Despite being the centrepiece of the insurance market since the beginning, brokers still have some way to go when it comes to digital transformation and risk getting left behind, warns Simon Ball, founding director and CEO of e-trading insurance software specialist Quotall.
Technological transformation and notions around relevancy have become close bed fellows in the world of insurance. Indeed, almost all corners of the industry are asking themselves what the future will look like and more importantly, what this future – which will undeniably be steered by technology – will mean for their business.
It’s becoming something of an existential crisis, with a huge gap emerging between those parts of the industry that are moving forward with digital transformation to make themselves more relevant in the face of competition from outside traditional insurance, including from tech giants like Amazon, and those insurance businesses that are simply not keeping up.
It is therefore vital to ensure the industry is getting the necessary support to survive what will be reflected on as the era of digital transformation; and let us not be mistaken – there will be winners and losers.
Having attended several industry events in the last few months, the broker is a key segment of the market which has stood out to us as one which is struggling to keep up with technological change in a meaningful way.
With the broad market experience they inherently possess, brokers should be at the forefront of insurance innovation, yet they are often playing catch up due to the prohibitive nature of their current technology platforms, cost and – crucially – their understanding of the opportunities and challenges they face.
Just a few years ago, many brokers may not have needed a Chief Technology Officer, but any broker looking to invest in skills and knowledge in their business needs technology to be a boardroom topic. Making informed decisions about what their business does and doesn’t need is the key to acting with confidence on matters such as platforms and cost.
Meanwhile both new start-ups and larger insurers are using advanced engagement models, which capture far more information about a customer, with the aim of providing the most appropriate cover whilst simplifying the journey. They are also innovating with newly modeled products including meeting demand short term / pay as you go policies that can be efficiently distributed thanks to technology.
Search volumes show that they are what people want. Brokers need to think about how they can adapt and meet these expectations.
A recent Google search of “What is an insurance broker” showed up more than 300 million results, and among those results were questions including “What does an insurance broker do?”, “How do insurance brokers make money?”, and “Why use an insurance broker?”
While these questions might reflect the most used search terms of consumers, this is also a line of questioning brokers need to be challenging themselves with more regularly as they continue to face new customer demands, and disruptive technology-powered competition.
Right support and advice
Insurance distribution is evolving – whether brokers like it or not. In fact, it is one of the more rapidly evolving segments of the market. From partnerships we are involved in, through to trends we’ve identified in the market through our own proprietary research, we are seeing much stronger interest and demand from the market – including from affinity partners who could channel significant volumes of business into the sector – for broker digital transformation to provide for customer needs more succinctly.
However, on the flip side to that, we are very concerned the market’s knowledge and understanding of how things are rapidly moving forward digitally, is not where it needs to be. There is an important education piece missing and it needs to be addressed sooner rather than later.
There was a prime opportunity to address this effectively at this year’s broker events, but we felt that instead the issue of digital transformation was treated more as a box ticking exercise rather than addressed in a practical, actionable way.
While there is a lot to be learnt from the way other sectors have improved their customer experience through ecommerce technology, or indeed, trading processes more generally, we have to make sure the lessons that are derived from other sectors are shared through a lens the industry can understand.
I see this at industry events all the time. Adjacent sector speakers talking about their own technology transformation. Sure, these tend to be very interesting, but there needs to be more insurance specific truisms being shared about a) how consumers are changing what they expect to be able to buy and how they are buying it and b) how businesses are successfully integrating new trading platforms and automated systems to make this happen.
Threats on the horizon
It’s long been a known known the industry will face larger threats in the future from adjacent sectors which have digitised more quickly and are better equipped at collecting data, turning it into a usable format and using that to build better consumer facing platforms and products.
This is why it’s increasingly important for industry associations to ensure the support and education piece is readily and comprehensively available for brokers to keep up with the pace of change, regardless of whether that change is on a small scale or ends up being a total transformative process.
Take data and analytics, for example. I’ve used analytics for years and years and still don’t know all the functionality, so expecting a broker to grasp it with a 30-minute presentation during an event workshop is a bit ambitious! Industry associations need to take note and look at providing some good, sector specific insights and training if they want their membership to grasp hold of digital and remain relevant.
Talk of digital transformation and automated platforms can prompt cries of disintermediation and worries around staff cuts among the broker world, but we think this is misplaced.
For many, it is easy to become distracted by the inertia created by these common misconceptions. Although this isn’t new thinking, it is telling that many broker firms are still not properly considering how digitalisation could instead grow their business to new levels.
By automating zero value-add activities and redeploying resources to new – and arguably much more interesting – business development activities, new opportunities will undoubtedly arise.
Cost is another sticking point that is regularly cited. While digital and technological change may be considered the prerogative of businesses with large budgets or a better ability to innovate, there is nothing to stop brokers making the most of the opportunities available through access to flexible, agile and low-cost technology.
A fresh perspective
As market participants continue to work out how this era of digital transformation will impact them, collaboration with market infrastructures, technology vendors and custodians will become more important than ever to both minimise the impact on their operations and to gain the benefits on offer.
We look forward to providing support and advice, and working with insurance businesses that are open to a fresh perspective on insurance from the world of ecommerce as they strive to remain relevant.
There are tried and tested platforms available to meet the needs of brokerages of all sizes, but the critical question that brokers must ask themselves is simple: what is the cost of becoming commercially irrelevant?