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Technology Allows Commercial Lines Insurers to Stand Out

With millions of dollars in advertising spent on convincing consumers that they offer the lowest premium, personal lines carriers make no secret that price is a key factor in the buying decision. But in commercial lines, price is just one component of the process. What an insurer offers a business—and, perhaps equally important, what it offers an agent—has a strong influence in the ultimate decision.

Commercial lines carriers look to leverage technology to differentiate themselves on many levels, including by adding value to the customer and producer relationship, by making greater use of analytics, leveraging the growing Internet of Things (IoT) for additional sources of data, and using big-data sources and big-data technology approaches.

“There has been a lot of publicity and excitement over what insurers have done [with technology] in the personal lines space. Carriers are now looking to differentiate themselves by applying those same types of technologies to commercial lines,” says Kimberly Harris-Ferrante, vice president and distinguished analyst, Gartner.

Give ‘em More

Offering portals that make it easier for agents to do business has become table stakes for commercial lines carriers. To differentiate themselves in the online space, insurers need to offer something more.

“Innovative carriers are trying to think of the agent portal as more than a cost of doing business—something that allows agents to process business the same way but with a website,” says Jeff Goldberg, vice president, research and consulting, Novarica. “We see insurers trying to build something that will truly drive their brand. That includes things like more and enhanced educational materials and other information that will help agents sell more product.”

Like many commercial lines carriers, ACUITY offers a library of educational and safety information via its web portal. However, the carrier raised the stakes in 2013 when it created ACUITY U, an effort geared toward differentiating the company when it comes to agent education.

One of the commitments the carrier made in ACUITY U was to provide agents the opportunity to earn continuing education (CE) credits at no charge. Approximately every two months since late 2013, the carrier has launched a new online course featuring a studio-produced educational video. The first, “The Anatomy of a Super Claim,” focused on educating businesses and agents about crisis and catastrophe claims management. Additional films have covered topics such as ethics, the commercial underwriting process, and workers’ compensation.

“Our goal was to provide relevant content to agents in a format that was engaging and fun, not a traditional classroom lecture or boring slide show,” says Ben Salzmann, ACUITY president and CEO. “We also wanted it to be free and convenient for agents, allowing them to access content and earn credits anywhere, any time, and on any device.”

Videos are hosted by Ooyala. ACUITY obtains CE accreditation from all the states in which it does business, and utilizes SuccessFactors’ learning management system to track agents’ completion of various courses. To date, independent agents have earned nearly 17,000 credits through ACUITY U video productions.

Analytics Powers Automation, Insight

The use of analytics has been growing in both personal and commercial lines. However, in the commercial space, underwriters have been reluctant to turn over their decision-making to the “black box.”

“Companies are afraid of ‘artificial intelligence,’ of eliminating the underwriter,” Harris-Ferrante says. “The place most carriers use analytics is still for underwriting decision support, modeling, improving productivity by delivering information at the right time in the process, and similar outcomes.”

“It’s not a majority of commercial insurers who have predictive modeling systems in place, but it’s becoming a larger minority that realize they can benefit from analytics without taking the human out of the process. Investments in risk-scoring technology, instead of being used to automatically accept or reject the policy, can be used to give additional information to underwriters,” Goldberg says.

“That’s actually where we want to be as an industry—figure out the models that will allow us to automate non-value-added decisions and tasks, and allow the underwriters to focus their time on complex decisions,” he adds.

In personal lines, direct-to-consumer insurers have leveraged analytics and other technologies to grow their market share. The IIABA reported in its 2015 Property-Casualty Insurance Market study that direct writers claimed a 14.9 percent stake in the personal lines market and experienced 9.5 percent premium growth over the previous year. However, direct-to-business sales account for only a 1 percent share of the market.

One carrier in the direct market is Hiscox USA, which launched its online sales to businesses in November 2010, starting with professional liability. Hiscox has since expanded to write general liability and BOP online and increased its appetite beyond professional services firms to include landscapers, janitors, and retailers.

“We were seeing a lot of requests coming through the website to write those classes,” explains Kevin Kerridge, head of direct operations for Hiscox USA.

Most of the businesses Hiscox USA insures have five or fewer employees. To create its online platform for U.S. customers, the company used systems built for its online business in the UK, with Software AG’s webMethods business process management platform serving as the hub connecting a number of rating, rules, and administration systems to the business-customer portal. In 2013, the insurer opened the portal to retail agents through Hiscox-supported wholesale brokers.

Kerridge explains that in selling directly to businesses the approach a carrier takes to commercial insurance is just as important as the technology it chooses to support its strategy.

“The mistake most carriers make in marketing to small business is that applications are worded like traditional commercial offerings, with questions stated in a quite technical way that business owners simply don’t understand,” he says. “We believe the winners in this space will be ones who can simplify the experience, so the application for coverage and the product itself feels like a personal lines policy rather than something only an experienced risk manager would understand.”

Hiscox had sold insurance to U.S. businesses through its Lloyd’s of London Syndicates for over 40 years and through its U.S. operations since 2006. In creating an online experience, the company began by reevaluating the underwriting process from the ground up.

“We had asked 100 or more questions on a typical application for coverage. That wasn’t going to work in a direct-sales environment. We realized that needed to be 30 [questions] or fewer, including asking for basic information on the insured such as name and address,” says Kerridge.

“We put our underwriting team in a room and said we weren’t coming out until we reengineered the process. We looked at each question to determine why we needed it. We learned that a lot of times underwriters asked the question simply to have a higher level of comfort, not because they actually use the information in risk selection or pricing,” Kerridge explains.

Hiscox analyzed the performance of its existing book against underwriting questions to determine which questions actually had an impact on acceptability or account performance to reach its 30-question goal. Underwriters also looked at the way questions were worded and policies were written.

