Todd Greenbaum sits down with Tim Hicks to talk about how insurance companies are responding to recent economic changes, and how to better prepare for the future.
Tim Hicks: Hello and welcome. You're listening to IASA’s Additional Coverage podcast episode #14. I'm your host, Tim Hicks, and for today's additional coverage I'm pleased to be joined by Todd Greenbaum.
Todd Greenbaum: Hi Tim, I'm glad to be here.
Tim Hicks: Todd is the President and CEO of Input 1, a leading billing and payment solutions provider in the P&C insurance space. As the head of Input 1 for over 30 years, and seeing the frontline effects of economic changes to accounts and receivables of insurers first hand, he has a unique insight into what the insurance industry can expect moving forward.
But before we get into today's topic, I would like to recognize the support received from IASA’s member companies and volunteers. IASA is the voice of the insurance industry. If your company is not already a member, I encourage you to consider all the benefits that come with membership in IASA, like IASA’s national annual signature educational rich events, IASA Xchange™ and OnPOINT. Find out more at iasa.org.
Hey Todd, I really appreciate you for giving us some of your time and expertise today. As the economy has been, well, in sort of a slowdown. People in the insurance industry are curious about what we can expect in the foreseeable future. In your experience, what have insurance companies and MGAs and agencies done in the past to prepare themselves to weather these types of changes?
Todd Greenbaum: Well, thanks for the question, Tim. The first thing I'd like to say is, don't wait until something has happened or is beginning to happen in order to prepare. Preparation is done before an event hits. Downturns cause fear and when people and businesses are fearful, the last thing they stop buying is insurance. But they will buy less. So be prepared for a drop in premium. Make efficiency the top priority because it is more likely than not that you're going to have to deal with less for some period of time. This means eliminating duplicate manual or analog elements of your operation and getting leaner and this has the extra benefit of giving you an advantage which can lead to margin expansion when the economy regains footing, we should be more efficient at that time.
Now for carriers, a financial downturn will usually come with a drop in investment income and increasing insurance fraud, unfortunately. By the time the event is apparent, it isn't likely that much can be done about the investment portfolio. But fraud prevention is an enduring effort and during times of distress, focusing on fraud will help preserve margins.
And finally, I'd like to talk about product diversity because it's critical for all segments of the insurance vertical. You know the financial crisis of 2008 saw the destruction caused by insuring agreements for financial products. The 2020 global pandemic saw destruction for insuring commercial aviation, automobiles and events, but no one knows what is coming next. But if your book of business is narrowly focused, you will be at a greater risk for the next unknown event. So the key operation or the key word here is to diversify.
Tim Hicks: As an insurance agent that was part of my challenge is when the economy turns down and people don't have the money and they start having to choose between do I pay my insurance premium or do I put food on the table? The choice is pretty obvious. Therefore, you see those downstream effects as you're saying with the insurance companies - with their premiums, with their investments. So then they have to change and adapt to that. So why would you say that some companies have done better than others during challenging times like that? Are there proactive steps that they've taken to position themselves differently in the market?
Todd Greenbaum: Well, you know, I don't think about actions that you take during challenging times much different than I think about actions you take during normal times, because actually they're the same. So here's some examples. You know from a financial perspective, just don't over leverage your business by taking on too much debt. In this particular moment in time, it's even going to be more important because interest rates will likely remain high for a period of time, but it's also a good practice to never take on too much debt.
Customer communication is another really important element. As I said earlier, during challenging times, people are fearful. As their insurance provider, you are a source of comfort. Reaching out to your customers to let them know you're thinking about them really does matter and most insurers or agents don't make this part of their client retention ritual as often as they should. Constant contact is a perfect example and an inexpensive way to do this. As with leverage, as I said earlier, it's good to do this all of the time in addition to just during difficult times. The other thing you can do is this. The primary responsibility of your customer is to pay for the premium. If you can make it easier for them to pay for it during tough times then you're bringing value. If you're an agent, you can try to secure better terms from companies. If you can't, maybe you can use financing as an alternate way of paying for the premium where better terms can be provided. Carriers can also build relationships with premium finance companies if they themselves can't offer the terms. And for companies and agents alike, adopting various digital payment modalities such as credit card payments, can also help your customers keep their payments up to date.
And the other thing I'd like to say is make your people your priority. You know, I read a recent report from McKinsey that talked about how there's a difficulty in attracting people and retaining talent during this time, but, this is also true all of the time. So, focus on a healthy working environment and giving your human capital the flexibility in working conditions. Communicate your goals and your business strategies often. Coach your team on how to deal with the environment which is unfolding around them and recognizing them for making the contributions that they do. Their success largely depends on how your people feel about their contribution to the organization. During good times, large advances can be realized. During hard times, a great team that is treated well can save the ship. McKinsey referred to this as operational resilience, and I thought that was a great thing to think about in terms of keeping your folks really energetic about your business.
