I recently received a press release advertising another earth-shattering automated insurance quoting platform. The press release reminded me of a conversation I had a few weeks ago with an industry veteran who cited chapter and verse a 30-year-old press release from an insurance industry technology organization promising single entry in the immediate future.
I have no clue how many automated quoting platforms have been built, or how many have crashed and burned. And we still don’t have single entry on adequate scale. The question then is, “What in the world causes this industry to adhere to antiquated IT?”
Seriously! All admitted carriers must file their forms and rates. It’s fairly easy, maybe expensive but fairly easy, for smart IT people to pull those public documents and build a rating engine. AI is going to make it even easier. Therefore, the issue is not getting the data and building a program per se, except now carriers have their own AI black boxes and they’re no longer providing all the rating/underwriting data to state regulators.
Does this mean automated quoting platforms capable of quoting every carrier will never be available? I don’t know but if not, it might be a blessing. In other words, “Be careful what you wish for.” If such a phenomenal rating platform was built and successfully sold and implemented, most agencies would become obsolete. Most agents don’t provide meaningful advice to clients other than, “Here’s the lowest quote.” And most consumers couldn’t care less about anything other than “the lowest price.” An agent and an agent’s commission expense are entirely expendable in that environment.
Perhaps this is why so many technology firms keep building these rating engines because they know that if they succeed, they will get the agents’ commissions, or at least a portion. Their reward, if they succeed, is huge. And that huge reward comes at the agents’ expense.
Many economists and consultants consider these situations to be wasteful because, due to the lack of working technology, consumers are not getting what they want as efficiently as is theoretically possible. Furthermore, it is wasteful because agents are getting paid extra unnecessarily. This is a fair point so investors will continue trying to find a solution. Whoever figures it out will likely become instant billionaires and a whole lot of agents, and maybe some companies, will go out of business.
And this might just be a reason for all the failures! There’s a lot of money invested in keeping things the way they are. This is especially true for all the firms buying agencies because if commissions are cut, their already expensive acquisitions become debt and/or impaired asset anchors overnight.
If you think a breakthrough will happen sooner rather than later, and you’re concerned for your future, the solution is simple. Stop quoting and begin advising on a professional level. To me and many of my agency/broker clients, this approach is more fun, more rewarding, and they make a lot more money. A high-quality rating engine will actually enhance this business model rather than threaten the standard agency model.
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None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.
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