The new year is here, and with that everyone is curious about what’s likely coming around the bend. Some of Vertafore’s experts are weighing in on what they think is coming in 2022 for digital transformation, InsurTech investment, the evolving distribution channel, the Great Resignation’s impact on hiring and retention, and why agents might start diversifying their lines of business.
Enhanced digital landscape
I am so excited for what’s coming in 2022, particularly that we are finding more and more ways to digitally connect as an industry. Agencies are more equipped than ever to manage their processes and communicate with their clients in ways that increase efficiency, client retention, and growth. Insurers are better able to compete in a digitized landscape because of streamlined and standardized processes. The industry is finding ways to use all the data we have at our fingertips to gain more insights and make better business decisions as we adapt to a rapidly changing world.
Vertafore’s recent acquisition of AgencyZoom is one of many exciting developments that’s in line with what we’re seeing at the industry level—constant innovation and a focus on providing tools that help increase operational efficiency and competitive edge.
I think 2022 will be a year of further embracing InsurTech across the industry as digital solutions and modern applications continue to make a significant positive impact on the entire distribution channel.
Continued appetite for InsurTech investment
2021 blew away all the records for investment in InsurTech, yet at the same time we saw relatively lackluster performance of many InsurTech darlings in the public markets.
In 2022, we’re likely to see continued appetite for InsurTech investment from private investors, as it’s easy to recognize the potential for technology to transform our industry. But we’re also likely to see one or two spectacular failures in the coming 12–18 months as some overvalued companies fail to maintain their momentum.
In this environment, those companies focused on distribution and distribution-related software are likely to succeed. Vertafore is in an amazing position given where we play and our ability to focus on the long-term for insurance and insurance distribution.
Further confirmation of the independent agency channel’s value
As several of the new start-up “InsurTech carriers” have gone to market over the past several years with a consumer-to-carrier direct sales model, we see more and more of these entities determining that the value of the independent agency channel is extremely viable. From a personal lines perspective, we are seeing both auto and homeowner InsurTech carriers enabling connectivity with the traditional comparative raters in the channel to extend their reach into a market they originally believed was overvalued and lacking in technology solutions.
Increased investment in D&I practices
The market for talent will continue to be highly competitive in 2022. As people nearing retirement have left the workforce in larger numbers, industries like ours are hit hard. In 2022, agencies that embrace searching for talent in diverse markets will be better positioned to staff their teams. As an added bonus, bringing diversity and inclusion into agencies will have a positive impact on innovation, and ultimately results!
A closer eye on client retention and cybersecurity policies
As we look to what lies ahead for the independent agent distribution channel in 2022, the outlook is somewhat mixed. There is an indication that premium rates for commercial lines will not increase as rapidly as they did in the latter half of 2020 and early 2021 or they may even flatten. Early indications across commercial lines products are that the hard market we have been experiencing (where we see premium rates increase) may be coming to an end with rates stabilizing or declining.
The Q2 2021 CIAB survey reported that average commercial lines rate increases in the quarter were 8.3%, down from 10.0% in Q1 2021. Since insurance agents gain most of their revenue from commissions on written policies, this means their revenue might see either flat or slightly declining growth year over year for 2022. As a result, agents must be better at servicing existing clients to keep their retention percentage up or even try to gain a percentage point or two to continue to see growth in their business.
Rates stabilizing or declining in 2022 also means agents might look to other lines of business such as cybersecurity policies to make up for the decrease in commissions in other lines of business. It is expected that cyber premiums will increase through 2022 as the industry struggles with massive ransomware losses.
Overall, the outlook for the independent insurance agency distribution channel continues to be cautiously optimistic, and it will be interesting to see how the economy and late-season catastrophic losses such as the recent tornadoes affect our industry.