State of the Broker Nation: Digitalisation and the future

Will brokers become a relic of the past in the next 10 years or will the industry still thrive? The answer may hinge on brokers’ ability to take on a new breed of consumers, who want to transact with life in a completely different way than ever known to the market before. This is the digital age, and one that might just see the end of the intermediary profession. To survive, brokers, as well as insurers, need to switch on to the changes and welcome their new breed of customers with open arms.

Increased online activity and faster transactions will become the usual patterns of consumer behaviour in the future, according to the 23 brokers in this research, who feel the industry needs to be “more reactive” to customers.

“Things need to get a lot slicker,” stated one broker, while another said: “Processes need to improve with a lot more e-trading. Why should the fish and chip shop owner who wants to expand wait six days to get a quote back from the market?”

Customer demands are changing rapidly and for several brokers “commercial insurance is not yet meeting the challenge”. Accusing the industry of “lagging far behind”, one broker asked: “Why can’t clients have omni-channel access on a 24/7 basis?”

Consumers will demand to communicate “through whatever medium they choose”. One broker elaborated: “It won’t just be the traditional branch opening hours, but they’ll want a response at any time. It’s not a one-size-fits-all approach. One thing customers want is speed and immediacy, so we need to be more nimble and more efficient.”

Other brokers felt personal lines could suffer more than commercial: “I don’t think brokers will be around much longer for personal lines with consumers. It’s all on the internet now. It’s pretty easy and a lot cheaper,” said one respondent, while another predicted: “More direct sales are happening, especially in the SME and private markets. On the commercial side, there will be a need for relationship but consumers will want everything faster.”

“Relying on the older generation who like to ring and speak to someone” may not be enough to ensure a sustainable future for brokers but, according to one respondent “insurers are still going to need the brokers because a lot of them won’t maintain the networks they have got at the moment”.

Digitalisation
The majority of brokers felt their sector wasn’t very agile at present, with only 10% stating it was. Keeping up with the way customers want to use technology is an important priority for the respondents, but some are more concerned for the actual survival of the broking industry itself. “We seem to be doing a lot of analysis of the Internet of Things, the connected world, how we are going to embrace the customer of the future but my biggest concern is: where is that broker in the value chain? A broker has got to add value, that’s why we exist,” said one intermediary.

Almost one-quarter of respondents felt the broking sector is generally adapting “slowly” or “quite slowly” to digitalisation, although several brokers stated a distinction between personal and commercial lines. “Personal lines are adapting very well, commercial lines, hardly at all,” one broker summarised.

“It will be a long road,” predicted another broker, although the problem may not lie wholly with the intermediaries. “The vast majority of clients still want a piece of paper, still want face-to-face. With the client base we have, digital quotes and digital market activity is very difficult – and long may it reign! The day digitalisation takes over, I won’t have a business.”

Other brokers were more positive. “We’re here for a reason: to add value, to advise, to support. And how do you do that if you just create a completely digital world? Engagement is really key in the world of brokers and I don’t believe customers who transact with a broker are looking for virtual engagement. You’ve got to look at that customer and build a world around them, and develop a digital strategy for them.”

Although 25% of respondents worried that digitalisation might impact negatively on their business in terms of disintermediation, the majority remained confident in their customers’ requirements. “People are buying a promise,” explained one broker.

“They’ll still need someone to explain what the promise is. The model of not being involved with the customer doesn’t work. Taking the broker out of the chain removes loyalty. There is no longevity to it.”

Digital disrupters
Brokers are generally more worried about market disruption from non-insurance brands than disintermediation.

Technology giants such as Apple, Google or Amazon, with crowds of personnel and “very large cash reserves”, may well be the next disruptor to insurance, although brokers were sceptical. “It’s a potential threat but they would have to come into that country and also sell in accordance to the regulations in that country and set themselves up to do it. Those would be hurdles. But there is plenty around the edges of insurance they could do without being a provider themselves.”

Another broker felt the target audience of such a disruptor could be “so broad it may not affect commercial insurance”. However, there is a slight unease of something round the corner. “There’s an Uber or Amazon waiting to happen in our industry, so someone with a lot of data on smaller commercial customers will probably do it a different way. I’m not sure we’ll be asking 25 rating questions of a hairdresser in 10 years’ time to enable them to get a personal liability or personal injury quote.”

For one respondent, whether disruption came from outside or inside the industry depends largely on “who’s more intelligent”. The broker continued: “It depends on whether we have more intelligent people inside the industry who can create something amazing to help us, or if there’s something outside the industry that’s going to create a risk we weren’t predicting.”

