When the 2018 Future One Agency Universe Study asked agents to identify the most important issues for carriers to address in the years ahead, their responses ranged far and wide, from chatbots for customer service to artificial intelligence in risk underwriting.
To gauge the status of agents’ top five concerns as we look ahead to 2020, IA spoke with several independent agent carrier partners about where these trends stand today—and where they’re headed tomorrow.
5) Internet of Things for commercial lines: 25%
Year over year, Mo Tooker, head of Middle Market at The Hartford, has observed “incremental growth” in use of IoT devices in commercial lines—“anything from property-type tools like water sensors all the way through casualty-type tools like exoskeletons and worksite monitoring,” he says. “The base is growing in terms of how many people are experimenting.”
The IoT is already having an impact in industries like manufacturing. Erika Melander, manufacturing industry lead, Travelers, notes that machine-to-machine communication can greatly simplify monitoring and reporting, while automated technology such as robotic arms and assembly mechanisms can be programmed to perform complex operations at low costs with greater accuracy.
“Automated processes can also handle repetitive and potentially hazardous tasks, which can decrease the frequency of worker injury claims,” Melander adds. “With integrated IoT sensors, deviations from tolerance thresholds can be detected and notify maintenance teams when human intervention is required. This information helps managers make informed decisions more quickly and adjust processes for more efficient operations.”
Similarly, for companies that are developing IoT technology for the medical and healthcare industries, “there are remarkable possibilities,” says Patty Nichols, medical technology practice lead for Travelers. “Personal health and wellness devices are empowering consumers to take better care of themselves. Connected medical devices are helping to manage chronic conditions and facilitate remote care. Other IoT technology is designed to improve health care operations, the patient experience and patient safety.”
Of course, with increased connectivity comes greater risk. Improperly incorporating IoT technology could damage a manufacturer’s surrounding equipment or even lead to employee injuries, Melander points out, and these devices also increase exposure of a company’s intellectual property and customer data.
Cyber will be a huge concern for any insured looking to reap the benefits of the IoT. “Many devices used for medical applications pose unique cybersecurity risks,” Nichols says. “Thieves find personal health information a particularly attractive target and have come up with more elaborate schemes to break into IoT-based information systems.”
While a business may assume that the liability falls under the third-party device manufacturer, “they need to understand that security gaps can open up if they don’t have the network set up properly,” Nichols cautions. “Organizations using any device or piece of equipment that connects to the network have the responsibility to ensure that they are implementing and maintaining security protocols.”
4) Usage-based insurance: 30%
Whereas the IoT is about collecting data and insights, UBI is about “taking that data and marrying it with a product,” Tooker explains. “How are you going to take my unique characteristics and sell me a product that reflects those? Maybe not by 2020, but longer-term, we think that concept can be very widespread in the commercial space. If I have a better loss experience and I can demonstrate that to you with data, that will be a UBI product that ultimately customers will want.”
That’s already the case in the tough commercial auto market, where “we see very few large fleets that don’t have some sort of telematics product in with their drivers,” says Tooker, who notes that The Hartford has begun to consider that data in commercial auto underwriting. “Over the next 18 months, your driving patterns as an owner will start to influence how much you pay at the end of the year. If you have safe drivers and you can demonstrate it, you could see an insurer like us offering a rebate.”
“The electronic logging mandate is now fully in place and being enforced by the federal government,” adds Heather Day, general manager, Agency Distribution at Progressive, which offers a commercial UBI program called Smart Haul that earns truckers a minimum savings of 3% just for signing up. “Better drivers can save up to 18%—that’s a significant chunk of change. By offering this option, our independent agents can show they understand the new landscape and get their customers rewarded for something they can control.”
On the personal lines side, most carriers expect UBI adoption to continue to grow. From Progressive’s Snapshot program and Safeco’s RightTrack to Travelers’ IntelliDrive and The Hartford’s TrueLane, most carriers now offer some kind of UBI program to personal auto insureds.
“UBI has been around for a while, and we’re starting to see some more adoption on the personal side of things,” says Erin Rodliff is senior vice president and general manager of U.S. Business Lines Product for Liberty Mutual. “I expect that once we start seeing more adoption of UBI in personal, then small business owners will see how that can expand to their business policies, too.”
