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So what should a broker do? One option would be to partner with these internet of things device companies and create a revenue stream. Software companies are highly profitable, generally 80% gross margins. (Credit: Nmedia/Adobe Stock) So what should a broker do? One option would be to partner with these Internet of Things device companies and create a revenue stream. Software companies are highly profitable, generally 80% gross margins. (Credit: Nmedia/Adobe Stock)

Who Moved My Cheese” by Spencer Johnson is an apt description of what’s happening to the broker community today. You are under attack on all fronts. Carriers are developing direct-to-consumer communication mechanisms, private equity has seen the profit margins for broker companies and has aggressively moved in to acquire and expand, there is increasing pressure on brokers to heavily invest in their technological transformation initiatives to maintain relevance, and now the internet of things (IoT) devices have arrived that threaten to disrupt the fundamental insurance business model, and with it, broker commissions. This creates a firestorm for all those who have enjoyed a high renewal rate/lifestyle business for, in some cases, decades.

A very well-publicized example, Hippo Insurance provides to its insureds a smart home kit containing five sensors, which go on front and back doors, one on the ceiling in the kitchen, one near the washing machine, and one near the water heater. In exchange for using these devices, Hippo provides a premium discount of up to 25%. Using these devices is a condition of coverage and is reflected in the policy form.

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