[Transcript] Ellen Carney – Principal Analyst for Forrester

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Michael Jans: Hello everybody. This is Michael Jans with Agency Revolution. We make it easy to automate your systems, engage your customers and grow your agency or brokerage. I want to welcome you to this episode of The Connected Insurance Podcast where we examine the trends, innovations, challenges and solutions to the biggest problems facing retail agents and brokers. I am honored to have the privilege to introduce you to our guest today, Ellen Carney.

Ellen is a principle analyst with Forrester Serving Insurance E business in Channel Strategy Professionals. I was first introduced to Ellen, it was a little over a year ago when I read an article in the New York Times where she was quoted as predicting that 25% of insurance brokers would soon be gone. I called her up. We talked and we have become colleagues ever since and so I’m thrilled to be able to introduce her to you and her perspective to you. She may be more bullish in the industry than you originally think.

Her research focuses on the E business strategies, technologies, adoption trends and best practices of property and casually life group and health insurers globally. She works with insurance clients to understand how market forces are changing how consumers groups and distributors engage with insurance carriers and the role that technology plays in maximizing new opportunities. It’s very timely. Without further ado, I want to introduce you to my friend Ellen Carney. Ellen Carney, thank you so much for joining us. It’s an honor to have you here. How are you today?

Ellen Carney: I’m great Michael. Thank you for having me. I’m excited to be a part of today’s podcast.

Michael: Okay. Well I’m going to leave no stone un-turned. First I’ll tell a little story about our background. Apparently you saw me speak at some industry conference so long ago that neither you nor I remember exactly what it was. But in particular, I recall it was about a year or so ago I read an article in the New York Times and the headline was something like, Industry analyst expects 25% of brokers to disappear in the next few years. Okay? I saw that was my old friend Ellen Carney and I thought oh, well I should reach out to Ellen. So we did talk about that a little bit last year and here we are now. I’m going to give you an opportunity to explain yourself and to dive in. But before we do that, tell us, if you can, tell us a little bit about what you do at Forrester and what Forrester is all about in regards to its insurance practice.

Ellen: Sure. Mike thanks. I’ve been with Forrester for going on 10 years and I’ve covered the insurance industry for that whole 10 year period but from two different lenses. The first three and a half years I was with Forrester, I looked at the kinds of technology investments that insurance companies were making and why they were making them. Then I had a very serendipitous opportunity to come over to Forester’s digital business team to look at how insurance carriers were basically winning, serving and retaining customers in both agent channels as well as digital channels. A little known fact about Forester, we are one of the largest surveyors of consumers in the US just behind the U.S census bureau. So we have tons of data for many many years on consumer behaviors around their banking relationships but for me, their insurance relationships. That’s a little bit about Forrester. Been in business for 33 years based in Cambridge, Massachusetts but look at insurance not just in the US but Canada, Europe and Asia-Pacific.

Michael: Got it. All right. Well, we have a lot of listeners in the USA and Canada, so we’re all going to be excited to hear what you have to say. I’m going to circle back to your 25% question or declaration in a moment. But let’s start at the beginning. You’re in a unique position in the industry where you get to hear and see what’s happening with Carriers and what they’re thinking and also see what’s happening with consumers and what they’re thinking. What are some of the really big things that jump out to you about changes in the insurance industry now?

Ellen: Right now? Well, obviously because of digital customers, because they have these experiences that they’re borrowing from their banking relationships or from airline apps or whatever, are raising the bar for insurance carriers and their agents. They’re embolden now by the power of digital that they can carry around in their purses or their pockets when they want to interact with their insurance companies. It means that they always want to know about the status of their claim and if they’re not happy with that experience, Gosh they’re ready to not only defect but tell the world about their crappy experience.

Michael: Right. And they’ll share that on a digital device where all of their friends can find out about it.

Ellen: Exactly. These escalating expectations are challenging insurance carriers and agents at the same time. While all of this is going on Michael, they’re also battling start ups and non traditional players who are finding the insurance industry fascinating.

Michael: Like never before. Right?

Ellen: Like never before. Let me give you a few examples. I always suspect a bunch of people in the audience have smart home devices. Think about a nest thermostat or the ring doorbells that they’re seeing advertised on television. These smart home devices are giving rise to new ecosystems that surround the home and the car. Think about –

Michael: Internet of things.

Ellen: Internet of things, exactly. Think about, not that we’re going to be thinking about our cars. We’re thinking about a transportation experience. We’re not thinking about our homes. We’re thinking about a lifestyle experience. All of this is driving engagement with the customers. It’s opening up new partnerships that insurance companies can play but over time maybe it means, and I’m not saying this is going to happen in 2017, but play up 10 years. Maybe insurance becomes an ingredient brand like Intelinside.

