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InsurTech Acquisitions Mark the Digital Age with a Bang

Digital acceleration in the independent agency channel stepped up a gear with the announcement of two high-profile InsurTech acquisitions last week.
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Last week, digital acceleration in the independent agency channel stepped up a gear with the announcement of two high-profile InsurTech acquisitions.

At the heart of many of the takeovers in recent months is the necessity to conduct more business online and create a more streamlined process for brokers, carriers and clients alike. Other considerations for acquirers appear to be an increased appetite for small commercial and cyber business.

Simultaneously, one InsurTech questioned whether an environment rife with consolidation and acquisitions will truly benefit agencies as well as the end-user.

On Thursday, Applied Systems, one of the world's largest providers of agency and brokerage management systems, announced it has entered into a definitive agreement to acquire EZLynx, a pioneer in real-time comparative rating and one of the fastest growing agency management systems in the U.S. Additionally, in 2019, Applied entered into a definitive agreement to acquire Indio Technologies, Inc.

“Start-up and fast-growing independent insurance agencies are on the rise, creating a growing segment of the marketplace looking for automation and technology choice," said Taylor Rhodes, CEO, Applied Systems, in a statement. “Applied's investment in EZLynx further demonstrates our commitment to providing technology choice for agencies of all sizes and increasing automation and connectivity between agencies and insurers to create a more valuable digital distribution channel."

In the second big announcement of that day, Bold Penguin announced that they will become a subsidiary of the American Family Insurance group, pending regulatory approval and closing. The Bold Penguin digital exchange is used by insurance agents, brokers and other distributors to match, quote and bind policies from a range of insurers to meet customer needs.

Bold Penguin had only recently completed the takeover of RiskGenuis, a company founded in 2016 that uses artificial intelligence to evaluate a variety of emerging risks across an entire portfolio of insurance policies.

“We welcome Bold Penguin's incredibly talented, nimble and customer-driven team," said Bill Westrate, American Family president and CEO-elect. “Like American Family, they believe that innovating and collaborating with others is the best way to meet customers' wide-ranging needs."

In a statement, American Family said it would run Bold Penguin with a “relentless commitment to neutrality and confidentiality with its insurer, broker and agent customers," in an acknowledgement of the potential conflicts of interest involved in an insurer owning a platform that interacts with multiple agents and carriers.

These latest announcements follow news from November when Brown & Brown, an insurance broker and Big “I" member, announced that they planned to acquire CoverHound and CyberPolicy, in a seldom seen move into the InsurTech acquisition arena by a large-scale broker. CoverHound offer personal lines and small business policies from a variety of carriers while CyberPolicy, launched in 2016, helps small businesses buy cyber insurance online.

“By combining CoverHound with our expertise and market strength, we will be able to meet more customers where they are and provide them with the appropriate coverage for their unique exposures," said Steve Boyd, Brown & Brown senior vice president of Technology, Innovation and Digital Strategy.

In 2015, Chubb (then ACE) took a 24% stake in CoverHound. However, Brown & Brown will now assume 100% ownership. Brown & Brown is one of the most active acquirers of insurance agencies and brokerages annually, according to Insurance Journal.

Meanwhile, HawkSoft, an AMS designer, reaffirmed on Thursday its commitment to remain an independent software developer, suggesting that independence is the best way to deliver its product. “The company has grown organically without outside investors," a statement read, which the company claims gives them the “freedom to be answerable to just two stakeholders–customers and employees."

"Having been an independent agent in the past, I know how much the freedom of choice matters to agents who have made the commitment to offering their policyholders multiple options," said Paul Hawkins, CEO and co-founder of HawkSoft.

"While the rest of the agency management system industry is disrupted by consolidations and acquisitions, HawkSoft is choosing the opposite path of sticking to our commitments to customers and remaining privately owned," he said. “We continue our product-driven focus towards delivering the best insurance technology platform for independent agents to run their businesses."

As the insurance landscape continues to evolve in the wake of the COVID-19 pandemic, digital processes are more important than ever before, according to recently released research from Bindable. The survey found that 75% of agents agreed that investment in technology is critical to their survival—with 80% citing that slow technology adoption has made them less valuable to carriers and 65% believing they have been less valuable to the overall insurance ecosystem.

“COVID-19 changed the insurance landscape and accelerated the need for digitization. Consumers are transacting more online and expect access to digital products on-demand," said Bill Suneson, co-founder and CEO of Bindable, regarding the survey.

“We know that limited investment in technology hinders agents and that is only magnified in the current landscape," he added. “Today, business strategies rooted in technology will prove to be the most successful for independent agents in terms of customer satisfaction and retention."

Will Jones is IA editor-in-chief.

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Thursday, January 21, 2021
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