Pete Buccola is the Vice President of Insurance at Coterie Insurance, an insurtech that helps small businesses get the coverage they need when they need it, so they can get back to what they do best. Pete was interviewed by Michael Fiedel, a Managing Director at InsurTech Ohio and Co-Founder at PolicyFly, Inc in collaboration with The Future of Insurance Newsletter.
Pete, there are several competing priorities when attempting to improve the insurance experience, what should be the top priority when striving to unlock growth?
“If you step back and unpack the whole insurance experience, particularly for small business, there's very little that insurance providers can do to impact the demand of the insurance product. On the one hand, we have issues around cyber and employment practices, and the demand for those products have risen. But, for the most part, the insurance marketplace is one that's fueled by supply, and the carriers who are controlling that supply dictate the products and purchasing experience. The priority that insurance companies must begin to take into consideration isn’t just how do you build a better buying experience, but go further to define exactly where and when that need to buy is occurring.
The reality is no one likes to buy insurance. No one thinks that they really need insurance. No one really wants to pay a premium for something they don’t plan to use. Everyone has a much lower risk perception of themselves than the insurance companies do, so we have to accept the fact that they're oftentimes buying our products because they have to, there's a regulatory requirement, there's a contract, there's a loan. Where we can unlock growth in an industry is bringing the supply of that product closer to where the demand exists, and the demand exists in a variety of ways. It’s still evolving because of the changes in our workforce.
The top opportunity for insurance companies in the future is less about optimizing price and more about speed. It really comes down to who is able to meet the requirement of insurance when and where that customer’s need arises.”
How dangerous can attempting to increase speed be in insurance, and how should it be done properly?
“When you're making fast decisions, it can usually lead to suboptimal decision-making in prioritizing speed as a strategy. It comes down to how accurate of a decision I need to make, and what data is available to do that. If I don't have to make a very sophisticated decision, I can be super quick. The danger is trying to bite off too much at once. If you try to accommodate multiple distribution channels and multiple products with more complex risks, you end up slowing down. That's one risk. On the other hand, the other risk is you go too long making simple decisions. Insurers must recognize the trade off that they’re willing to make in order to make that fast decision. Can I make a decision knowing 60% to 70% of my information is accurate? What is my threshold for risk? Once you set it, you have to come back to it. You can't be complacent in just staying at that 60%. As you continue to improve and iterate, it's important to make sure you come back to continually improve the results, so that long term, the decision making you have is sustainable.
Fundamentally, Coterie started with the end in mind. We said, ‘How can I make a decision in two and a half seconds?’ And the ability for us to do that was with a partner who had a very simple product need, who was also already getting a lot of accurate data for us. And, it was a very homogeneous group of risks. The decision-making required was very limited, and it allowed us to innovate insurance, underwriting and insurance delivery. Today, we're omnichannel. We have digital integrations with a whole host of partnerships, and we're in several non-traditional embedded opportunities and growing. What that has allowed us to do is accommodate different types of data wherever they're coming from. We've iterated on that to be as granular as possible using the data to make intelligent decisions depending on where that customer is, but the fundamentals don’t change. It's all about: where is that customer? Where are they coming from? We’ve layered, over time, a more sophisticated and growing workflow around decision-making, always testing for precision and quality at the core.
A lot of insurance companies are logging a new submission, allowing a machine to generate a price, and yet they’re still stuck Googling the risk. If you think about the underwriting process, it's really a fact-finding, discovery process. If, in 2022, I still have to Google the risk, I need to give a hard look into the technology and data available to accelerate that fact-finding workflow.
Instead of tracking down the data, we pull the data in and establish decisions for what to do with it. To do this very fast is a combination of deep data science and intellectual underwriting work. That's what we at Coterie have been focused on, is getting smarter and smarter over time, and that's going to continue to unlock potential. It all started with the end in mind. We still want that API call to be low, single digit sub five seconds, and we work from there.”
How is the specialization of the workforce forcing specialization on the insurance industry?
“There's two phenomena. I see the first is that specialization in various industries makes the ability to determine risk quality much easier. You're actually able to distinguish pools of risk because the specialization has become more standardized and ubiquitous for certain industries. Those businesses or individuals that haven't specialized are much more apparent. Number two, those specialized industries and business owners have come to expect when they're buying insurance, it’s something that's specifically tailored to meet their needs.
Despite the fact that they don't want to buy the product, they still are paying a premium. They want to make sure that what they're getting is actually going to meet their needs for the work they're doing. We see a trend toward more tailoring of products to meet their occupation, work, risk, industry and geography. They expect that we understand their unique needs and come with tailored recommendations that suit their business.”
How is the evolution of the industry changing expectations for agents and brokers?
“The advent of cloud technology and the availability of third-party data is the impetus and the fuel that's unlocking new opportunities. APIs have been around for a long time, but what it's allowing insurance companies to do is rethink how those building blocks and that value chain is created, and how they're creating value in the marketplace.
The consumer is expecting agents to know more about their businesses and exposures than ever before without explicitly asking. Basic business facts about their business, premises, services, etc. are more transparently available from publicly-available sources. And, we're seeing that business owners are far more likely to transact digitally for more complex needs. They're much more willing to have a vendor share data IF they get value out of it: a more accurate, faster experience with fewer keystrokes. There's a greater degree of trust, ironically, in a post-quarantine environment, so long as it’s trusted and yields a customized experience.
There's actually a reasonable expectation on the agents and brokers to understand their own customers: basic things that flow upstream from the customer up to the agent and broker, and then up to the carrier.
What we want to do is help agents and brokers be a trusted advisor, and arm them with data. It means that we up the ante in terms of how we can meet the customer more quickly. That responsiveness today is not about who can answer the phone the fastest anymore. It's about who can provide a bindable quote to that customer when they're signing the loan documents, when they're taking the job, when they're starting up as a business and signing the lease agreements. That's where we see a profound opportunity to help agents and brokers grow.”
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