Tim Hicks: I couldn't agree with you more. When people feel appreciated, they tend to go above and beyond than, you know, when they're just left alone. As far as the customer contact is concerned, I can say with all confidence that I have not heard from my insurance agent since I bought the policy. So, you know, I don't hear anything. Yeah, it's kind of like there's no communication until there's a problem. And I agree with you, Todd, it really should not be that way. There's no reason why carriers, MGAs shouldn't be reaching out to their clients, or you know, flip that around at the institutional level. Same thing. People want to know that you're there that you're thinking about them, that you've got their best interest in mind, that sort of thing like that.
And as far as making it easier, one of the things that has come up lately is allowing cryptocurrency for premium payment. Do you see that as a technology trend or is that a fad?
Todd Greenbaum: You know it's really hard to say at this point in time. Cryptocurrency is a really, really interesting payment modality. I know that, you know, at one point Tesla was allowing you to pay for cars with cryptocurrency and people were making mortgages with cryptocurrency or paying for real estate. I think we need to see that come forward a little bit. You know, I'm watching CNBC every single morning, there's always discussions about cryptocurrency, and I think what they say is that it's going to be hard for cryptocurrency to become mainstream until there's adequate regulation around it, because there are unknown things. So I would say I'm going to hold back on cryptocurrency until I see adequate regulation, which will then bring that stability into that market, into that payment modality.
Tim Hicks: Insurance companies are by nature very, very conservative. We don't want to be on the bleeding edge of anything, so the very fact that some insurance companies might accept crypto, the regulatory stuff that I've seen at this point basically says, do you take in cryptocurrency as a modality of payment, and do you immediately convert that into dollars so that we can actually see what it's worth? You know, so I tend to agree with you. We're following the regulatory guidelines on that, which are not in place and in some cases not real, not really forthcoming. I'm seeing it more on the gap side than I am on the statutory side. At least gap now has some disclosures, like are you taking crypto and if you are, are you flipping it to dollars? I'm not seeing really much of anything on the statutory side. Yep, but I digress.
So, you and I are both in the industry of technology and particularly you’re insurtech. What would you say to the companies that have really yet to launch much of any other transformation initiative for these types of things that we're talking about here?
Todd Greenbaum: Well, you know, I think of companies in terms of different profiles, you know. There are some companies that move too fast, like startups. You know, they execute before they plan. Think ready, fire, aim. Some companies make decisions at normal pace, some are more conservative and make decisions at probably too slow of a pace. Insurance entities can often move at what I call a glacial pace and the reason for this is that insurance related businesses tend to look at most initiatives through a risk lens and that makes sense because they're in the risk business. But it also means that they're more adept at risk assessment. If they can build a risk model for their core business, they should be able to build one for the next technological initiative.
You know, success is dependent in no small part on disruption or at the very least not getting stuck in existing habits. So, the notion that insurance is low engagement, disintermediated category, in which customer relationships can be delegated to agents and brokers is really an obsolete concept. Digital technology and the data and analysis give insurers the chance to know their customers better. You know, according to Accenture, a report that I read recently, over the next five years, 90% of consumers will buy most of their insurance through online and mobile apps. Over the next few years, the companies that win, will have a greater focus on driving efficiency, improving customer experience, and supporting long term growth. Now with that said, making a huge transformative initiative is a big deal. I would say start with some smaller ones first. Digitizing your outbound communications and payments is low hanging fruit. Take a few baby steps, get comfortable with the risk, the timetable, and what it takes to manage a successful outcome on a smaller initiative. And then plan out the larger transformational change.
Tim Hicks: How do you see those transformational changes like in an ebb and flow situation as the economy gets worse or the economy gets better? How does the technology need to slide one direction or the other in your opinion?
Todd Greenbaum: I mean, ultimately technology is supposed to improve the customer experience and create efficiencies within your business. So I'm not so sure how much those technological changes align with an improving economy or a deteriorating economy. The way I see it is that we need to continually move in the direction of improving the customer experience with technology. And you need to continually improve operational efficiency with technology, so I think that those technological advances should be embraced irrespective of the ebb and flow of the economy.
Tim Hicks: So basically, mutually exclusive of the economy.
Todd Greenbaum: I think so, yes.
Tim Hicks: You know in one of our recent podcasts, we talked about the changes in voice technology and the fact that I want to be able to talk to my smart speaker and say, hey, when is my premium due or what is my insurance premium or any of a myriad of things that may have ultimately to do with insurance. If you could project different categories if you will, of technological changes over the next 5 to 10 years, what would you think we should look for?
