Canadian Underwriter

Digital Expectations

September 2, 2016   by Chuck Ruzicka, Vice President of Research and Consulting, Novarica

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Commercial lines carriers are seeing new analytical and digital service capabilities emerge in the personal lines industry, as well as new entrants disrupting and innovating in the small commercial market. Large commercial insurers generally have more complex exposures, use a greater number of specialized coverages and require expert underwriting.

In spite of these factors, however, it is only a matter of time before they, too, will be expected to meet the new standard for digital interaction and service. What should larger commercial carriers be doing to prepare for new technologies and meet the emerging expectations for a truly digital insurance experience?

This can be broken down into data, digital and core system components.


The Internet of Things (IoT) and interactions from websites and social networks create massive amounts of data. Consider, for example, recently revised guidelines from the Federal Aviation Administration in the United States that have opened up the potential for use of drones in thermal imaging and real-time video feeds. This capability could be applied to inspections of rooftops or rail lines, better response to natural disasters and surveying commercial crop fields.

Chuck Ruzicka, Vice President of Research and Consulting, Novarica

Chuck Ruzicka, Vice President of Research and Consulting, Novarica

Sensors are also a key source of data, and use cases include monitoring buildings for structural damage and tracking livestock. In addition, telematics and autonomous vehicles are making their way into the commercial space, with many companies having debuted feedback data for fleet vehicles and self-driving trucks.

Though it may take decades to achieve, data feedback from autonomous vehicles can reduce the frequency and severity of claims. Current offerings such as on-board computers, accelerometers and in-vehicle and out-of-vehicle video also provide opportunities to analytically assess driver behaviour and safety, as well as to improve fuel usage and efficiency.

Insurers are now in an era of data super-abundance and have access to a growing pool of information from a wider variety of sources. However, this data is outside the typical data models insurance carriers maintain; it also may be unstructured and require new tools to search, process and manage.

That being said, new analytics tools are emerging. Predictive analytics and complex data analysis models afford large commercial carriers the ability to leverage multi-dimensional and third-party data.

Predictive modelling tools, once applied primarily to risk data to improve pricing, are now being applied to identify potential fraud, predict loss severity and recommend net best product or service alternatives.

Predictive scoring can decrease the volatility of underwriting and the severity of claims, and though these capabilities are still nascent at many insurers, they are poised to grow in the future as insurers look to build out their data strategies.

Insurance carriers who want to improve and leverage new analytics capabilities are asking themselves the following questions:

  • Are the right people on board? Should data scientists be hired or engaged to augment more traditional actuarial and product analyst roles?
  • Are the right data governance processes in place to manage definition, absorption and ownership?
  • Are the right tools in place to analyze these new data sources? Should partners with experience in other tools and analytical models be engaged to assist in the utilization of these new data sources?
  • Is there capacity to deal with these new data sources and types of analysis? If not, is it possible to prioritize opportunities or expand analytic capabilities?


Consumers and agents expect an experience that recognizes them and remembers prior inquiries, actions and preferences. They expect data that can be captured by phone or GPS, provided by third-party data sources, or IoT to be seamlessly integrated into insurance process and leveraged to streamline application, customer service and claims processes. They expect an omni-channel experience that allows them to use the communication medium from the location and form factor of their choice.

A digital, omni-channel experience is especially important for brokers and agents, as large commercial policies involve frequent back-and-forth with carriers, underwriters and policyholders.

Email and offline communication dominate the space, as they allow the flexibility and direct personal communication often required by the individualized nature of policies.

Email and offline communication are so widely used that it is not uncommon for brokers and agents to request that certain accessibility to policy detail be turned off in customer portals so that client inquiries come directly to them.

The large volume of emails has been a driver for insurers to seek out systems for email handling and internal workflow capability. Systems must recognize the receipt of requested data and trigger follow-up actions without human intervention.