Other things that we’re seeing obviously kind of tied here is around engagement, big tech firms. They’re also creeping with deeper inter-financial services. I hate to say no matter how much we’ve invested ourselves as agents in the carriers that we’re partnering with on our mobile apps, they spend most of their time in five mobile apps and guess what? None of those five apps happen to be an insurance app.

Michael: Yes. How about that? [laughs]

Ellen: [laughs] Exactly. We expect insurance carriers are going to be seeing bits and pieces of the funded experiences of customers being lost to these big platforms and of course what I’m I talking about? I’m talking about Apple. I’m talking about Google. I’m talking about Amazon.

Michael: Okay.

Ellen: This may not just be that mobile device. It may be that little robot that’s on the kitchen counter. Alexa. Siri. Google Home.

Michael: There are already are insurance carriers that are partnering with them, right?

Ellen: Exactly.

Michael: At least to be providing information so you can ask Alexa, Alexa what does this insurance term mean and she’ll tell you.

Ellen: Exactly. And suppose maybe you ask the address of the nearest new car dealer because you’re in the market for a new car. Wouldn’t it be — doesn’t car insurance go along with that?

Michael: Yes. Okay.

Ellen: Absolutely. We’re seeing a lot of start ups obviously. We’re tracking about 400 insure tech start ups around the world. Of course you know just as our friend the Google mail tanked last year, went out of business. They’ll come back as something different.

Michael: Right.

Ellen: We’ve got a lot of interesting things. Think about that smart home I just talked about. There’s a new company that’s coming out in 2017, Hippo. Smart insurance for the smart home. 450 of those. You’re seeing these interesting start ups becoming interesting partnerships opportunities for insurance carriers.

Michael: All right. What do you think — from an agent’s point of view, where we’ve sort of been in some ways, king of the roost for decades and generations and things have not changed that much, some. Clearly in the last 15, 20 years we’ve seen some other channels arise and take market share in personalized and small commercial lines. From an agent’s point of view, it’s difficult to look at this and say oh, those 450 start ups that you’re tracking are there to support the broker or the agent. They’re mostly not. They’re mostly not friendly to that channel, right?

Ellen: Right.

Michael: Okay. Is this where we circle back to your New York Times headline?

Ellen: [laughs] Well interestingly, absolutely, because one of the other interesting things I would call this is kind of — maybe not quite this smart home in Connecticut but another interesting trend, the rise of the machines. How about artificial intelligence? We’ve already talked about those little helpful assistants like Alexa and Google Now, Bots, Virtual Assistants.

Michael: Jack bots.

Ellen: Interesting. Exactly. Guided selling and service tools. Believe me, we see a lot of ways. How could we offload basic questions that a consumer who might want to call their agent, “When’s my bill due? There’s three dates on the bill I just got. I don’t know. When I’m I supposed to pay it?”

Michael: Right, okay.

Ellen: Wouldn’t it be nice to have something to answer that? Something that will affect our agents will be these helpful, digital tools that will offload some of that mundane stuff that keeps them engaged with their customers but hopefully we’ll free them up to do things like deeper consulting, better understanding of what a customer’s need might be, what thoughtful solutions to that customer and when you think about the smart home in Connecticut we were talking about Michael, a lot of customers are going to have a hard time installing them and wouldn’t it be nice to turn your agency into maybe the Geek squad?

We talk a little bit about the shift from insurance carriers just selling insurance to insurance carriers selling a solution that could include bundled services that wrap around the core insurance product. I think I bought home owners insurance but on top of that, I could get home inspection services, I could get disaster pleading services, I could get, “I want to do an audition. Could you help me connect with a home improvement contractor?” We’ve asked consumers and over 30% of male heads of households with kids under age 18 in the home said, “I would like to buy services to help me maintain my home for my insurance company.”

Michael: Really? Okay. Let’s dive in to that a little bit. First of all I’m just going to highlight yellow highlighter on something you just said. Insurance agency as Geek squad?

Ellen: Yes.

Michael: I think it is a tremendous idea, obviously it’s a technology company. It’s something we encourage because we know how technology can multiply your capabilities. That’s a learning curve and I think it’s incredibly exciting and I guess I’m going to step out of the roles interviewer into the roles advocate and encourage listeners who are agents and brokers to take technology very seriously because technology is taking your industry very seriously. I mean wouldn’t you say Ellen that that is going to be, if not the disruptor, the transformer of this industry?

