Oct 295 min read

InsurTech Ohio Spotlight with Chris Cline

Chris Cline is the Executive Director of the Agent’s Council for Technology (ACT), helping agents use technology to enable their strategic goals. Chris was interviewed by Andrew Daniels, Co-Founder and President at CrashBay and Founder and Managing Director at InsurTech Ohio.

Chris, what does the current agency market look like?

“When I think about the overall agency market, I continue to note that M&A is strong and acknowledge we've had a long run with some ups and downs, but the market still seems to be strong. There are 39,000 plus independent insurance agencies in the US and though that’s slightly down from the last study, it’s still an upward trend over a number of years.

The overall increase in agency count, coupled with market share data and some overall agency health indicators contradicts some of the early thoughts about what the influx of new tech might have done to the independent channel. Early on, this massive influx of capital seemed somewhat earmarked with the largely misguided perspective that many agents and carriers were not going to be viable in the future. But, even through a global pandemic, customers have said they value what an independent agency does. This is validated by continually increasing independent agent market share in both personal and commercial lines.

Some of these numbers are a little driven by the current hard-market conditions and vary by revenue size. But, the average agency grew roughly 10 percent last year, returning north of 20 percent of EBITDA (earnings before interest, taxes, depreciation, and amortization), and agency values are holding strong. If you use the profitability of a growing business as an indication, is it healthy? I don't know about you, but I don't know where else you put a dollar and can get a 20-percent return with little risk. The industry is very resilient, and agencies are still worth as much as they have been in any of our careers. It's an interesting spot to be.”

Why are a lot of companies unsuccessful when selling to agents, and how should a solution provider approach selling to agents?

“One of the primary reasons I believe newer tech companies fail or have a lack of success in selling to agents or carriers is that they materially don't understand the economics of our industry. While some may argue that we're not too different from fintech or other financial services, there are nuances about our industry that differ in material ways. The other part of it is the amount of risk we bear. It’s important to start with a fundamental understanding of why this industry exists…to indemnification…and that all of us share in the same job of contributing to the fact that there's a financially healthy insurer available to pay a covered loss at the time we need to be there.

So, you start with that and recognize that 65 cents of every dollar of a premium collected has to be placed on a shelf to pay claims. That's the only reason we exist. Now, think of all the other things that need to be paid for with the remaining 35 cents, and it can be daunting.

I've had a lot of conversations over the years about a flawed notion that multi-billion dollar companies are sitting on all this capital and record profits, but they aren't spending more money on technology. In fact, I literally had this conversation with an Uber driver at Insurtech Connect who asked, “Is it true that every insurance company is making record profits?”. When you look at how each dollar from a premium has to be allocated, consider all that it must pay for and apply current hard-market conditions. There's not a lot left if you're a carrier running north of a 100 percent combined ratio. Relative to technology adoption, this can create a scenario where allocating capital to innovation can be a challenge.

When selling to an agency, you need to understand the core functions an agency has to solve for, what their slice of the dollar needs to pay for and if your new solution justifies its expense. In fact, I've talked to many companies over the last eight years that have found a real pain or friction point. They have built something that solves it, but it doesn't make sense financially for an agency to invest at the current cost and how it impacts an ROI. It's frustrating for a company to understand why people won't buy it. But, you need to solve enough of the problem for what you charge, make it scalable and effectively integrate it with other tools.”

What still needs to be fixed in the agency world?

“We could do better as an industry collaborating. Connectivity challenges are still real, and we have a lot of work to do in the world of data. You would've thought with how long API capabilities have been around that we might have more systems talking to each other.

Agencies still need to go into different carrier portals to clean things up to get quotes. We're getting better, and these things seem to ebb and flow. But, it’s still something that agents would love to see even more improvement. The goal is that once a human being types something, they should never have to type it again. I suppose as we start to think about the capabilities at our disposal, does a human even need to type a piece of data? How do we get what we need to truly understand a risk, price it, underwrite it and service it with the least amount of human keystrokes in an industry with tens of thousands of agencies, numerous carriers and such a large variety of technology solutions? These are some of the challenges and opportunities in front of us.”

Where do you see this agency space in five years?

“I would love to think that many of these issues are solved, but five years isn't very long when we consider other highly transformative periods in society and business. Though we're in a world with AI where the pace is probably as fast as it's ever been, it’s important to think about some of this in a historical context. We as humans tend to overestimate how quickly something will happen but underestimate the overarching or long-term impact. For example, many early adopters thought the internet was going to upend the world quickly, but it took a long time to become socialized and woven into business practices. Here we are, 30 years later, and you can't fathom anything in your life being done without it. It fully transformed nearly every aspect of life just not as quickly as many thought.

Though I believe AI will have an overall quicker trajectory, I suspect that we’ll see a similar change or adoption curve with AI as viable use cases get tested and integrated in meaningful and financially sensical ways. In fact, I really encourage everyone to learn as much as they can about AI, how and where it’s being used today and stay plugged in to this journey, especially if you own or are leading a business. I also encourage us all to do the same as our lives will be impacted as well.”