In some places, broker and agent portals are also commonplace at commercial lines carriers as a medium for information upload and collaboration. Recent iterations of these portals tend to feature enhanced user interfaces, as well as the ability to collaborate with underwriters and individual policyholders.

The portals are also sources of marketing material and underwriting guidelines. Functions such as online policy document access and agency management systems connectivity will be key capabilities for insurers wishing to deliver a truly digitalized experience for brokers and agents.

New business submission, as well as file attachment and spreadsheet import, are also becoming necessary as more business is conducted electronically.

Consumer portals offered by carriers in the independent agent channel often offer less functionality than their agency portals and, more importantly, than the consumer portals offered by direct marketers.

While customer portals may not possess the same robust digital capabilities as broker and agent portals, they are, nonetheless, table stakes at most commercial insurers, including those in Canada. In the future, these customer portals could be used to push educational material and risk prevention advice to policyholders.

While large commercial carriers generally lag in this space, the increased availability of sensor and telematics data makes this a real possibility in the future.

Carriers who wish to improve the customer experience and meet the emerging digital expectations of consumers may consider establishing customer journey maps to enable insurers to look at their services from a customer experience perspective and to identify data that is most relevant to decisions and the opportunities to make interactions more effective.

Carriers may consider measuring and improving usability of both externally facing and internally facing systems.


Modern core systems are based on a service-oriented architecture to facilitate extending services to the web and to external customers or third parties. These systems enable the consumption of data from third parties and also provide business rules capabilities to enable straight-through processing with the appropriate controls.

More importantly, they provide the ability to add data fields and extend the system. Modern core systems allow easier access to data and improve data quality, offering a more complete view of both policies and customers. While some analytic capabilities can be added to legacy systems, it is much easier with modern systems.

Individual core applications can also provide competitive and operational value for commercial lines insurers.

Larger commercial insurers tend to want customized accounts, with the ability to split billing between locations and match billing dates with internal processes. Modern billing systems allow the flexibility to accommodate different requirements.

The wide variety of industries and coverages written also makes for claims that are often complex and highly variable. Modern claims systems can streamline workflows, improve data and increase operational efficiency.

Predictive analytics is a key capability of many claims systems to identify potential areas of early intervention and reduce severity.

A core application of emerging importance is also reinsurance management. Reinsurance is heavily used in commercial lines, but is mostly managed through Microsoft Excel spreadsheets.

Employees, too, have changing expectations and will look for automation in these areas.

Large commercial carriers are beginning to develop reinsurance solutions in-house that have advanced capabilities in managing location data, modelling and reporting. As regulatory demands for information increase, and as huge dollars continue to become available through recoveries, investment in reinsurance management solutions are expected to increase.

Modern core systems and applications are not enough, however, to guarantee success. In addition to modernizing core systems, carriers should anticipate change by the following:

  • establishing an architecture that enables data exchange and facilitates adding or dropping services from the overall application portfolio;
  • expanding testing automation to enable rapid regression testing and testing of bulk data form external services;
  • developing agile development processes to accelerate the velocity of change;
  • encouraging continuous builds and improving software upgrade and release processes;
  • encouraging innovation and experimentation through funding and by establishing bi-modal organizations to remove some of the restrictions and constraints core systems require; and
  • considering investing in start-ups that intend to disrupt the insurance market to learn from these experiments and hedge against business model disruption.

As commercial lines carriers continue to face intense competition, technology investments will be key in retaining and serving clients. This market segment is heavily specialized, and the legacy systems in place at many organizations will no longer allow insurers to keep up with an increasingly complex set of customer expectations and technological changes.

Carriers cannot afford to take the risk that these new expectations are just for personal lines or small commercial. They should expect disruption and innovation whenever there is a less than satisfactory customer experience and begin learning and applying these new approaches today.

As insurers continue to navigate a constantly evolving technological landscape, the right investments across data, digital, and core capabilities will surely be necessary.

—Chuck Ruzicka, Vice President of Research and Consulting, Novarica

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