Ellen: Absolutely, and we can even extend this idea of the agency being the Geek squad to help consumers with technology that they need to insure. Think about what was the big Christmas gift last year and this year, drones.

Michael: Right, okay.

Ellen: I’ve got to go in to make sure I’ve got Drone covered but how about helping me set up my Drone? Another idea I have is that if a lot of members of the audience, they go in to the apple store to get the new or latest iPad or iPhone, think about turning the agency into the genius spa. Here we are going to show you how to use the mobile app, we are going to actually show you how to do online bill pay. You can use the cool digital tools to help you have a better understanding of your insurance coverage, will you stand on your clean status or whatever it happens to be. I think we are going to see some interesting hybridization of the role that the agents are going to play in helping customers.

Michael: Okay. We are seeing a lot of technological innovation, we are seeing, as you said, you are tracking 400 or 450 insurtech start-ups, I stumbled across the registration list for an insurtech conference, it was held a couple of months ago. I noticed that there were over 750 companies that were going to be participating in that one conference and those conferences are taking place throughout the world and in various cities throughout the United States, so it’s huge. But ultimately, the magnet for the insurance dollars, it’s ultimately got to be the consumer. You do a lot of consumer research, tell us if you can what does today’s insurance consumer want? What are they saying to you?

Ellen: What they are looking for is great experiences and some of that great experience isn’t necessarily delivered in a digital fashion. Let me give you A for instance. It’s one thing to talk about the fact that there might be 450 insurtech start-ups and all of them have done a really great job with their marketing, they’ve done a great job with getting venture capital to help them grow their businesses and they’ve done a great job with writing press releases.

Michael: [laughs] Right.

Ellen: You know what they haven’t?

Michael: Yes, no I saw one in a couple of days ago then I thought, “Okay, that’s a great press release, closing and claim in three seconds.”

Ellen: Three seconds. Our friend just eliminated that if stirred at the pod.

Michael: Okay.

Ellen: What haven’t they done yet? They haven’t gotten customers.

Michael: Sold a lot of insurance, [laughs] right?

Ellen: Bingo. This is something that obviously we do through agents and they know how to sell, they know how to take care of the customers, so we can have all this hype about these insurtech start-ups. With them getting customers, that remains to be seen.

Michael: Okay. Right on. Let’s circle in on that question. What does today’s consumer want? Obviously they don’t all fit into the same bucket so there are different buckets of consumers. What are you finding out? What’s important for agents to understand?

Ellen: Right now what consumers are looking for is a great experience. This is what we are focused on now is, are your consumers making decisions around the carriers that deliver great experiences? They defect if they have a poor service experience, they defect if they have a bad client experience and what we are looking at is the ways that we can make that insurance experience more helpful, more human, more handy for the consumer.

Michael: Okay.

Ellen: More helpful, more handy, more human, the human we know that is coming from the agent experience. The people who listen, who provide empathy, who help them pick the right products. The helpful stuff is when I can’t reach my agent, how do I actually get that information and so we see digital and mobile tools help the consumer. And again the handy part, it’s obviously the convenience where you can carry it in your purse or your pocket and have access to whatever kind of insurance information you kind of need.

But as I said, it’s going to be an experience such it’s going to transcend just the purchase and use of insurance is going to be, what is insurances we are all going to be in, protecting my lifestyle, my home, getting me to and from work. That’s kind of where we see it going.

Michael: All right. That gets back to my bucket concept. Who do you think is the optimal customer, the optimal demographic for the broker channel as opposed to some of these other channels?

Ellen: It’s probably going to surprise you but [laughs] when we asked 18-24 year olds what is the most common thing you’ve done on a mobile phone with interacting with an insurance company in the last 90 days, what they said was, “I was looking for an agent.”

Michael: Oh, I love that. Okay.

Ellen: Here’s your first time insurance buyer. This is the first time you actually started off in the right foot and see the value of an agent. Basically my call out to the audience is will you pay attention to that young person who comes into the agency?

Michael: Well, they pretty much have to considering that there 83 million of them in the United States.

Ellen: Exactly. Exactly.

Michael: Honestly, that’s a conversation that we have constantly. It is now. Today’s agent really is asking, “How do I get that customer?” You are saying that the millennial is perhaps attracted to this channel?

Ellen: Yes.

Michael: Why do you think that is?

Ellen: Well, they need help. I am a first time buyer. I need to understand the nuances of, what’s the right kind of coverage. I’ve just graduated college, I’ve got a car, I’ve got to get to work. Mum and dad, or a friend or family member told me, “Hey, go talk to my agent. Here they are.”

