While traditionally considered to be a people business, broking is not immune to a digital future. To date, the industry has been comparatively slow to feel the impact of digital technology, protected by regulation, the size of in-force portfolios, and the (now changing) customers’ tendency to stay put with their service provider without shopping around. However, pressure is now mounting: Distribution channels, products, underwriting technology, competitors, and even business models are shifting as technology is being deployed to blow business inefficiencies out of the water. Technology is also enabling innovative players to step up to the task of not just meeting, but exceeding, customer expectations.
Today’s market climate is tough for brokers and is becoming increasingly so. Some of the drivers contributing to this include but are not limited to:
- The rising InsurTech threat which is winning and retaining books of business by offering innovative and well-controlled customer service/experiences, often backed up and owned by the deep pockets of carriers.
- Insurance carriers going direct to market (so called ‘disintermediation’) leveraging technology to cost-effectively connect to the end-customer, potentially rendering brokers irrelevant.
- The rise of the millennial generation and their famed unwillingness (or perhaps financial inability) to buy insurance at all, let alone engage on a broker’s terms that we are familiar with – the in-person and traditional way of doing things.
- Commoditisation at the lower end of the broking market is a real problem for many – very tight and unsustainable margins are leading to an urgent need for new business models and product innovation.
- Skills shortages – broking expertise is rapidly aging and traditional insurance broking skillsets are gradually less sought after in favour of a new breed of data analysts and statisticians. Recruitment is getting more difficult for everyone.
- Due to a lack of technological agility, many brokers are unable to escape the commoditisation of their services due to their inability to tailor bespoke products and services and deliver them rapidly to market ahead of the competition.
- The comparatively high costs of doing business at Lloyd’s and the London Market is driving it to irrelevance, leaving it exposed to competition from deep cash reserves in China, North America and East-Asia.
In the face of this onslaught, one might be forgiven for exhibiting a bit of pessimism. But not so fast – the help brokers need is well and truly out there. With a well-planned and executed digital transformation programme, brokers can pre-empt future challenges and ensure that they not only survive but flourish into the next digital decade.
McKinsey states that there are 5 pillars of a digital broker. These pillars form the backbone of what a successful and digitally agile broker should look like. In other words, a broking business which is fit for purpose in 2019 and beyond:
A Centralised Broking System
A central BMS – with process automation being a core component. Siloed data and software solutions which cannot communicate with each other have to be confined to the dustbin of history. A central platform which efficiently manages customer relationships, policies and benefits administration, sales automation, financial accounting processes and document management across the entire business is vital. PaaS software (Platform as a Service) provides an internal layer to coordinate between systems, ending data siloes and providing a seamless data experience where processes can be implemented across pre-existing platforms. Data becomes easy to find, action and utilise. In the same way, a layer of connectivity to the outside world of APIs and plugins is an extremely attractive advantage for brokers seeking the full benefits of new technologies and to implement full connectivity between partners, customers and members of staff. The benefits to brokers of such a central BMS system are numerous and the topic would warrant another dedicated blog post.
Mobile Data Accessibility
Access to data and workflow for stakeholders anywhere, any device, at any time. Customers need access to their providers; brokers need access to their carriers in real time – particularly during the process of gathering information about a new claim. In an increasingly globalised and connected world, geography, device or time zone should not be a hindrance to agile working initiatives aimed at greater stakeholder collaboration. Agile working practices such as this are supported with the use of a fully mobile enabled workflow solution.
Solid Insurer Relationships and Connectivity
Digital technology that enhances greater connectivity makes it easier for carriers to work with brokers and vice versa. By increasing the ease of doing business, not only can overheads be reduced but brokers can coordinate products and services with carriers, create bespoke solutions quickly and reduce the possibility of cannibalisation within complex distribution chains. By digitalising the carrier management and reporting process, brokers can gain valuable insights into the performance of these relationships.
Analytical Data Capture
“Give me AI” they say! If only it were that simple. The road to get there is a long one – an important step is to identify processes for automation, allowing for the removal of manual steps or ‘grey areas’ (paper, spreadsheets, emails) to successfully capture data within a process which is automated from end to end. In this way, brokers can build the data reservoir they need to move towards machine learning and enhanced predictive outcomes by assessing trends in the data over time. The many areas of potential data analysis include internal operations, new market opportunities, customer sentiment and 3rd party/carrier relationships. I personally believe that the biggest value of AI lies in empowering and augmenting humans, particularly in the c-suite, to make better, smarter and more considered business decisions. I have covered it in another blog posting here.
Cloud
By using cloud computing, brokers can benefit from a more flexible operating environment that can deliver platforms on which scalability and strong business growth can be achieved. The cloud also offers brokers the flexibility to implement and test new business models quickly and discard them if necessary. More importantly, digital transformation is not a destination but a process of continuous improvement and refinement. It is in a cloud environment that brokers can best embark on a well-planned and executed digital transformation journey.
Conclusion
The trends highlighted in this blog may be concerning but knowing that the support, expertise and solutions are out there for brokers if of great reassurance. The insurance industry, by its conservative nature, has exhibited a now famous reluctance to change, but those that choose to embark on a well-planned digital transformation journey have every reason to be optimistic of success. Fortune certainly does favour the brave and early movers will gain key advantages. Brokers that do not invest now to become digitally agile risk buy out by more innovative brokers or carriers or, a disastrous closure in the long term, preceded by an increasingly difficult time of it in the run up.
Watch out for our forthcoming article that will provide an ‘implementation checklist’ for brokers embarking on a digital transformation and automation journey.
AUTHOR: Tim Hatzis | Account Executive, Insurance | psKINETIC