June 1, 2016 by Tracy MacDonald, Vice President, Corporate Services, Trillium Mutual Insurance Company
For many Canadian insurers, particularly for mutuals, it all started on the farm. Mutuals, and even insurers focused on other markets, count farm insurance as an important part of their businesses.
However, over the years, as the country urbanized, and as other insurance markets grew, farm insurance shrunk in numbers and in priority.
While automobiles, new homes and new businesses have increased over time, the number of farms has decreased. This has had an impact on investments in insurance technology, with broker connectivity and portal solutions provider Hubio reporting that farm business has received less new technology than the more commoditized personal lines products, in which automation could be more easily replicated.
Farms have historically not received the same level of technology investment, Hubio notes. As a result, farms and agribusiness customers can face slower processing times to get new business quotes, incur delays in getting answers to their insurance questions, experience lags in updating their policies and renewals, and may see potential inaccuracies as a result of human errors.
While farm numbers are down, farm and agribusiness production is at an all-time high. Statistics Canada figures show that farm cash receipts were up 11.2% to $49.2 billion in 2011, attributable mainly to an increase in crop receipts that make up more than half of total farm receipts.
The Canadian Association of Mutual Insurance Companies notes that in 1940, there were approximately 750,000 farms in Canada compared to 175,000 today. But acreage farmed per farm has increased from an estimated 200 acres in 1940 to 850 acres today. As well, income per farm continues to rise, with more than half of farms generating over $1 million in annual revenue in 2016.
Slightly less than 20% of the gross written premium (GWP) of Canada’s mutual insurers is generated by farms and agribusiness. For mutuals to succeed, they will need to make new technology investments to keep pace with user demands.
In many cases, new technology has been developed, and solutions are lower cost and more functionally rich than ever before. These solutions include upgrades to policy administration solutions to properly capture and manage the new types of farm assets, new liability coverages and the ability to handle agribusinesses.
For example, while hand-milking equipment used to cost hundreds of dollars and was captured as a general field on the policy, now computerized milking costs can exceed $500,000 per station, requiring specific policy treatments. Combines, tractors, seeders and sprayers, for their parts, are more specialized than the family car, and can each cost hundreds of thousands of dollars.
Other solutions include enabling brokers to evaluate new farm business and quote/secure new business online via mobile devices at a farm site.
At present, much of this activity is done manually. Unlike personal lines auto and home, much farm business relies on rating books and manual look-ups.
Portals that allow brokers to input complete underwriting details on a new farm policy – be that a family farm or a complex agribusiness – can be implemented quickly and cost-effectively. This helps to improve accuracy of data, generate faster response times and apply underwriting rules more consistently, while also providing wider access and ease of doing business.
Integrating these portals with a company’s policy system – and across the organization – is now affordable, and offers real-time interaction. Such integration is as relevant for farm insurance as any other line of business.
Trillium Mutual, for example, initiated its new farm portal project because brokers clearly indicated they needed better technology to meet their farm underwriting needs. While farm business has one of the highest retention rates for insurance companies, it was recognized that not only changing demographics within farm ownership, but also within the brokers serving farms, necessitated the move to new technology to maintain high retention rates and ensure customer satisfaction.
In terms of return on investment, this is an area where significant gains can be realized immediately. Investing in new technology could help brokers and farm customers have a more positive digital experience when interacting with insurers.
Beyond operational benefits, it is expected that improvements in broker and customer satisfaction would lead to increased business and stronger loyalty.
An additional plus may be the positive gains achieved within a company’s own underwriting team, since members will have access to more information, and be connected to agents, brokers and, in some cases, farm or business owners.
GETTING BROKERS ENGAGED
Some brokers may prefer to do business by starting and ending transactions within their broker management systems (BMSs). But for farm policies, most BMSs cannot handle the breadth of coverages and capture the overall information required. This means submissions are often done manually via paper forms.
As well, while a BMS can capture details on some farm buildings, the process is oftentimes disjointed and inefficient.
As such, brokers may view investing in a quote/new business submission/endorsement portal as positive, especially where partial upload from the BMS is also supported whenever possible.
Farm portals enable a broker to provide all the information necessary for a new business quote. This can be done in a broker office, but is much better at the farm location, via laptop or tablet.
Using refinements in questioning and data capture, the information presented can vary depending on coverages offered without bogging down the process.
The more intuitive and easy-to-use the system is, the higher the usage rates. Brokers would likely view an awkward system that is difficult to use and understand as worse than no solution at all.
Automation of this stage in new business standardizes what is collected, and greatly assists in pre-qualifying risks. When compared to paper-based options, the speed of processing is improved, the accuracy is upgraded, the underwriting rules are applied more consistently, and the experience is much improved.
“The technology allows us to save time in our quoting process, alleviates pressure on our (Trillium Mutual’s) underwriters and, most importantly, delivers new business to our clients at an accelerated rate,” says Jeff Gerber, agriculture manager for Zehr Insurance Brokers Ltd.
“From quote to new business submissions, the transfer of data is accurate and time-efficient. Nice touch on being able to save the quotes for an extended period of time. This saves enormous time on re-quoting,” Gerber adds.
But farm portals are not simply about introducing new technology; their success will depend on both promoting and generating usage.
As such, it is essential to design proper roll-out plans that include frequent communication, training and a support desk to handle any broker concerns.
Technology does not replace the face-to-face interaction between a broker and farm customer. Instead, portal technology offers the promise of complementing the interaction, providing a tool to complete a transaction more accurately and efficiently. The popular “what-if” scenarios, which were impossible to address in manual systems, can be queried and modelled in real time.
IMPORTANCE OF UNDERWRITERS
Underwriters cannot be forgotten in discussions around the need for technology. Providing underwriters with complete, accurate information enables them to more efficiently underwrite new farm business. A farm portal can help facilitate this, and depending on the insurer processes, can be used to enable underwriter/broker and underwriter/customer interactions.
Portals can allow underwriters to enter new business using technology provided by technology partners. By capturing more data and more detail, for example, this data can be analyzed to improve offerings and the accuracy of ratings.
Portals can further be used to collect greater detail than that required by a company’s policy administration system.
This information could be captured, stored within the content management system and be available to help with underwriting issues, thereby allowing underwriters to better understand the market and be able to better determine what new coverages can be offered.
Current manual systems cannot guide brokers about what to look for. One Ontario-based mutual insurer indicated that as older brokers retire, gone is the vast amount of information they have collected over the years.
That information has proved key for accurately underwriting risks on a farm property. As the guard is changing in the sector, newer brokers will require online tools to help them identify risks.
It is time for insurers to invest in technology solutions to make sure that farm customers receive the best solutions the insurance industry can offer.