“For instance, the last question we asked was, ‘What is your retroactive date?’ Expecting a small business insurance buyer to understand what that meant is not realistic. So we decided to eliminate that question and provide full retroactive coverage in the policy automatically,” Kerridge says.

Even for agency carriers, reevaluating the application process can help create differentiation.  “Do we really need a 15-page application to underwrite a commercial quote? Probably not,” says Richard Clarke, vice president, McKinsey Solutions.

“In, general the application process at commercial carriers is becoming much more streamlined,” says Rob Hartman, a principal in McKinsey’s insurance practice. “It’s not that carriers are cutting good questions or data fields—they are applying analytics to determine the impact of questions on results, and they are using third-party data sources to supply credible, verifiable data that they had previously asked agents to provide. They are simply becoming smarter about the essential information to ask for from a customer.”

Leveraging the IoT

In addition to utilizing third-party data sources, carriers are looking at ways to incorporate data from the ever-growing IoT in their underwriting processes and the services they provide commercial customers and agents.

“An area of differentiation among commercial carriers will be [created by] tapping into new data sources created by new devices and touchpoints, such as telematics devices. That data is going to enable insurers to better understand potential and existing customers, better understand the risks they’re insuring, and enable better and more tailored customer service,” Clarke says.

Because of its adoption in personal lines, telematics is often thought of in terms of usage-based insurance programs. In the commercial lines space, telematics is more commonly used as a way to provide additional services to a customer, rather than as a rating mechanism.

“There is a huge opportunity for insurers because so many fleets now have telematics devices, including on-board recorders, cameras, and more,” Harris-Ferrante says. “Commercial insurers are finding ways to use the information to improve driver safety and overall help customers become better risks to insure.”

Travelers began offering its fleet-telematics service, IntelliDrive, in 2012. Unlike personal lines programs that supply an ODB device for consumers to use, Travelers’ program utilizes devices customers have deployed in their fleet.

“We found in our initial research into the development of IntelliDrive that there was a ton of data available through on-board recorders, cameras, and other devices, just waiting for someone to come along to use to help companies understand their fleets, drivers, and risks on the road,” says Chris Hayes, vice president of risk control in Travelers’ Transportation Services.

Travelers also works with customers who are considering making new telematics purchases.

“When a customer comes to us because they are hearing about new devices being mandated in fleets, or looking at new mandates for electronic logging, that’s a great opportunity to begin the discussion about how to gain the most value from the devices they invest in. We believe that most fleets are making the investment in telematics technology to be more effective, not simply for compliance,” Hayes says.

Over the past three years, Travelers has found what’s most important to an effective telematics-based safety program is not the device chosen, but the way devices are used.

“Being able to go to a group of drivers who have had higher than expected safety events and present them with data from devices, and letting drivers know how their driving compares to their peers, is an incredibly powerful tool. Most drivers think they are above average, so simply talking to them about safety isn’t enough—you need to show them data. Also, fleet managers are able to identify the safest drivers and reward that behavior,” Hayes says.

One of Travelers’ customers, Sweeteners Plus, has been using the IntelliDrive service since 2012. Sweeteners Plus began exploring telematics after experiencing an episode where a driver had an accident and was pinned in a truck. Although the company knew where the truck had been dispatched to, it didn’t know exactly where the unit was.

“They wanted to be able to avoid a situation like that in the future, and improve overall safety,” Hayes says. “Drivers were initially apprehensive—worried that they were ‘being watched.’ However, they found that having the devices and information gave them peace of mind by providing alerts of accidents, delays and diversions, road debris, and other information through in-cab devices.”

Goldberg feels commercial insurers have only begun to tap into the competitive differentiation offered by utilization of data from other devices.

“Connected systems and technologies that characterize a growing number of ‘smart’ buildings provide a wealth of data in the underwriting, loss control, and claims processes,” he explains.

“There is also much less of a privacy concern on the part of businesses in providing information to insurers, especially when businesses can see the benefit in terms of improved worker safety or loss reduction. We don’t see a ton of investment in those systems yet, but there is plenty of opportunity,” says Goldberg.

Big Data

Carriers are also seeking competitive differentiation in commercial lines by using big-data approaches to chew on existing information stacks in their own organization, or finding better ways to leverage external data sources.

“The most common uses of big data technologies we see in the industry right now are to process data better and improve the decisions and processes insurers are currently doing. The more innovative companies are bringing in new types of data, such as weather data, due to a better assessment of risk,” Goldberg says.

For instance, The Climate Corporation, founded in 2006 as Weatherbill, combines big data, climatology and agronomy. The company analyzes climate information from 2.5 million locations and processes 150 billion soil observations to generate 10 trillion weather simulation data points, managing over 50 terabytes of data at any given time.

In 2010, the company began offering crop insurance under its Total Weather Insurance (TWI) product for corn and soybeans. Using weather data for risk selection and pricing, the company designed TWI to protect farmers against events that cause production shortfalls before federal multi-peril crop insurance (MPCI) kicks in.

In 2013, the company began administering MPCI and also launched Climate Basic and Climate Pro, a set of advisory tools to help farmers make planting and risk management decisions. The company offered insurance in all 50 states through the 2014 growing season. However, economic and market changes have led The Climate Corporation to discontinue the TWI product after four seasons. 

“Current commodity prices make a non-subsidized supplemental risk product less affordable to farmers. Also, with the additional coverage levels provided in the Federal Crop Insurance program in the new Farm Bill, the market opportunity for a purely weather index-based insurance product for 2015 is diminished,” says Chelsea Shepherd, communications manager.

“Carriers are starting to have more data available to them—customer data, geolocation data, fleet data; the list keeps growing,” Harris-Ferrante says. “The information out there is better than it ever has been. Each year it gets better.”



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