Cyber remains an ever present worry for the respondents, with the potential for cyber attacks and cyber crime having a “huge and detrimental impact, especially when companies are trying to work in paperless offices”.

As one broker explained further: “The reliance on digital means if something damages your ability to trade, our exposure is huge – in the old days, when you had hard files, you could carry on and the customer is covered.”

In 10 years’ time
Consolidation in the future was a major concern for the respondents, who felt generally that fewer companies would result in a much more competitive environment. “Smaller brokers will all have been bought out and there will be six or seven national brokers left,” predicted one broker.

Fewer local offices and more “digital-type trading arrangements” will serve consumers with “a different road stock on the road”. “Will people still be buying houses?” pondered one broker, “The idea that you would sit around, buy a house, buy a car and insure both for 12 months might no longer be acceptable. That may well be a challenge.”

Survival for brokers in the future will depend not only on “adapting to our customers’ needs” but also revving up the level of service offered to those customers. “The commercial broker will still dominate the market and will still give advice to its customers. The quality of that advice needs to improve though. If the quality of advice doesn’t improve, it’s more likely our lunch will be eaten.”

Advances in technology
To stay afloat in this increasingly digitalised world, brokers are embracing new technologies and online trading platforms to engage with customers and their insurers. With investment into new routes to market a high priority, several companies had already either brought out or were in the process of bringing out an app to help meet some of their consumers’ insurance needs. However, a few brokers moaned that their legacy back-office computer systems were not capable of effectively dealing with the new technology.

Many firms are now actively “looking at ways of doing things more directly and how to access customers directly”, a respondent noted. The growing number of online bases and e-trading platforms is certainly a testimony to brokers trying to engage with their customers.

But a focus on digitalisation may not be the answer for all smaller brokers. “We have bespoke systems. Every now and then I look at spending £25,000 – which is a lot for a small business – on digitalisation but it would give me a lot of stuff I don’t want and not a lot of the stuff I do want,” explained one small broker.

The majority, however, took the view of actively “investing in completely different websites and routes to market and using data to help with underwriting”.

Social media
The use of social media as a route to market and a medium for engaging audiences with insurance is very high among the brokers, although a small percentage did not believe its use was an appropriate tool. “There’s a clue in the word and that’s social. It’s not for car insurance,” stated one broker, while another echoed: “I don’t think it’s an effective medium for selling or attracting business. Everyone is attempting desperately to find a way of attracting customers.”

One broker explained their company was “about to embark on the use of social media” though hastily added: “But our engagement with that channel will be purely about raising brand awareness and won’t be about selling insurance.”

The broker continued: “The online world opens up a world of pain because it really needs close management, resource and interesting content. It’s a big investment for companies to make. But posting on Twitter ‘Okay I’m off now, but I’ll be back tomorrow’ that’s not going to engage anyone. I see companies out there doing it every day and I wonder: ‘Why?’”

The overriding sentiment, however, was of social media having a “massive influence” and being “hugely valuable” to keep clients informed of new activities. “It’s got a huge space in our world and we are not using it very well at all,” sighed one broker.

Linked In, Facebook and Twitter were the three popular platforms for serving different needs. “We use Twitter and that has a definite audience for one product, whereas platforms like Linked In allow you to publish e-letters that can be seen and shared by everyone – you’ve got a broader footfall in terms of who can actually see the publications,” described one broker.

Managing customer expectations was another popular use for social media platforms, as one broker explained: “It will become increasingly important because it gives you that understanding of what people are doing because there’s so much information out there.”

Several brokers hoped to tap into the influential power of social media. “It’s an engagement tool. The problem is we sell insurance: it’s not particularly an exciting product. Those who’ve been successful probably use social media to engage the customers in something completely different from insurance,” reflected one broker.
“It’s a massive influence,” stated another. “Instead of sending a letter through the post and waiting a while for a response, a customer knows they’ll get a response on social media straightaway. It is really powerful because these things get shared, someone shares it with their friends and family, who then share it with their friends and family.”

However, for one broker, the effectiveness of social media depended on the sector: “It can be an effective way to communicate things that are changing but in highly targeted commercial lines it’s not as successful. It’s powerful insofar as it’s not seen as advertising but more like a recommendation or word of mouth, so it’s a powerful movement.”

While digitalisation might be the most immediate challenge facing brokers, it is certainly not the only one. Upheavals like Brexit and legislative reforms will have significant impacts on the sector’s future – and, as the British Insurance Brokers’ Association will have a vital role in influencing it, read our next section to see how brokers feel about it.

Read more broker views on regulation and professionalism and staff and watch the video about apprentices, women and the future.