The insurgency: united we stand, divided we fall
Insurers and brokers need no reminding that the digital age has unleashed a wave of disruptive forces that could demote them to fringe player status.
And they know the drill by now: they should do this, they should do that – there is no shortage of advice on countering the digital insurgents.
But the conversation often overlooks one crucial element: the “strategy disconnect” between brokers and insurers.
A recent EY survey found 43% of brokers in Australia are unhappy with the consistency of interactions with insurers, and 81% expect insurer support around product customisation.
Only about 20% rate insurers as very good or excellent in meeting their needs.
“Market disruption is pressuring existing distribution models,” the survey report says.
“In their efforts to get closer to customers (and reduce costs), insurers’ strategies are evolving, leaving brokers uncertain about their role and some confusion and duplication of effort in the value chain.”
The Broker of the Future – Australia survey featured phone interviews with 273 general or life brokers and managing agents last year.
There is broad agreement that insurers should be providing better online access and tools to support brokers’ clients and businesses.
EY says the sooner the two sides shore up their alliance, the better their chances of co-existing with insurtechs, robo-advisers and the like.
“While insurers have the financial strength and scale to invest in sophisticated digital and analytics capabilities, they have not traditionally had depth in customer data to leverage this,” it says. “Many have minimal or fragmented customer data.
“Conversely, brokers’ long-standing, integral role in managing customer relationships and building trust can generate quality customer data and insights. However, brokers do not always have the tools to mine this.
“Given these dynamics, we believe insurers and brokers will have to collaborate in different and new ways… to optimise the value chain and leverage their respective assets for mutual benefit.
“It is only by working together that insurers and brokers can best serve their customers, giving both parties renewed relevance in a market that is increasingly exposed to disruption.”
Standing still is not an option. Not when the digital insurgents are rapidly expanding, drawing from a huge war chest. Investors increased their funding for insurtech to $US2.6 billion ($3.28 billion) in 2015.
Having upended the personal insurance market, the consensus is the “less complex end of the commercial market” – aka the SME sector – looms as the next target.
More than two-thirds of commercial brokers see the market’s shift towards online and direct as a major growth constraint.
Nearly half of intermediaries view the direct channel as a significant threat.
“Intermediaries relying on business as usual will find it hard to sustain market share and margins,” EY says.
“Brokers need to consider how to participate in the disruption facing the industry.
“In fact, moves towards multichannel create new opportunities for insurer and broker collaboration, including new market revenue and sharing business plans and investments.
“The future broker who collaborates and co-develops with insurers will be better placed to capitalise on this shift.”
Brokers and insurers urgently need to start working on a value chain for the digital era.
Optimising customer experience and deploying technology to improve quality and reduce costs should be the focus.
“Insurers will need to work harder to understand the views and behaviours of intermediaries – and build this into their broker segmentation and account management structures,” EY says.
“Just as the industry has moved to more sophisticated segmentation of end customers, insurers must also apply behavioural and micro-segmentation to brokers, rather than simply relying on traditional product or size factors.”
As the saying goes, united we stand, divided we fall. For brokers and insurers, that has never been more true.