Over the past two decades, direct sales models and digital distribution have transformed personal insurance lines in South Africa. Yet digitalisation has yet to take hold in commercial insurance, where a substantial portion of policies are still sold through brokers and where manual business processes are still commonplace.
By Deon Louw, head of product and marketing at Bi-me (Business Insurance Made Easy)
Although similar stats aren’t readily available for South Africa, brokers still account for around 70-80% of all commercial policies sold in markets like the US and the UK. Global numbers from Insuramore show that commercial brokers account for around $69-billion a year in commercial non-life premiums.
The complexity of commercial insurance, along with the nature of the risk, means that business owners still turn to their brokers for specialised advice. Many commercial customers find it difficult to know which policies they need or what they will get for their money. Brokers have always played an invaluable role in offering intricate guidance to businesses.
AI set to disrupt commercial insurance market
However, this segment of the market is unlikely to be immune from digital disruption. We can expect to see the rapid adoption of artificial intelligence (AI) and intelligent automation, in particular, catalyse massive change in commercial insurance, creating significant threats and opportunities for commercial brokers over the next few years.
We are seeing a surge of insurance investment in AI around the world, which promises to have a transformative effect on industry efficiency, productivity and profitability. McKinsey predicts that AI implementations could increase productivity in insurance processes and reduce operational expenses by up to 40% by 2030.
AI has a role in almost every process and link in the insurance value chain–from quoting and binding to assessing claims. Underwriting, for example, remains a heavily manual process in commercial insurance. By automating underwriting and introducing AI to crunch huge data sets, insurers aim to improve the accuracy of their pricing as well as deliver a slicker and faster customer experience.
When it comes to claims, many insurers are starting to leverage AI for faster claims settlement. The technology enables them to more rapidly assess claims based on real-time insights surfaced from large volumes of data. They can use these insights to rapidly approve valid claims and flag others for investigation if anomalies are detected.
Automation and AI pose challenges and opportunities for commercial brokers
For commercial brokers, these advances may appear to be a double-edged sword. As insurance processes become more automated, it creates opportunities for insurance companies to sell policies to business owners via self-service apps and websites. Instead of phoning the broker for a quote, a small business owner could simply go online and get an instant quote themselves.
This could put the role of the broker at risk when it comes to simpler insurance needs, such as the requirement to insure a delivery bakkie or a plumber’s tools, or to purchase liability cover. As AI matures and small business owners become more confident using digital channels, the range of products they buy direct could potentially expand. As such, brokers face added pressure to prove their value in the distribution chain.
One way they can achieve that is by embracing the technology rather than fearing it. Cloud-based platforms have made it easier and more affordable for brokers to automate their own processes and start exploring AI-powered solutions. Brokers can use this as an opportunity to scale up, reach new markets via digital channels, and meet the demand for digital experiences among their customers.
They can, for example, use AI-powered chatbots to answer basic customer questions around the clock. Or they could offer tools that help clients to get online advice and indicative quotes for their insurance needs. AI tools like Chisel AI or Exdion Policy Check could be used to check policies for errors at faster speed and higher accuracy than a human.
AI empowers commercial brokers to scale up, serve clients, and improve efficiency
In a world that is moving towards digital channels, AI-powered solutions can give brokers an edge in winning and retaining business. They can use algorithms to support marketing and prospecting, helping them to identify and convert high quality leads. AI can help them to predict if a customer is going to churn or default, so they can take action.
The ultimate value of AI, however, will lie in helping brokers to cut back on the manual processes and administrative tasks that consume so much of their time. AI will enable them to focus their energy on bespoke advice, customer advocacy and complex cases, in turn helping them to enhance relationships with and value to their clients.
AI may thus be a threat to brokers who are merely processing transactions. Those that are taking a proactive role in helping clients reduce and mitigate risks will be able to turn AI to their strong advantage. They will be better positioned to adapt to changing customer needs of customers and to better service business owners via omnichannel business models