Brokers and agents will become more specialised and focus on high-net-worth customers with complex risks to remain relevant, according to Insurance Governance Leadership Network participants.

They will look to provide better service and add capabilities such as risk prevention and management, a report from New York and London meetings on the future of insurance distribution says.

Intermediaries may shift from a reliance on commissions to fees, while the agency sector faces a shake-up, according to the report.

“Ultimately, agencies will face more consolidation as past underinvestment in technology catches up with those that find it difficult to compete in a more digital world,” it says. “The result will be fewer but larger agencies, fewer employees overall, greater use of technology and more added services.”

The network comprises non-executive directors and is organised by professional services group Tapestry Networks, with support from EY.

Participants in the meetings say digital distribution will affect even the most complex products, but insurtech groups will face challenges competing directly against insurers.

The report warns of partnership and outsourcing risks.

“Future distribution strategies will rely on a greater number of partners. This in turn could result in the loss of customer relationships and associated value and could open up insurers to new security challenges.”

Insurers have focused on digitalising the sales end of their businesses, with insufficient attention on systems that support distribution, according to the report.

That increases the risk of losing customers who are not assisted effectively after an initial purchase.

Some participants say brokers have “tremendous power” in commercial insurance and people are hesitant to upset established networks.

“Ultimately, when insurers do decide to embrace more direct distribution and reduce reliance on intermediaries, they unleash the potential for channel conflict, which becomes a risk to be managed,” the report says.