In the present and into the future, there are significant forces challenging brokers. Those interested in adapting should focus on their own education, on claims advocacy, and keep focused on the digital elements of their business to keep pace with that change, say experts gathered for the Future of Insurance conference, hosted by Reuters Events.
The evolving ways of providing advice and education to clients was just one topic touched on by Hub International’s chief marketing officer, Sarah Thompson.
“AI (artificial intelligence), machine learning and the internet are all set to make major shifts in the way that we do business, before the end of this decade,” Thompson told those gathered for the virtual presentation. “As digitization, AI and machine learning continue to evolve, brokers need to shift from being purely a means of distribution to engage with customers and demonstrate value through advocacy, advice and education as key pillars of their value proposition.”
Present conditions and future challenges
Demographics are changing, and so are consumer buying habits, she points out. “There’s a greater demand for transparency when making a purchase,” she says. “There’s also a greater desire by consumers to understand what they’re paying for.” Consumers, she adds, want choice and the ability to only pay for those coverages they need and want, at the times the coverage is warranted. “This is really where we start to see the emergence of usage-based buying.”
As the sharing economy grows too, she says new insurance products and means of delivery will also emerge. The move from traditional purchases to subscription-based services akin to those offered by Netflix or Spotify are already being introduced by some carriers. “A consideration for brokers is how we maintain the client relationships through regular touch points.”
The ability to work from anywhere in the world, meanwhile, has positively impacted the industry’s pool of potential workers, but at the same time requires more traditional employers to rewire their thinking about remote work. “It also requires manager training on how to manage a remote workforce, which doesn’t always come naturally.”
Against this backdrop, as previously mentioned, AI stands to greatly change the business dramatically in the coming ten years, allowing companies to better understand and model risk before determining terms and pricing, almost instantaneously. In one example, Thompson points out that clients could even be given an updated cost of their insurance should they choose the most recommended route to work.
“This will change how brokers negotiate terms for their clients,” she says. “We’re already seeing the dramatic impact of having more complex data and algorithms and the impact it’s had on catastrophe modelling.” Specifically, the ability to run multiple scenarios quickly has also emerged as computer processing capacity has increased. “What might have taken weeks to run can now be done in hours,” she says.
This itself poses a challenge for brokers trying to place business: “Today, more than ever, insurers are requiring more information and data prior to accepting a risk.”
Capacity issues also stand a chance of creeping into the picture as insurers consolidate as well. “Consolidation of insurers means that brokers have fewer choices to present to their clients,” she says. More, she adds “we know one plus one rarely equals two when it comes to capacity, as insurers look for cost savings while merging their reinsurance placements.” Eventually, however, she says she expects creative solutions will be brought forward to fill the capacity void if it does come to pass.
Two trends meanwhile, specifically the growing demand from consumers for transparency, coupled with increased direct to consumer sales, claims and account servicing, will also put pressure on commissions in the future. “More direct from the insurer and direct to client communications and documentation can really cut the broker out of that distribution chain, leaving customers wondering why (they’re paying broker commissions).”
“The challenge that exists for many brokers is that policies are going direct to consumers,” she says. “Clients will submit claims directly to the insurer; brokers aren’t notified in most cases.”
Business strategy for brokers
To survive in this environment, Thompson suggests advisors become vocal educators and advocates. “There’s a huge value in brokers providing their own risk services that are focusing more on helping the client control their overall risk profile, not just what’s covered by insurance,” she says.
“As a broker, it is vitally important that we continue to expand our knowledge and expertise,” she adds. “Customers are looking for specialization, unique knowledge and understanding of their businesses or their personal assets for that matter. Brokers expand the value they provide to clients through education. By offloading simple and non-complex transactions to automation, brokers should be able to spend additional time providing insights and guidance.”
Be accepting of the fact too, that clients are on social media. “Even GenXers are on TikTok these days. If you haven’t invested in your presence on mobile applications and social media, you’re already falling behind your customers’ preferences.”
Buyers, she adds, are looking beyond Google to their social networks, including neighbourhood Facebook pages, for advice. “Are you part of these networks?” she asks. “Are your employees there? Do they feel empowered and comfortable (enough) to provide advice as an individual or representing your organization? Do you have a social media policy and staff training?”
She says addressing this challenge could mean hiring a specialist in cases. Facebook, she adds, is an absolute must for every brand. “Keeping up with the latest trends on social media might not seem like a top priority when you’re struggling to get a placement done in a hard market. But, as the demographics of our customers shift, and our role as brokers evolve, it’s really important that we are there providing advice and education through these platforms.”
