The future of the insurance broker is under threat.
The danger comes from new technologies that are reinventing the insurance industry's distribution chain, its business models, and arguably even society as a whole. Many believe that the current shift towards a globally connected network of businesses will result in widespread disintermediation.
However, this future is not so black and white. The change is very real. New technologies are altering business processes, and 'disruptors' are constantly emerging; but instead of feeling threatened, we must see these developments as an opportunity to evolve. By changing the way we see ourselves, and modifying our approach to the business, the good brokers will survive and prosper.
Failure to acknowledge the challenges that have arrived with the digital era would be a big, possibly fatal mistake. Equally, failure to recognize and act upon the opportunities it presents would be disastrous. We must adapt to become much more efficient and more accessible to our clients. But if we don't identify the areas where we have to improve and advance, don't make the right investments and learn how to become much more useful to our customers, we risk redundancy.
Innovate
The threat of disintermediation is not new. The best way to deal with this threat is to innovate. Granted, innovation is already a high priority on the boardroom agendas of insurance companies and brokers. But while there are discussions at high levels about innovation, industry executives and market commentators have noted that the industry needs to work harder at being innovative.
Rather than discussing innovation once a month during a board meeting, we must constantly work to improve. Businesses must adopt broader approaches to stay nimble and focus on expanding their innovation strategies.
Consult
Brokers' key roles include areas where innovation is vital such as risk management, strategic advice, and negotiation. All of these are qualities that can hardly be replaced by codes or algorithms. They instead depend on human social qualities and cannot be replaced by technology (at least, not yet). Brokers must alter their business models to emphasise these interpersonal and social qualities, their strategic advice, and their consultative offerings. To survive, brokers must adapt their role to act increasingly as holistic risk consultants, not just transactional market specialists. Such a shift will pave the way to build and maintain trust between brokers and clients. Trust is essential to maintain and attract business, and is a something else that computers cannot guarantee.
Trust
Brokers can innovate by building this trust, which in turn increases business retention. It is very important that clients trust their broker's judgement, their risk assessment counsel, and their strategic planning. That means embodying the role of the trusted adviser and using it to build strong and positive reputations in a competitive market.
The most effective way to achieve this trust and build an unassailable reputation as an essential business partner is to constantly deliver innovative solutions that fit each client's specific risk profile and appetite. Renewal at expiration is not the path to survival.
As risks continue to change and evolve, so too should insurers. (Photo: Shutterstock)
Learn
Risks are constantly changing, so education is important. To succeed, brokers must be experts in new and evolving fields such as cyber threats, environmental impairment, reputational risk, and complex terrorist attacks. Customers are increasingly hungry for advice in these areas, and seek an informed broker to work closely with them to help gain an understanding of how these new perils may pose a threat. They want protection for their businesses through tailored, targeted, inclusive solutions.
As risks continue to develop and evolve, so too must insurance solutions. First, we must understand the modern risk landscape and learn to assess it with confidence. Then we can adapt our business models and the products to deliver the benefits to clients. Brokers must be willing to be proactive, and embrace the challenging future.
Digitize
There is, of course, a key place for technology in this new business strategy. Brokers can and must leverage the most advanced technologies to best inform their risk management advice. They must fully understand their clients in order to create tailored solutions that fit their risk profiles, which probably means harnessing advanced analytical technology to peer deeply into their clients' businesses. Nowadays, customers increasingly look for speed, ease and convenience in their business transactions. The balance of power has shifted towards them. They want insurance and to purchase it in a manner that suits their preferences. Therefore we must ensure that our technology can be embedded into existing policy administration systems.
Commercial brokers have always struggled against competitive forces and survived. Now a new threat, the technology disruptors, has already gained an edge by harnessing big data and deploying analytics. Brokers must take steps to deliver innovation in this critical area. They should adopt technology to capture and analyze large volumes of data, and create methods to structure and operationalize it into the quantifiable insights that clients and insurers demand. All of that means we must invest significantly in technology, and embrace it, rather than viewing it as a threat.
Adapt
The transformation of traditional business models is driven by social changes that are fuelling the shift to increased consumer power. The uptake of mobile and online technology has caused a major change in customer expectations. Brokers must embrace this change as an opportunity. We have to offer clients what they want, in a way that best suits them. We must adopt new business strategies to stay ahead of the curve. We all must focus on expanding innovation strategies, and continue investigating, adopting and deploying new technologies.
Survive
In order to stay relevant in the era of digital shifts, we must evolve. We don't need to revolutionize the way we trade, we need to change the mechanisms. Companies already offer insights, skills, services, and a human ability to judge and analyze which cannot be replaced by competitors grounded only in technology.
Insurers have strong, established customer and market relationships. Their goal is to give clients what they now need and rightly want: a comprehensive, informed, twenty-first century risk consulting service, which delivers the best possible solutions every time. Do that, and our future is secure.
José Manuel Dias da Fonseca (jmdfonseca@mdsinsure.com) is the CEO of Brokerslink.
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