A new survey of property and casualty (P&C) insurers by AM Best has found that more than half of respondents consider digitization and technological investments to be the biggest challenges in modernizing distribution and growing sales.
The rating agency found that 56% of respondents that viewed digitalization and technological investment as significant distribution obstacles.
And another 36% cited improving the customer experience or understanding consumer trends as leading challenges.
This translates to nearly 80% of the insurers reporting technology and innovation as areas where they are focusing most of their distribution channel enhancements.
“The survey reinforced the notion that COVID-19 pandemic lockdowns caused insurers to pivot quickly to meet their own business requirements and customer demands, such as implementing seamless remote access for claims, underwriting, loss control and policy issuance,” said Jason Hopper, associate editor, industry research and analytics, AM Best.
“Ultimately, the pandemic accelerated the digital transformation, especially for tech-exposed lines such as automobile.”
AM Best believes that insurtech growth should continue in the auto and homeowners’ markets as insurers focus on effective and efficient ways to reach and service customers, particularly as automated underwriting contributes a significantly larger percentage of new sales.
Its survey also concluded that 70% of companies are moderately satisfied or very satisfied with their innovation efforts related to distribution, with those that are more satisfied generally having greater annual premium growth on average over the last 10 years.
Additionally, although 50% of respondents stated that no new distribution channels are under consideration, nearly 25% are considering a direct-to-consumer (DTC) model, while approximately 18% are considering independent agents and other non-traditional channels.
“There has been a transition where the cost of obtaining new business is driven by efficient returns—maximizing results for the lowest cost possible,” said Robert Raber, director, AM Best.
“AM Best expects this to lead to an in-depth review of distribution costs—the amount carriers are paying internally for acquisition and what they are paying to partner—looking to ensure customer service and distribution reach are at an appropriately valued level.”
