The insurance industry continues to face disruption on all fronts, and perhaps none as much as the broking sector. Technology has greatly enabled today’s customers with information transparency and more direct access to insurers. Where does this disruption leave the broking sector? Is the traditional broker now obsolete? What will define tomorrow’s broker?
Connectivity, empowered by technology, is a trend that is steamrolling its way through the financial services sector. The asymmetry of information which has long been existent in the insurance industry has been disrupted – verily for the better – though it poses a challenge for all including the broking sector. For one, the increased transparency and accessibility to information has enabled insurance buyers to expect more in a shorter period of time.
Evolution of customer expectations
Ms Kay Jackson, Director of Australian brokerage Simplex Insurance Solutions, noted that in the past, a broker would meet a client and gather relevant facts and risk information, then obtain quotes from several underwriters over the course of a few days.
“Fast forward to 2015 – a client expects an instant quote; if an email is received from a client at five o’clock on a Sunday evening, they expect a response by the close of business on Monday.”
Marsh’s Asia Pacific CEO Martin South agreed. He cited the increasing emphasis placed on health and benefits by Asian consumers as an example: “The market is changing and employers are now demanding real-time, technology-driven solutions.”
On the corporate side, particularly in the SME sector, he said the challenge for brokers looking to tap opportunities there “will be in finding a good balance between geographic distribution and technology”. Significant investment will be required in marketing, technology and trading platforms to drive improved distribution and access to the sector, he added.
Then, there is the increasing demand for brokers to deliver more analytical advice. “Large corporate clients are demanding a greater ability in their brokers to deliver a more analytical approach towards risk identification and tolerance, and to use quality data to make better decisions regarding their risk retention or transfer strategies,” said Mr Simon Weaver, Head of Southeast Asia, Willis Towers Watson.
Disruption not too significant yet
Notwithstanding, across Asia, whilst technological trends and initiatives such as e-commerce and insurance aggregators have surfaced in the more developed insurance markets, Mr Weaver said technology has “still not encroached on traditional insurance buying to create any significant disruption.”
Mr Peter Jackson, CEO of Lockton Companies Singapore, also noted that while technology has not particularly disrupted the business, “more business will go online”. “However, we are a long way from SMEs and large businesses buying online,” he added.
This being said, brokers are not resting on their laurels. Change, Mr South said, is inevitable and brokers must continually think about their businesses in the context of being a disrupter. “At the end of the day, we have a choice to be either the disrupter in our industry or the company that gets disrupted – there is no in-between.”
He noted that there are still market players which “engage risk management and corporate clients exclusively on the basis of price and/or product”. But to truly add value to clients, the industry needs to focus on risk and capital which will help effect better outcomes on programme structures and total cost of risk, he added.
Recognition of growing interconnectedness of risks
Clients today recognise and perceive that risk to both assets and human capital are becoming increasingly interconnected, and so having a broker who can offer consultative advice across all areas of risk will enable them to manage their potential exposures with more confidence.
Mr Weaver said the company’s investments in analytics, actuarial, risk consulting and engineering talent has enabled it to do this. “The Willis Towers Watson merger has produced a global consulting and solutions company that allows us to bring combined analytic and solutions-based advice to our clients.”
Mr South said: “The effort to provide clients with tools that will help them solve their risk management problems is an ongoing one.” Hence, Marsh had developed initiatives such as its global analytics division, which taps on the firm’s global benchmarking portal data and other sources to help clients better understand and address risks, and further expanded capabilities with an “iMap” tablet application for management of risk-financing options.
In the life and health space, the broker, through Mercer Marsh Benefits, has launched a portal designed to fulfil both employer and employee needs to have more control over their benefits, including real-time access to benefit programme data.
Ultimately, improving client service, being more responsive and understanding clients’ broader risk issues better are the crucial qualities that the industry must cultivate to transform its businesses in order to engage clients better, said Mr Jackson.
Networking for clout
For a small-to-medium-sized broker like Simplex, its approach to the challenge of disruption was joining broker network Steadfast. Not only is the firm able to tap on the group’s technological solution which can provide a summary of several quotes within minutes, it is also able to leverage on the network’s clout when it comes to negotiations in coverage.
“With Steadfast, we have ‘special business package wordings’ which means that the coverage is negotiated by the network on behalf of members and is a broader and more comprehensive that the standard business policies – this means most of the common negotiation are already done,” said Ms Jackson.
The only negotiations needed once coverage and premiums are reviewed would then be additional and specific to the client’s occupation of physical risk of the property, she added. This leaves brokers free to spend more time in front of clients to understand their needs and also to explain policy coverage, instead of having to repetitively enter risk information into several underwriter online systems to obtain separate quotes.
A need to be a traditional broker “plus”
So with the disruptive changes that brokers have had to adapt their businesses to, does this banish the traditional transaction-only broker to obsolescence?
Mr Jackson said the traditional transaction-only broker is “out of date and underplays the broker’s role”. And this is “exacerbated by a soft market” and the lack of education among clients on the “full role of the broker in helping to manage risks”.
Meanwhile, Mr Weaver noted that at the C-suite level, clients tend to look for a more “consultative engagement with their broker”. And at the risk transfer point, large and complex risks will always require specialists to deliver the product. Hence, he said the key will be aligning these placement skills to the analytical assessment and advice that determines the client’s optimal risk transfer structure.
For her company, Ms Jackson said Simplex “is a very traditional broker”. However, it is using technology to supplement its interaction with clients, looking at ways to increase its back-office efficiency so as to enable its brokers to “spend more time in front of clients”.
“My belief is that brokers are still the trusted advisers and to be one, you need to be talking to your client, providing advice in relation to their specific business risks and needs.”
The future of insurance broking, she added, hinges on brokers sticking to their traditional role and legal obligations to ensure they get to know their clients’ businesses and risks, make sure that the coverage sourced is appropriate to needs, and assists in the claims process in clients’ time of need.
“Brokers need to look at technology in ways it can be used to get them back in front of the clients, as well as to provide efficiencies in back-end processing, not as a way to cut short its relationship time with the clients,” said Ms Jackson.
Nimbleness and analytics are must-haves
The Willis Towers Watson merger, Mr Weaver said, is a good physical example to define the broker of tomorrow because it combines “direct access to global risk consulting and broking capabilities across both human capital and physical risk at the client level”. And behind this is “leading-edge analytics, thinking and software”.
Meanwhile, Mr Jackson summed up the requisites succinctly: “nimble, IT-enabled and working in defined segments”.
Mr South agreed: “While I believe the broker of tomorrow will still be placing insurance and helping clients with claims, it needs to be much more than that. Brokers will increasingly need to ensure they are technology-enabled and armed with industry data and analytics to help drive improved decision-making for clients, and understand broader business issues to offer guidance to help improve their clients’ businesses.”
Tomorrow’s broker, he added, will compete from depth of risk and industry knowledge to transactional capabilities.