Data and Analytics in Insurance – An Insurance 2023 Report

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Data Analytics have been identified as very significant factors by members of the Insurance2023 Study Group. During a recent I2023 conference call, 2 independent distributors from north America engaged in a conversation about the significance of analytics and data for the independent channel.

The Players

Chris Hill is a partner in Erb & Erb in Kitchener, Ontario, CANADA

Brian Bartosh is the principal at Top O’ Michigan Insurance in Alpena, Michigan, USA.

The Playing Field

Hill sees the brokerage community in Canada as tiered. Each tier has its strengths, but is also challenged.

  • Tier one would be the smaller brokerages, generally outside of metropolitan areas who are well established in their communities, and have a defined range of products. However, they generally have ageing owner operators, many of whom do not have a formal succession plan.
  • Tier 2 would be regional, multi branch offices (Hill puts his operation at the lower end of this group). This group has more formalized operations and processes and have a greater range of products and markets. These organizations are being squeezed by the smaller brokers (with loyal clients) direct marketers, and larger players.
  • Tier 3 would be the very large, multi-national and international players.

Overall, brokers have been losing market share to captive agents and, more recently, direct marketing financial institutions.

Bartosh sees some differences in the US. A recent study found that smaller agencies are growing in the US, mainly as a result of net new start ups. These agents are young (some just out of school, carrying insurance or risk management degrees) and are using business and analytic tools to plan, direct, and control their activities. They are directly attacking markets that the captive agents and direct marketers have abandoned.

Both Bartosh and Hill indicate that their role in the business is to manage the business. Neither of them carry their own accounts.

Data and Analytics for the Independent

Both Hill and Bartosh see Analytics and Data as key elements in the future of the insurance industry generally and independent system specifically.

Hill believes that the use of analytics by insurers to improve underwriting will advantage brokers, allowing them to be more competitive against direct marketers and allow the competition to move beyond price alone, to incorporate service and product features.

However, Hill also sees downside of some data driven initiatives – such as telematics/usage based insurance – which could leave the broker out as a value add intermediary.

Bartosh believes that agents who use data and analytics to analyze customer preferences will be able to take market share by being proactive rather than reactive in marketing and service, e.g., by offering the right product at the right time. He notes the success of Capital One with its credit card offerings targeted to very specific demographics as an example of a model to work towards.

Bartosh says he has been using his agency management system coupled with stand alone Business Intelligence applications in his agency for a while. He notes that he is ahead of many of his colleagues in this, and is pushing his agency system vendor to incorporate more tools in their base products.

Hill advises the he has not seen much of this activity in Canada. However, he is now contemplating a system upgrade in his office which he views as an opportunity for his team to become more data and analytics driven.

About the Insurance 2023 Report

Insurance 2023 is collection of insurance and technology professionals who are sharing research and opinions with each other and the general community on trends and factors that will impact the insurance industry over the decade ending in 2023., Inc., provides consumers and insurance professionals with information about insurance-related topics pertinent to Canada.