3) Sharing economy: 36%
Many carriers, including Progressive, Safeco and Travelers, already offer ridesharing endorsements to personal auto clients in select states. This type of coverage fills the gap when a personal auto policy does not respond because the insured is using their vehicle for a business purpose.
Day notes that in most states, Progressive’s rideshare insurance also provides this gap coverage while drivers are engaged in goods or food delivery activities that are enabled through an online application, such as UberEats.
Both Progressive and Travelers also offer endorsements for home-sharing through websites like Homeaway or Airbnb—an activity that results in coverage gaps under a traditional homeowners policy.
“It’s clear that the sharing economy has staying power—consumers like the benefits that sharing services provide, and that isn’t going away anytime soon,” says Angi Orbann, vice president of property for personal insurance at Travelers. “It’s definitely becoming a more mainstream practice for homeowners who see it as a way to generate additional income and maximize their property when they are not staying in it. But people also want to feel protected, which presents an opportunity for insurers.”
“The sharing economy poses an interesting conundrum to the insurance industry in terms of where liability sits and how this kind of sharing should be insured,” Rodliff agrees. “Things like ridesharing and home-sharing straddle the line between personal and commercial insurance, so they open the door to hybrid solutions and completely new products to cover this space. Given how quickly these types of sharing apps and services have grown, in the next two years, I expect we’ll see more companies coming out with new products targeted at these industries.”
By 2020, “product offerings for the sharing economy will continue to evolve,” Tooker predicts. “Right now, because there hasn’t been too much proof of concept, carriers have been rather reluctant or restrictive. But over the next 18 months, as the data becomes more mature, more carriers are going to be willing to walk out on the risk spectrum a little further. I think will happen naturally.”
2) Cyber risk and data security: 41%
The recent Travelers Risk Index showed that 50% of survey respondents admitted to not buying cyber insurance. Understandably, then, “carriers view cyber as an area with significant potential growth,” says Tim Francis, vice president and Enterprise cyber lead, Travelers. “But it’s also a competitive space, which means carriers will need to make sure they are communicating the products and services that set them apart.”
And that doesn’t make it easy for agents. “The average producer still struggles to understand cyber coverage, and that’s not a criticism—it’s just that the threats are evolving so quickly, it’s really hard to stay current on it,” says Tooker, who notes that The Hartford has refreshed its cyber product set three times in three years. “Commercial carriers are all grappling with how to bring coverage to the market most effectively, so when that agent is trying to understand their offerings from their carrier base, those offerings are not consistent. That makes it really hard to understand the solutions that are being offered.”
Rodliff notes that cyber insurance can be a “great premium and commission generator for agents”—but only if agents can “figure out how to connect customers with coverage in a streamlined way.”
In what Francis calls a “fluid” cyber landscape, that could be easier said than done, at least in the short-term. “As long as businesses use technology to protect sensitive data, there will be people out there trying to access that information,” he says. “Hackers keep looking for new ways to breach a company’s or organization’s system, so cyber insurance options will likely evolve as risks change over time.”
As an agent, you’re probably “looking for a center of mass to emerge” so you can offer your clients a definitive solution for their cyber risk, Tooker says. “But right now, it probably changes every month. The standardization will come, but it will happen slowly. I don’t know if it’s going to be in the 2020 period, but definitely over the next three to five years. We expect it to start with the BOP and move up from there.”
1) Other new coverages and products: 51%
This category covers a lot of ground, but in the commercial space, The Hartford is keeping a close eye on the gig economy. “We’ve got some coverage for the gig worker in market now, and we will continue to make sure that happens,” Tooker says. “I think you’re going to see considerable energy from the industry in that space over the next 18 months.”
“With the rise of the gig economy, we’re starting to see less of the traditional employer-employee relationship. Companies are using more independent contractors, which changes the dynamics of how business owners think about protecting themselves and their employees,” Rodliff agrees. “There aren’t a lot of answers for this yet in the insurance industry, but it’s definitely a trend that will impact insurance in the near future.”
Overall, data will continue driving new product development in the years ahead. “As we get better and better at gleaning insights from data, that allows us to think creatively about how we bring things to market,” Tooker explains. “Just by having more insights about the population, we’ll be able to tailor coverage more specifically to certain demographics.”
Jacquelyn Connelly is IA senior editor.