Todd Greenbaum: I know, look, I do agree with you that there needs to be an enhancement in AI with respect to communication. People should be able to just ask their machines questions and get answers to fundamental things like that, so that's important as well. There's already a lot of digital and transformation and technological advances in IoT. You know, the Internet of Things, where they have devices that can help property insurers protect against floods and fires and things like that, but I think that those are just at their very beginning.
I think there needs to be, there are going to be substantially more enhancements with respect to that and of course, you know, there is a huge wave right now in digitizing the claims response process. The ability to get money to people faster. You know, think about these cat risks where you have people that are just displaced from their homes. And how do they even get in touch with their insurance agent? How do they get the carrier on site to give them their money? And what if they can't even go to the bank to turn that check into cash? So those types of things are happening now, where digital payments are going on an outbound basis and are giving people the ability to get what they need in the time that they need it most.
So all of those things I think are underway, but they're going to continue to be developed over the next 5-10 years and will continue to improve the experience that people have, which will increase the value of the insurance product to the entire insurance buying public.
Tim Hicks: That's a good answer. You know, I used to think even 20 plus years ago, when I was actually doing claims on it, why don't we evolve ourselves to a place where an insurance agent could go to the scene of a casualty of some sort to say, you know, hey, this this tornado just hit, and you've got this amount of damage. And they can punch some stuff into an electronic gadget and spit out a check right there, right then and there. And even 20 years ago I'm thinking OK, something that can write a check. How about this? How about a payment card that I can say OK, here is the damage. Do you agree with this estimate? Yes, or at least an initial amount and then just take a payment card, load it right there at the spot. Here's your payment card. Go do what you need to with it.
Todd Greenbaum: Yeah, that actually happens today, and it's important because, it was funny when I first started thinking about this, I was breaking it down. I was like wow, you can get a check because adjusters will go out to these cat sites and write checks. But what if you can't get to the bank. So you take these payment cards and you can go directly into a Walmart or a hotel and you can use it without ever having to exchange it for another payment modality. So that's real valuable and that to me creates a lot of value to policyholders in the time that they need it most.
Tim Hicks: What other bits of advice moving forward would you like to offer our listening audience?
Todd Greenbaum: Now, I just, I've been doing this for a very long time and what I find is that I respect the evaluation of risk that insurance related entities have with respect to business changes, but I think that there needs to be a moderation in the degree to which it is viewed through a risk profile. And they should do all the research that they want to when they're adapting to new technology, but they probably need to make decisions more quickly because, as they say, the insurance industry is not the industry of technological evolution. But it can be, and it should be. And part of that is getting the human beings that make the decisions to be able to make them more rapidly, still intelligently, but more rapidly and less risk adversely.
Tim Hicks: True enough. I mean, when you think about the Titanic. The Titanic was going too fast, they couldn't really change the direction as fast as they needed to, and they hit the iceberg. OK, so you've got to give up a little speed, maybe for a little more direction or a little more agility, if you will, to be able to change and adapt to what's going on. We can't, you know, we can't take forever to turn the ship as it were.
Todd Greenbaum: Yeah, there's a balance between risk and rapidity, if you will, right? You can't make rapid decisions without increasing yourself on the risk curve, but it's better to take a little more risk and move a little more quickly than it is to take no risk and not move at all.
Tim Hicks: It's a delicate balance. Hey Todd, thank you so much for sharing a few minutes with us today. That's all the time that we really have for today's podcast. But hey Todd, if our listeners would like to follow up with you, how would you prefer that they reach out to you?
Todd Greenbaum: They could go to our website and send us an e-mail that way, they can connect with me on LinkedIn, they could send me an e-mail at my e-mail address at email@example.com. Always love talking to people and learning from people in the insurance business.
Tim Hicks: So input1.com, input and the number one dot com.
Todd Greenbaum: That's correct.
Tim Hicks: Great and if you have any comments about the show or any show suggestions which are always welcome, you can always e-mail me at Tim.Hicks@FISGlobal.com. Until next time, I'm Tim Hicks with today's guest, Todd Greenbaum.
Todd Greenbaum: Thanks again Tim, really enjoyed it.
Tim Hicks: Be sure you catch the next podcast when I sit down with Doctor Gleb Sabrosky to talk about the relationship between diversity, remote work, and returning to the office. You don't want to miss it. If you enjoyed this episode, I encourage you to subscribe to the podcast so that you never miss a new episode when those come out. Let your friends and colleagues know about this show too. And one more thing, if you wouldn't mind, please rate and review the show. It does help others find us more easily. Thanks for listening. We'll see you next time.
Original podcast on: IASA's Additional Coverage Podcast with host Tom Hicks