Easy to digest personal lines data led to this part of the market taking the lead when it came to digital transformation. However, industry commentators tell me that commercial lines is now quickly playing catch up
By Editor Katie Scott
This week, commercial lines broker Konsileo secured £4.7m in series A funding, collecting monies from financial consultancy Committed Capital, UK venture capital fund ACF Investors, as well as a number of angel investors.
The key reason why investors’ eyes lit up at Konsileo’s proposition was its proprietary technology platform, which focuses on “both back office efficiencies to give brokers more time with their clients” as well as “front end systems” for customer experience, explained Peter Henderson, the broker’s co-founder and chief technology officer.
This type of technology within commercial insurance is apparently rather rare.
Committed Capital chief executive Steve Harris, for example, said that commercial insurance is “not an area that’s seen much tech investment”.
ACF Investors founder and managing partner Tim Mills added: “Commercial Insurance is absolutely critical to the operation of every business, but compared to personal insurance and underwriting, it is an area that has been mired in an old fashioned and cumbersome customer experience for years, with very little interest or investment going into technology and process to create a 21st century level of customer engagement.”
Broader feedback from the market mirrors these views. The consensus from those I’ve been chatting to is that digitalisation in personal lines has, so far, outpaced technology transformations in the commercial arena – by quite some margin.
This digital acceleration in personal lines has been driven by the use of price comparison websites and self-service models, as well as been steered by the heavy influence of forward-thinking, customer-facing tech developments in rival financial services sectors, such as banking.
Henderson told me: “Personal lines has led the way on digital insurance, driven by disintermediation, online purchasing and the need for cost savings in a low margin, high volume market.
“Personal lines products basically treat people the same, so a single product is suitable for millions of purchasers. Commercial lines products treat companies in much smaller groupings, so each product needs to be understood and advised separately.
“Digital disruption to the personal insurance market tends to be driven by the millions who understand it as a consumer. Far less people understand the commercial insurance market, even at a shallow level, so far less digital disruption has occurred.”
Deepak Soni, commercial director at Axa Commercial, added: “The digitalisation of personal lines developed alongside the trend towards the use of online aggregators.
“Consumer expectations were often based on their experiences with other financial products, such as banking, which moved quicker to embed a digital journey for customers.
“Customers now expect a seamless, fully digitised journey, with support where needed from their insurer. On the other hand, commercial lines customers have their own expectations, however these tend to relate more to expertise and capabilities - although efficiency and simplicity is still a top priority.”
The complexity of the data needed to support personal and commercial lines products respectively seems to be the primary barrier as to why commercial lines digitisation is taking a more roundabout route in coming to fruition.
Chris Haggart, commercial director at GRP, explained: “The fact is that personal lines are more homogenous, with consistent data points that can be used to understand and evaluate the risk.
“Commercial lines, on the other hand, contain more complex exposures and require more complex products to accommodate them. Often, there is still a requirement for professional intervention to ensure adequate coverage for the customer – this is more difficult to accommodate in a digital journey.”
Richard Hartley, chief executive of Cytora – a software business that digitally processes commercial risks in real-time and then triages them to the relevant underwriter or department – noted that “one of the main reasons” why digitalisation has historically been focused on personal lines is because “risk submissions in commercial lines are unstructured”.
However, “technology now exists to turn unstructured risk submissions into digital decision ready risks. Insurers can now digitise their intake in a way they could not do before”, he added.
Soni agreed: “I think the big area for the industry is data and how to use the insights it provides to inform better and quicker decision-making.”
Digitalisation in action
In terms of where digital transformation efforts need to be focused when it comes to commercial lines, Haggart said that GRP has been working on creating “blended online-offline models”, while Axa’s Soni is using data to inform “insight led development” around “product development, pricing and online journeys and processes”.
Henderson, meanwhile, has spotted “some interesting developments” around data enrichment from MGAs and insurers.
He also feels that commercial lines digitisation can support compliance processes.
“In an increasingly regulated industry, where treating clients fairly is vital, digitisation can be the key to monitoring and tracking complex transactions and guaranteeing [the] provision of the best service to clients in a reproducible, automated and demonstrable way,” he said.
Henderson added that Konsileo’s platform, as an example of what digitalisation in commercial lines broking could look like, also delivers enhanced risk capture and presentation, as well as automation to support renewals.
“In 2022, broking at some of the largest national firms remains desktop driven. It just shouldn’t be,” he said.
“With our platform, no Konsileo professional will have to type up notes from a client visit or find that they can’t access a file when a client needs them - everything is linked.
“By leveraging digitisation to guarantee quality of service, professionals spend more time delivering bespoke advice to clients.”
Hartley, meanwhile, explained that “risk processing is a major area of value that insurers are now competing on”.
He continued: “What this [refers to] is the manual steps to turn new business risks, renewals, mid-term adjustments [and] claims into a digital, decision ready format. This enables insurers to unhook premium growth from expense growth and achieve better control over risk selection.”
Pace of change progressing
The tide is turning, however – the majority of the industry experts I spoke to feel that digital transformation in commercial lines is now on the up.
Hartley explained that although digitalisation in this sector “has been slower” historically, it has now been “measurably speeding up” since 2021.
“For example, Beazley Digital [is] straight processing 80% of risk submissions. Allianz UK [has a] goal to digitally deliver quotes to brokers for 80% of risks within one hour. This is setting a new market standard,” he said.
Soni added: “Digitalisation of commercial lines is progressing at pace, stimulated by customer and broker demand, as well as the desire to deliver a better all-round experience across the insurance industry.
“Although personal lines took the first step and [was] expected to change at the same rate as banks and tech companies, commercial lines is starting to catch up.
“This covers both how we interact with customers, develop and distribute propositions and improve key areas - from underwriting through to the claims function.
“I believe digitalisation of commercial lines is accelerating and the crux will be to keep pace and maintain the rate of change.
“As we move beyond modernising internal processing, the next step will be to enable more digital interaction, more self-service and more innovative products.
“The key will be anticipating customer requirements before they have happened, as well as upskilling our experts with the tools that will allow streamlined processes to become the norm.”
However, Henderson warned that commercial lines digitalisation cannot follow the same route as personal lines.
He explained: “Commercial lines need to become at least as digitally savvy as personal lines, but in very different ways.
“Personal lines were forced to digitise to handle large numbers of customers with similar requirement, whereas commercial lines need to digitise to allow expert advice to be delivered to companies as efficiently as possible.
“Commercial lines businesses - apart from micro SME level and other more homogenous business lines - need to focus on using digitisation to reduce overhead and ensure quality while continuing to deliver expert advice.”
For him, insurers hold the key to really turning the digitalisation dial in commercial lines.
“The insurers can unlock innovation by providing targeted funding and real access to knowledge and data. They need to encourage the new wave of innovators to learn about commercial insurance - you cannot digitise what you don’t understand,” Henderson added.
Joining the digital dots
The Covid-19 pandemic helped prove that digital methods and processes have to be an important part of businesses’ operating models moving forward.
Although personal lines focused firms have leapt at this opportunity to engage directly with consumers, commercial lines providers – traditionally – have been wondering how best to action technology.
This void has even led to firms like Cytora, which launched in 2014, being established to help join some of the dots for insurance businesses – Hartley told me that the lack of digitalisation in commercial lines was a specific niche that his firm strived to address.
It’s great news that the commercial lines sector is now becoming more tech savvy – it will be interesting to see where the next innovation comes from and how this will impact market participants and end customers.