Economic Trends: Insurance industry in transformation

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The insurance industry has experienced a significant shift in the past two decades, an evolution driven by technology, data and consumer demand for a faster and more customer-friendly experience.

So much so that many of the insurance industry’s biggest players have reinvented their identity as tech companies in addition to insurance companies.

As the industry transforms, more data and technology are being used in a variety of ways, from prospecting, advertising and sales to underwriting, claims and service, American Family Insurance Group chief executive officer Jack Salzwedel said.

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“The human interaction of insurance – agents (and their trusted expertise), service, claims – are still important to customers,” Salzwedel said. “But today, they’re supplemented by more self-service and technology solutions to improve business and satisfy the changing needs of customers.”

Salzwedel believes the insurance industry is in an era marked by “paradoxes and contradictions.” While there’s continued investment in technology and data, insurance companies are also tightening expenses.

Jack Salzwedel
Jack Salzwedel

Salzwedel will be among the speakers at the 19th annual BizTimes Media Economic Trends breakfast on Jan. 24.

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The industry has also seen a surge of tech-driven companies, such as New York-based Lemonade, a property and casualty insurance company that brands itself as “instant everything.” It takes “90 seconds to get insured” and “three minutes to get paid” are among the promises on its website.

Companies like Lemonade and others with a customer “self-service” business model are targeting less complex policies like auto, renters and homeowners insurance and having some success, said Kevin Steiner, West Bend Mutual president and CEO.

However, money that initially entered the insurtech space, which sought to disrupt the industry and even eliminate the independent agent, is instead moving towards efficiencies, Steiner added.

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“As long as independent agents adapt to customer expectations and find ways to use technology, there’s still a very bright future for them,” Steiner said.

Technology is replacing jobs while many organizations, including American Family, are adopting lean methods and practices to gain efficiencies at lower costs. However, the same companies are also investing more in their employees through higher pay, more intentional development, stronger employee experiences and more modern facilities.

American Family recently announced the location of its new downtown Milwaukee office – the 110-year-old former Mandel printing building near the northwest corner of West McKinley Avenue and North Dr. Martin Luther King Jr. Drive.

Once completed, between 200 and 250 employees, mostly in claims, will relocate to the building from American Family’s current Pewaukee office. The company will also create 150 new positions to be based at the downtown Milwaukee building. Those new employees will work in functions such as technology and data science, community investments and partnerships, and sales and agent recruitment.

An American Family spokesperson said the new office is part of the company’s strategy to retain a diverse and tech-savvy workforce, specifically those of the millennial generation who want to live in an urban setting.

The project will also likely take advantage of the Opportunity Zone program, a federal program created in 2017 by lawmakers to encourage investment in projects located in distressed areas. The Mandel building is located in a designated Opportunity Zone.

Salzwedel said more companies in the industry are investing in their communities and social issues because of their employees. He cited a 2017 Cone Communications corporate social responsibility study that suggests 78% of consumers want companies to address important social justice issues.

The same research, Salzwedel said, shows Americans feel companies should have a seat at the table to solve complex and controversial social issues. In 2018, the company launched American Family Insurance Institute for Corporate and Social impact, a new venture that supports leaders of social change, coaching them in entrepreneurial thinking, processes and partnerships.

“We’re doing these things at American Family, and so are many other companies, because we believe it’s the right thing to do for the communities where we live and work,” Salzwedel said. “It’s needed to solve complex issues but it’s also being demanded by today’s workforce.”

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