New business driven by emerging risks such as cyber security could either bypass brokers and leave them sidelined or lead them into greater advisory roles – if they can grasp the opportunities.

A new PricewaterhouseCoopers (PWC) report warns that businesses facing evolving risks are looking beyond brokers and towards other advisers in their search for help.

“Broking is at a once-in-a-generation crossroads,” the report says. “As the pace of change in the marketplace accelerates, a major rethink of how they operate and compete is likely to be needed.”

Social, technological, economic, environmental and political developments are driving new risks such as hacking and business disruption from failures in complex global supply chains.

PWC partner and New Zealand Insurance Sector Leader David Lamb says brokers are seen as trusted advisers and service providers, but not necessarily as a source of solutions to such problems.

“Many organisations, if not all, are struggling to deal with these risks, and there is a role there for brokers,” he told insuranceNEWS.com.au. “The report focuses on them being risk-facilitation experts and really pulling together the pieces.”

The report – Broking 2020: Leading from the Front in a new era of risk – is based on a survey of 60 buyers, typically heads of risk or CFOs at multinational corporations.

It also draws on interviews with Aon Benfield International Executive Chairman Dominic Christian, Marsh & McLennan President and CEO Daniel Glaser and Willis Group Deputy CEO Steve Hearn.

Mr Lamb says the findings are applicable to brokers serving SMEs that do not have the in-house capabilities of large corporations to tackle emerging risk issues.

Challenges for brokers include increasing training, so they are equipped to respond to the new environment, and attracting young talent into the sector, he says.

Operational, supply chain and cyber-security risks top the list of concerns among survey respondents.

The report says risk managers mainly rely on brokers for information about insurance placement, but they do not often turn to them for risk solutions.

“It’s especially notable that carriers and industry groups are ahead of brokers as the primary source of solutions for cyber and supply chain risks, which are at the forefront of the risk concerns identified in our survey.”

The report finds fewer than one-third of respondents are “very satisfied” with brokers’ analytical and modelling services across a range of areas.

PWC says Big Data and advanced analytics will be crucial in managing the emerging risk landscape and strengthening brokers’ positions.

At the same time, the focus must shift from the past to foresight, as brokers evolve from being placers of coverage to preventative risk advisers and managers.

“Many smaller brokers may lack the scale to develop advanced capabilities in-house, so it will be important… to find ways to pool resources or access market-wide information services.”

Brokers need to forge relationships with governments, academia, specialist risk consultancies and industry peers, PWC says.

At the large corporate level, Willis Group’s Mr Hearn says his company is engaging with clients in different ways rather than merely transacting.

“The new breed of analytical brokers are more information-driven than their traditional counterpart and have a deeper knowledge of the client’s particular industry,” he says.

“To lead, there needs to be a shift in mindset from ‘we have a policy’ to ‘we understand the dynamics of your business and market and can help you to develop the solutions’.”

PWC warns that brokers may be left competing for increasingly commoditised standard risks if they do not grasp the opportunities presented by emerging threats.

But they must also continue providing the services that have earned them a high level of trust from clients over many years.

The challenge, the report says, is developing capabilities to help clients with new and escalating risks while remaining relevant and cost-competitive within a standard risk management market.

Clients expect more advice and assistance in a rapidly changing environment, and it’s up to brokers to prove they can meet these demands.