John Drosos, principal at the Alexander Group, shares key trends and challenges in the insurance industry. Alexander Group interviewed 80 leaders across 60 major carriers in the $500 million range in premium to $5 billion+. The survey findings include:
Hi. I’m John Drosos, principal with Alexander Group and the lead of our insurance practice. As part of my work, I also do extensive external research and more recently we took a look to see what trends there are out there in the insurance space, particularly in the P&C and life space. We wanted to get a pulse of key trends and see what also challenges were out there. We reached out to about 80 leaders across 60 major carriers covering just about every type of line from companies in the $500 million range in premium all the way up to $5 billion+. So, pretty good coverage across the industry. What did we find? Growth in premiums last year was actually pretty strong at around 5% and it’s expected to be fairly strong this year and with a similar growth trajectory. Online and mobile channels are supporting nearly 20% of sales renewals currently of premium, and that’s gone up dramatically. If we looked ten years ago, that number would have been probably less than 5%. At the same time, carriers are still investing pretty heavily in more traditional channels, in particular agents and in particular independent agents. So we are seeing at the same time as mobile is growing, carriers are adding filling capacity in with more agents. They’re using specialized bonus programs to guide growth. So, more strategic carriers, ones, in fact, that are gaining a little bit extra growth, are utilizing not just core commission plans, but additional more sophisticated bonus programs to guide specific strategic selling.
Top challenges that insurers are seeing include lack of sales process and investment in enablement programs and technology. The complexity of selling out there is really coming to the fore and companies are really trying to get a handle on do I have an effective sales process? Do I have the right sales process being executed across the various channels that they’re utilizing to go-to-market? Many carriers also see challenges in adapting to mobile and online while rebalancing other channels. There’s a big question out there. While there is a ton of investment in mobile and online, does that mean you draw down investment in other areas, particularly employee sales channels? When we looked across to see coverage across different channels, about 70% of premium is covered by traditional non-employee channels, agents, independent agents, captive or dedicated agents and then brokers and consultants, particularly on the high end on the commercial side. But as I mentioned earlier, close to 20% of sales are going through online channels or mobile. And that, from this perspective, it’s not just they’re not being supported by a seller and online, this is primarily online where there’s very little selling contact. So definitely seeing big growth in that area. At the same time, there’s not really a big pullback in traditional non-employee channels. We are seeing that perhaps the employee channel will be shrinking a bit or at the very least not growing, we’re not seeing a lot of investment in that area.
When we asked about top growth drivers and how carriers are going to achieve growth, number one, they are adding selling capacity. They are appointing more agents. This is a change from recent past where many carriers were consolidating their agent bases, in particular, dedicated agents. They’re investing in marketing and lead generation. And finally, they’re offering better support via tools, education and training. This often means having a sales operations team in place, not just an operations team, but operations team that is focused on making sure that all your selling channels are more effective. They have the right technology. They have the right programs to maximize productivity. Another growth driver, carriers, about 60% of them are using additional bonuses outside of core or legacy commissions. And these are programs that they’re quite varied, actually when we looked out there. And we found in prior research that we’ve done and also in this survey that carriers that do use additional programs not just core commission rates, 5% for this, 10% for that, are getting a little bit more growth and also have more flexibility in how they pay their agents and brokers. But same time, about 40% of companies are not taking advantage of these types of programs. Finally, we took a look at key challenges. The biggest challenge, sales process inefficiencies. About 60% of insurers said that was one of their top three challenges. And it’s understandable given that you have online channels you’re dealing with, you have employee channels, you have external agent and broker sales channels and trying to figure out what’s the best way to efficiently manage those channels. How much should a typical agent be generating for you, for example, in your business? How much should you expect from an online channel based on the investment? All of this is pretty complicated and requires a good deal of support to make sure you’re as productive as possible. On the other side, about half of companies are seeing issues with their goal setting and their incentive comp programs. And in particular, when we took a look a little deeper, about a quarter of companies see incentive compensation as their top challenge. So number one challenge. So it’s not an issue for everyone, but there’s a small minority of carriers out there that really need to fix their incentive programs.
So what do you do? Alexander Group has a lot of great ideas. We work with a lot of companies and here’s what we would suggest. One, invest in sales and marketing operations to better enable and support all sales channels. You need a sales ops team, not just an ops team, but a sales or revenue ops team. Assess your selling capacity, productivity and effectiveness. This is something the sales ops team can do. This is something that strategic operations teams can do. But you have to understand what’s my capacity. What’s the productivity of all channels? Should you invest more in one channel or less? Or what are the drivers that are making your channels ineffective from a productivity perspective? Ensure that your traditional commission plans are driving the right behaviors in the right lines and the right segments.
There’s a lot of issues you could be having and we see that carriers out there with the wrong commission rates, not understanding how to support a growing agent versus one that is in decline or ready to retire. Develop a robust online mobile strategy that is integrated across your sales channels. It’s not enough just to put up a website, say, here, we’re ready to go. You really have to understand how mobile and online ties in with the rest of your sales strategy, how it ties in with your traditional selling channels. And finally, we emphasize this earlier, utilize additional bonus plans to give you more flexibility, more flexibility in driving the type of growth that you want. You may want to focus more on a particular line in one year. You may want to focus in a particular region or more on renewals versus new premium or new policy. So an additional extra bonus program can help you do those things.
If you want to find out more from the Alexander group, if you do need help with your go-to-market or your revenue strategy, please reach out to us and you can find us at alexandergroup.com. Thank you.