Michael: Right. Okay, all right, very good. Okay.

Ellen: And so off they go. It’s tempting to think that this isn’t the audience that we should pay attention to. This is the very audience we should be paying attention to.

Michael: Got it.

Ellen: But what are they going to find when they get there? Are they going to — let me give you an example on that Connecticut. Many agents are afraid to sell it, telematics insurance. I don’t understand it but I want to sell it but this is a particular audience that says, “Hey listen, if I can save money on my car insurance by being tracked and their privacy isn’t quite as acquainted and the rest of us. “

Michael: You are kind of used to being out there?

Ellen: That’s right. Is your agency repping carriers that are offering this kind of coverage and can you sell it? And then on top of it, if you even as an agent have a mobile app or a website, can you explain to that new millennial customer how they can pay their bill or use their site and honestly, do your agency hours reflect this particular market lifestyle?

Michael: Yes.

Ellen: Do you have office hours on Saturday, maybe even Sunday?

Michael: Right, okay so typically one of the ways that we look at the industry and this — some of this Ellen forgive me this is bands resource that there are three primary motivators that compel people to make their purchasing decision on insurance, one is price and we’re generally not the cheapest channel, one is convenience and we’re definitely not the most convenient channel and the third one and not the least of them is peace of mind, in other words, there’s a demographic that actually cares what insurance does and we are right on for them. They want to sense if there’s an expert and an advocate in my corner and if we can deliver that sense of being there, being present and being useful not just taking an annual premium, we can win a customer with a very high lifetime value in a long term relationship.

Ellen: That’s right and again, the little bit different take on my helpful human and handy.

Michael: Helpful human and handy okay got it.

Ellen: [laughs].

Michael: All right. Well, we’re helpful and human, this Channel’s not always handy but we’re definitely not as handy as the emerging digital channel just might win that one.

Ellen: Well, yes except I would argue that both the agencies have websites that can answer some of these.

Michael: Right okay.

Ellen: We’re getting there.

Michael: A growing number have a marketing automation system that reaches out to the customer delivers on going value and goes through customer journey, right? That’s important too. All right. I know that Ellen, that making predictions can be a bit of a fool’s game and we can all look silly a year later but I’m going to ask you to do your best. If you look at the next 12 months in this fast paced turbulent insurance environment, what kind of things do you see?

Ellen: Well, that Genius bar I talked about, you are going to see that. Now, it probably is going to be more with passive carriers than independents, but you’re going to see that deployed in the carriers. I’ve talked about it, they are very excited about this idea, a place where consumers can go and learn about the digital tools that they have. You’re going to see some interesting marketing coming from insurance carriers.

Michael: Okay.

Ellen: Last year, Allstate of course launched a big data company and I think you know that they poke around. State filing, that’s how I learned about Google compare.

Michael: Okay.

Ellen: A patent filing State Farm, a patent filing I looked at last week did not call themselves an insurance company, they said they were a life management company.

Michael: That’s fascinating. I happened to see a posting with Patent filings with insurance companies yesterday and it was absolutely fascinating. There were all digital technology patents that they were filing and so, those are from standard traditional carriers not the crazy innovative start up guys. All right, what else do you see for the coming 12 months?

Ellen: Well, and some of this is going to be obviously carriers are going to be expecting their agents to be on the fine end of delivering some bad news to consumer, clients again rate increases and of course that productivity pressure that has been hard to let up on the agencies. But we’re also seeing you more and more offerings that are coming –

Michael: Hang on there kid.

Ellen: [laughs]

Michael: You said rate increases, what’s driving that?

Ellen: What I call the high cost to cheat death.

Michael: Okay.

Ellen: Gas prices have gone down clean frequency has gone up, what does that mean, auto prices increase, that’s gone up, gone on a day to this year, so they’re enlisting agents to deliver that bad news.

Michael: Right, okay.

Ellen: About rate increases.

Michael: Okay, got it.

Ellen: Of course you know on the home owner side and I think Michael you yourself are experiencing the storms that you’re having in Oregon.

Michael: Oh my God, yes.

Ellen: Extreme weather.

Michael: Yes okay.

Ellen: From the wildfires in Fort McMurray and the flooding in the southern US this summer, rates are going to go up for property insurance still.

Michael: Okay, are you calling that climate change?

Ellen: We don’t use that word.

Michael: It’s just really bad weather [laughs] okay.

Ellen: We use extreme weather, Michael.

Michael: Okay, got it.

Ellen: Especially after next Friday.

Michael: Okay.

Ellen: Extreme weather.

Michael: All right, okay anything else?

