An Increase in Security Demands Amplifies Need for Cloud Solutions

This year, New York heightened their cybersecurity rules for companies doing business in the state and it has had far-reaching effects on the insurance industry. As of March 1, 2017, all insurers, individual brokers, agents, and adjusters have a new mandate to “maintain a cybersecurity program designed to protect the confidentiality, integrity and availability of [their] Information Systems.1”

With larger companies, they have the resources to make the necessary changes internally and are more likely to comply, having a proactive stance with privacy concerns, controls, and regulations. This is much more difficult for smaller companies. To independently architect and manage an infrastructure that is compliant with all of the applicable laws and security requirements of the insurance industry would be extremely difficult, requiring a large investment in people and hardware.

Lessening the burden of investment

The use of hosted solutions and cloud-based infrastructure can transfer some of the security burden to the service provider. Oftentimes, the minimum security standards offered by a provider can meet the demands of insurance professionals. When that is not the case, compliance and reporting levels can be negotiated in excess.

Clients want to do business on their terms, and blinders cannot be put on to those needs. Whether we like it or not, the industry will continue to evolve.

The Cloud allows smaller firms to still benefit from economies of scale. Where a retail broker or agent may hire one security professional, larger hosting companies like Microsoft might have thousands of resources that oversee the security of an environment—an important aspect to consider when deciding to enable cloud-based solutions. This can help smaller insurance businesses maintain a more level playing field in today’s marketplace.

The business model is shifting

It is no secret that our industry is changing. The model in which insurance brokers and agents operate is fluctuating from the traditional relationship model, with dependencies on the knowledge of the broker, to an era of self service. Quick access to information and online tools are now requirements of the client.

As members of the insurance industry, we should respect those expectations and remain open as to how we add value and the types of tools we make available for both internal and external users. Many established agencies have built successful processes upon business models that have remained constant and unchanging over the years.

Clients want to do business on their terms, and blinders cannot be put on to those needs. Whether we like it or not, the industry will continue to evolve.

Evaluating technology needs

As the potential to change grows and more technology becomes available, we cannot implement technology just because it is “the thing to do.” The brokers and agents of today and tomorrow will have to learn how to navigate the onset of new solutions within the insuretech space as hundreds of startup companies begin every year and billions of dollars are being invested.

Each solution needs to be carefully evaluated to measure the impacts that they could have on a broker or agent’s personal business and relationships. And, what is right for one broker may not be right for another. Enter the era cautiously, but also take the time to explore it.

There is a fine balance to embracing new technology and maintaining strong relationships. As technology is reviewed, it is important to reach out to key partners, such as underwriters and carriers, talk to them about how they see the marketplace changing for particular business relationships. Look to lean on trading partners as business advisers to build insights on what can be valuable and what technology your partners are evolving with.

This provides an opportunity to further engage with distribution channel partners by creating an open collaborative community that looks to share ideas and explore the future in partnership, not in isolation. This will also help provide clear choices if partners are using one system and if the broker is evaluating a different system.

A similar conversation can be had on the other side, communicating with clients to ensure the viability of the agency. Ask clients what they find valuable in terms of technology and the relationship they have with the agency. Use this information to guide the conversation with insurance partners. As technology is implemented, brokers and agents should be dependent on feedback from partners and clients on how they expect to do business.

Michael Paulin is the Chief Information Officer and Vice President of Information Technology at H.W. Kaufman Financial Group. With more than 20 years of experience, Michael is uniquely positioned to understand, interpret, and foresee technology trends.

References:

  1. Insurance Journal