokers, and MGAs will invest more on optimizing their existing customer base. Consumers gain an enhanced customer experience when they have an option to purchase multiple policies from the same broker/agent. Therefore, it is expected that brokers and agents will focus on increasing existing customer business, rather than purusing net new customers. Striving for negative churn, a high renewal rate, and maintaining client retention, will enable brokers and agents to maintain a competitive edge. Growing business with current customer base naturally reduces customer acsquisition costs (CAC) and increases bottom line profitability.
The Rise of Data Scientists. The need for experts to help MGAs and agents make sense of their data will only increase as they tap into their data to make more informed business decisions. Data scientists have already become critical players in the financial services, retail, entertainment, and pharmaceutical industries. In 2023, we should expect to see them in insurance. Consider that agencies are sitting on years, even decades, of historical data about their customers and operations. The time has come for insurance industry data scientists to decode this data and help uncover important trends. And let’s not forget that in order for data scientist to optimally perform their jobs, they will require advanced tools and technology.