Ellen: We’re going to see some offerings that are making life easier especially on the commercial submissions side. So if we haven’t caught, ever sure got picked up by applied systems, I think at this point in time two years ago, that’s now known as IVANS market appetite but also interesting company with match. So better way to match up carrier appetite to write and agent broker business for commercial.

Michael: Got it.

Ellen: Then I think the other thing is obviously we’re going to see this even moving into the consumer market cyber.

Michael: Okay, yes right, lots right? Even in the consumer market, okay fair enough.

Ellen: Even in the consumer market and in fact this might be one of the services that agents are called upon to sell cyber monitoring services, stuff like life locker ID 911 might get packaged up with insurance coverage.

Michael: Right, got it. All right. I’m going to ask you two things, all right?

Ellen: Sure.

Michael: If you could say in one or two sentences a message to the insurance carrier in the independent agency channel, something that you would say do this, what would you say?

Ellen: Make sure that your territory reps come with something digital to talk about the agency’s business. No more binders, no more data transfers, putting stuff on copy machines. Make their life easier by providing information that’s mobile, portable and in real time.

Michael: Got it, all right. In their portfolio, they can talk about agency revolution. All right.

Ellen: Yes [laughs].

Michael: If I was going to give you one or two sentences where you could deliver a message, a do this, to the agent broker community in the independent channel, what would you say?

Ellen: Don’t neglect your younger customers as I said, pay attention to them, recruit millennials into your agency and if you wanted refund my idea of the Genius Bars and use it to kind of promote your own digital nature, it will be a great way to draw both young people into the business of insurance as well as make everybody in the agency from both a customer standpoint and a staff standpoint a whole lot smarter about digital.

Michael: Got it, all right. Before we wrap up, we saw a long term future of our vertical, what do you think of the insurance industry?

Ellen: It may be less vertically integrated than it has in the past and part of it is because we’re seeing it actually breaking up especially with some of these insured tech startups. So we’re seeing right now, believe it or not, a divorce between distribution and underwriting. We used to think, “Okay, they’ll get taken care of by a Managing General, editor, agent, underwriter, model.” But now digital because if APIs and things like lets a piece of technology orchestrate the experience to assemble solutions for customers. So you could imagine that maybe they’re vertically integrated model but we’ve depended on and been able to control is we’re busted apart as insurance carriers and we focus on what we’re really good at. Maybe Allstate with their big data becomes much more about the data and marketing that as opposed to handling the claims piece, that’s just a for instance.

Michael: All right, got it.

Ellen: We’re specialized.

Michael: All right, very good all. All right. Okay, I’m going to change gears before we wind up, all right. I’m going to ask you a question or two that’s sort of on a slightly different tack.

Ellen: You bet.

Michael: All right. Ellen I know you’re a lifelong learner and probably of a racist reader. Have you read anything in the last 12 months that you’ve felt was particularly inspirational?

Ellen: Inspirational. Well, right now we –

Michael: Or insightful, yes.

Ellen: Insightful. A couple of things, one of the best articles I read last year was an article in The Atlantic Monthly called The Secret shame of the middle class that basically said that middle-class consumers who make as much as $100,000, could not come up with $400 in an emergency.

Michael: Wow, okay.

Ellen: After speaking in a new way about how we have to chang e– how we price life-insurance premiums and stuff like that. I’m reading Don Tapscott and his son, Alex Tapscott’s book on the Blockchain Revolution. So thinking about, how when we think about analyzing the business of insurance. If we not only just bust it up from a process standpoint but maybe even bust up the sub-components. How do we charge for this in-the-moment insurance? Blockchain seems like a great idea.

Michael: Is that what it’s called, the Blockchain Revolution?

Ellen: Blockchain Revolution.

Michael: Okay, got it. All right. Ellen, this has been a lot of fun. This was exciting and I appreciate you sharing your expertise and your insight. If any of our listeners would want to reach out to you or find out more about what it is that you do, how can they do that? What’s the best way?

Ellen: Sure, my email address is ecarney@forrester.com. E-C-A-R-N-E-Y@F-O-R-R-E-S-T-E-R.com. That’s the easiest way to reach me. I do have a Twitter handle but I’m mostly, I’m a big re-tweeter. But Michael, we should think about another one of these. I’ve got some other interesting research coming on the future of the insurance industry, 10 years out. If you’re up for another one, let’s do that.

Michael: I’m up for another one. You let me know and we’ll do it and I can promise you, a lot of people are going to listen to it. Ellen, this has been really exciting. I appreciate it. Thank you very much and have a wonderful day.

Ellen: Thank you Michael.