Insurers must learn to sell themselves better
Despite the many investments being made in innovation by re/insurers, few are focusing on the one thing that could gain them new business: a more sophisticated sales process, argues John Holm at Lloyd’s managing general agent Asta.
For all the investments being made by the re/insurance industry in innovation and technology, most efforts revolve around the product or process and there is a glaring lack of initiative around how insurance can be better marketed and sold to customers.
That is the view of John Holm, head of MGA investments at Lloyd’s managing agent Asta. Holm stresses that, especially given the lack of growth in the industry in recent years, more efforts could be made to solve the problem of underinsurance—and much could be learned from the world of ecommerce, he believes.
“It seems to me that there is a lot of competition for existing insurance business but less of a focus on new business—companies or individuals that are either underinsured or not insured at all,” Holm says.
“When I go to conferences, I see a lot of people talking product, systems, IT and technology but not as much on how to solve this problem and sell things better.
“Part of the problem is that insurance has a public relations issue—it remains a grudge purchase for most people. No-one wakes up and wants to buy insurance but I do think it is possible to address that and potentially open up a whole new line of growth in the process.”
He says this issue is important for reinsurers to acknowledge because ultimately any growth on the insurance end of things will filter through to them.
“By working together we can get the idea of selling insurance back on the front foot and start winning this new business.”
Holm notes that the lack of cyber and business interruption coverage among small and medium sized enterprises (SMEs) is a good example of the potential in the market for growth. But while products are being devised, the real key will be encouraging SMEs to better understand the importance and value of such products.
“Reinsurers have the knowledge and capacity on products such as this but that’s just the start,” Holm says. “It must become the building blocks to drive this and sell the concept to the underinsured.
“We need an industry-wide initiative, but the industry is very fragmented and competitive. I firmly believe that the guys who get it right and crack the underinsured market will take their business to a new level and be the winners.”
He argues that the market could learn from the approach of the e-commerce market, which is very sophisticated in its use of software and technology and using algorithms to profile and target potential customers. “They are light years ahead of the insurance market,” he says.
He adds that while many insurers and reinsurers have invested in innovation in a variety of ways, few have anything that focuses on developing better ways to sell and market products.
One company he notes that is very good is Lemonade, the US-based insurer that claims to have a very different business model from that of traditional insurers, based on a peer-to-peer approach and sharing the risks.
“They are changing perceptions about the way people feel about insurance,” he says. “They have made it attractive and interesting and have raised their profile in a very effective way, although it is still too early to judge whether this new economic model will be successful.”
MGAs are clearly playing an important role in encouraging innovation across the insurance industry. While, for a long period, the focus has been on market conditions and cutting costs, recent events such as hurricane Harvey have exposed the problem of underinsurance.
Now may be the moment when the market will redirect its attention to providing more cover for the risks—both natural and manmade—that the world increasingly faces. MGAs, with their proximity to their client base, particularly in niche classes of business, understand not only the market they operate in but the threats they are exposed to and should be at the forefront of solving the problem of underinsurance.
John Holm is head of MGA investments at Lloyd’s managing agent Asta. He can be contacted at: j.holm@asta-uk.com
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