Jason Walker is Founder of Agency Insurtech, an agency- and technology-focused consulting firm built on more than a decade of firsthand experience in the insurance industry. Their mission is to protect the livelihoods of insurance professionals and their customers with a dose of technology. Jason was interviewed by Michael Fiedel, a Community Leader at InsurTech Ohio and Partner at PolicyFly, Inc.
Jason, agents are bombarded with so many new insurtech options that it’s fair to say it can be overwhelming. What’s the most important first step for agencies to consider when evaluating their technology?
“Information technology (IT) infrastructure is where an agency needs to focus their time initially. We have witnessed potential security gaps within a given agency based on the lack of insurance industry expertise that is all too often experienced with local managed services providers (MSP). It is necessary for agents to revisit their relationships with MSPs to ensure that they are not unintentionally exposed to cyber incidents as they conduct more business online with the assistance of technology.
The industry is fascinated by the latest sexy technology solution. Agencies that are rightfully focused on growth and retention may rush into buying new enablement tools to satisfy operational tasks and not realize that they have opened themselves up to issues that may lead to cyber incidents.
For agents preoccupied with running their own businesses, they’re not always in the best position to evaluate whether they have the proper software and hardware protocols in order to protect themselves. Every year, agency owners must assess their E&O and cyber risk, affirming their digital and online practices meet industry security guidelines that protect consumers. When asking their local MSP if they’re secure, the provider may prematurely provide assurances like ‘Oh yeah, don’t worry about that, we’re compliant’ when in reality the answer is no.”
That’s a very interesting perspective and a cautionary tale that I haven’t heard a lot of people talking about. How have you seen agencies get burned?
“When an agency’s MSP rushes to say the agency is compliant without fully reviewing agency coverage requirements, that’s where we’re seeing exposure risk that can be detrimental during a cyber incident.
Let me give you some numbers. Forty-seven percent of small businesses and sixty-three percent of medium businesses had some kind of cyber incident reported in 2019, and the average cost of a cyber incident was $119,000.
Now compare that to more than half of independent agencies that make between $0 to $499,000 in revenue and we’re talking about roughly 20% of their annualized business taking a hit. That could have devastating effects on an agency.”
Who do agents need to turn to for the right guidance in considering their current infrastructure and understanding where it needs to be improved?
“Too many agents are working with a local MSP that isn’t really thinking about insurance and how agents’ risks are different from let’s say a local restaurant or salon. Agencies need to work with MSP shops that have experience with insurance and work more closely together to sit down and review their infrastructure in depth.
It’s really just practical advice. When you sit down to fill out your renewal app for E&O or cyber, do it together. Go through that process carefully, always questioning whether you have specific things covered or taken care of within your business.
Don’t rely on the MSP solely and accept quick answers. If your policy is based on inaccurate assumptions regarding IT and safety protocols and you make a claim based on a cyber incident, the carrier will likely deny the claim and the loss is coming out of your own pocket.”
Wow! This is an important reality for agents to understand. Do you think insurtech providers have properly considered this?
“No I don’t, because the agency’s internal IT challenges are not technically an issue that immediately affects an insurtech provider’s business model; however, I think insurtechs as well as carriers and associations have a responsibility, in good conscience, to raise awareness and even willingly disclose their compliance practices to provide agents with peace of mind when outsourcing portions of their workflow to these parties.
In addition, as we face the realities of COVID and pandemics in general as well as work-from-home practices, you have agency staff performing duties from their own little micro-environments and essentially expanding from the single brick and mortar agency to multiple satellite locations. Be it from coffee shops or kitchen counters, agencies face additional exposure to their network and tools when no two setups are the same. So you need to be smart about where and how you conduct business and ensure that your IT roadmap accounts for a growing virtual ecosystem that is properly secure.”
Once agents and their MSP partners are confident in the infrastructure, how do they make the leap into evaluating all of the insurtech players targeting the distribution and agency space?
“Agencies have to start with properly identifying a strategy before making the choice to buy something. Do you know what you want to achieve as a business even before selecting insurtech solutions to get you there? Unfortunately, a lot of agents are struggling with this piece and it’s actually not entirely their fault. I put more of the onus on anybody that’s helping advise that agency on what products to acquire.
Agents are willing to learn and need carriers and associations to wrangle the insurtech space and dispel the silver-bullet sales pitch. Their advocates’ recommendations carry tremendous weight, so their diligence and vetting processes need to be extensive and mimic the tough questions sometimes reserved for private equity and venture capitalists that thoroughly dig beneath the surface before making an investment.”
For the insurtechs that are getting it right, what are they doing particularly well?
“I used to see a lot of insurtechs speaking on behalf of the agent saying, ‘I know exactly what your problems are, and I’m going to build something to solve them.’ But then insurtechs work from assumptions and get five steps into development before asking agents for feedback. That’s when agents become jaded towards new technology.
The insurtechs that are getting it right are keeping the agent involved and allowing them to have a voice in the process so that the strategy behind the technology is much stronger.
Recently, small- to mid-size commercial solutions that intended to circumvent the agent have refocused on the importance of the distribution channel’s role. The insurtechs are saying, ‘we’ll take you this far, but an agent is going to be the best partner to help you make the right choice.’”
As an expert in how agencies operate and evaluate technology, do you have a guide for helping agents through the decision process?
“Agency Insurtech is building a website, insuranceplayground.com, that’s specific to insurance agents and everybody that plays in that space. We’re really excited about it because it will allow everyone to come in and be able to test and play in a sandbox across a number of environments. It will also feature peer reviews so that product discovery and promotion are more organic and based on experience. Being able to codify all of this technology for the agent is so important.
In addition, we advise agencies, networks, and carriers on identifying and implementing the right technology through an efficient approach we simply call Business Program Selection. The first phase focuses on your Business strategy. We use the Rockefeller Habits principles to define overarching objectives for the next 5–10 years and then tackle the next twelve months by assigning quarterly tasks, resources, and financial and production measurements. This process yields a blueprint for which technology enablement will be prescribed.
We then build a Program measurement and insurtech identification and scoring plan so that we can hold ourselves and tech partners accountable to what we said we would accomplish. The final Selection step includes a vetting process that is akin to an abridged diligence process conducted by private equity during an acquisition. This get-to-the-point approach ensures that selected insurtech partners have the right technology to align with your business and the measurable goals we set out to achieve.”