Introduction
A glaring gap exists in the Commercial Property and Casualty (P&C) Insurance landscape: the need for Agencies equipped to help their client with comprehensive risk management solutions. Could this gap be a significant opportunity for agencies? By addressing this need, could agencies better position themselves as indispensable partners in their clients’ businesses? As a former risk control consultant and insurtech founder, I believe this is a critical moment for agencies to redefine their value proposition. In a market where technology, especially self-service models, can be perceived as a threat to the traditional agency system, embracing more complete risk management solutions is a huge opportunity to strengthen and add value to customer relationships.
The Untapped Opportunity
Historically, risk management has been uneconomical, particularly in the small commercial market. The numbers just don’t make sense. This situation is primarily due to smaller premiums and lower commissions, which means fewer resources to assist small commercial clients. The high costs and perceived lower immediate return have made the ROI fuzzy at best. But are we overlooking emerging technologies? Technology is a game changer. A whole crop of insurtechs that offer massive cost reductions in the last few years have emerged, making that ROI very clear. These solutions not only reduce risk and associated costs but also encourage stronger, more resilient client relationships.
Common Objections
I have sometimes encountered a cynical view that agents (and insurers, for that matter) don’t care if clients have claims and, therefore, pay higher premiums, meaning agents make higher commissions. This view fails to take into account all considerations. For starters, agents are pressured to keep rates low or risk clients shopping for an alternative. This view also ignores the fact that when clients have claims, this entails more service work. Who do clients call when they have a claim? They call their agent. So, agents spend their time fielding phone calls instead of prospecting and selling. Also, if the claim is denied or is less than the amount expected, this can create an unhappy client who starts looking elsewhere for insurance.
Technology: A Double-Edged Sword
While technological advancements have brought numerous benefits to the insurance industry, they also pose a challenge to traditional agencies. Self-service platforms and automated tools are changing how clients interact with insurance services, potentially reducing the reliance on agents. However, this shift also presents a massive opportunity for agencies with the right mindset. The agencies that leverage technology to enhance their risk management offerings will thrive. Why? They can provide a level of service and expertise that their competition either can’t or won’t.
From Agents to Risk Management Consultants
The future of insurance agencies lies in transitioning from that of order takers or, as an agent friend of mine says, “those who quote and pray” to risk management consultants. This shift involves not just facilitating risk transfer (traditional insurance) but also providing comprehensive resources for measuring, managing, and mitigating risk. This shift requires a deeper understanding of clients’ businesses and a proactive approach to identifying and addressing risks. This change doesn’t mean agents become risk management experts, but it does mean providing or introducing clients to risk management solutions.
Leveraging Tools for Enhanced Risk Management
Tools such as Smarter Risk (my company), Mod Advisor, Ensure Analytics, and Trustlayr (to name a few) are insurtechs at the forefront of this transformation. These platforms provide value for clients we have never seen. By harnessing technology, these companies are not only making these services fast and inexpensive (compared to conventional methods) but also making them simple and transparent. Simplicity and transparency are things we desperately need in the insurance industry. These services offer automated tools, advanced analytics, AI-driven insights, and customized risk management solutions. By integrating such tools, agencies can offer more sophisticated and personalized risk management solutions, reinforcing their role as trusted advisors.
Conclusion: Embracing a New Role in a Changing Landscape
The insurance landscape is evolving, and agencies must evolve with it. Embracing risk management as a core offering is not just about adding a service but fundamentally changing how agencies interact with and provide value to their clients. In doing so, they can turn the challenge posed by technological advancements into an opportunity to strengthen their role and relevance in the industry.
*Author’s Note: As we navigate these changes, it’s clear that the agencies willing to embrace risk management and leverage technology to enhance their offerings will be the ones that thrive. This is a time of transformation, and I am eager to see how agencies rise to the challenge and redefine their place in the Commercial P&C Insurance sector.
About the Author, John Morlan
I began my risk control career in the Risk Decision Services division of Insurance Services Office (ISO). At ISO, now Verisk, I specialized in performing risk assessments, providing rating and underwriting information to commercial insurers, and consulting with clients on strategies for managing risk.
After five years at ISO, I consulted independently for another seven years. During that time, I provided risk control services for some of the largest insurers in the country. That led me to work one-on-one with businesses to improve their risk control and safety programs. As a result, these businesses achieved significant savings on insurance premiums, totaling millions of dollars.
But traditional risk control services have long been considered confusing, time-consuming, and uneconomical. I want to change that, which is why I created Smarter Risk – where we believe safer companies should qualify for the best insurance rates.
Smarter Risk is a cloud-based self-serve platform for communicating and improving insurable risk. It simplifies and streamlines the assessment, reporting, and development of risk control programs. The entire process is automated, making it efficient, affordable, and user-friendly. By presenting the risk control process in a way that is easy to understand, my goal is to empower small businesses to adopt risk control programs that will drive down claims and help organizations qualify for the best insurance rates.
Smarter Risk’s innovative automated risk control product, ARC, provides a scalable solution for the insurance industry. For insurers, ARC creates a platform that is 90% faster and 80% less expensive than conventional methods, and for agents, ARC turns risk control into a competitive advantage. When agents provide ARC for their clients, they position themselves as trusted advisors who can help business owners qualify for the most competitive rates. And with Smarter Risk’s consumption-based pricing, any agency can afford it.
Smarter Risk assessments take minutes instead of hours, producing reports and recommendations for improvement in seconds. For business owners, our software can develop safety and risk control policies in minutes instead of months. In a nutshell, Smarter Risk improves the speed and cost of assessing, reporting, and developing safety and risk control programs.
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