It is well recognised within the industry that brokers' independence and relationships with a number of insurers enable them to understand the full depth and breadth of the market, as well as the requirements of each customer. Armed with this information, they can then find the exact product to meet those individual needs.
With ABI figures showing that nearly a third of both home and motor insurance (31% and 32% respectively) is distributed through the intermediated channel, it is clear that customers also appreciate the real difference and full end-to-end service brokers deliver.
Yet when it comes to how consumers choose the right insurance policy for their needs, the world has changed drastically in the last few years, and this is in no small part due to the rise of the aggregators. While an aggregator might provide a customer with a favourable price from a brand they like and respect, there is no broker involvement in the transaction.
Recent research by Finaccord showed that aggregator usage varied greatly from country to country, and peaked in the UK. Of the UK respondents who switched their car insurance policy or bought their first one, 74% did so online, demonstrating that for a large proportion of purchases, brokers were simply unable to demonstrate their differential.
The picture is slightly different in commercial lines, where even as insurance products become more commoditised, brokers are still able to offer the same levels of service and professional expertise. This is especially pertinent as the risks become more complex, when a broker's understanding and deeply embedded knowledge are essential to combatting the levels of underinsurance that arise from businesses not appreciating the extent of the cover they really require.
To make the most of this ability, brokers need to embrace digital and technological change. While this may be considered the prerogative of businesses with large budgets or a better ability to innovate, there is nothing to stop brokers making the most of the opportunities available through access to flexible, agile and low cost technology.
With the broad market experience they inherently possess, brokers should be at the forefront of insurance innovation, yet they are often playing catch up due to the prohibitive nature or cost of their technology. Meanwhile both new start-ups and larger insurers are using advanced engagement models, which capture far more information about a customer, with the aim of providing the most appropriate cover whilst simplifying the journey.
The latest figures show that the average UK customer has five policies spread over three providers. I, for one, would welcome the simplicity of reducing the number of carriers I engage with. If policyholders could also access new and innovative products, and pay for them in a combined manner, then I'm sure many of them would see even greater value from such a portfolio approach to insurance broking — and the data already exists to make innovations like this a reality.
While pay as you go data-driven models, such as telematics, have been around since the mid-1990s, the introduction of game-changing data collection solutions, including 12V devices, is set to reduce the cost barriers to adoption. Additionally large insurers and start-ups have started using technology to offer on-demand cover for individual items, as well as short-term car insurance cover, as customers' lifestyles — and hence their insurance requirements — change.
All of this shows that as brokers consider their future use of technology, they need to be looking at how they can build data enrichment and flexible pricing into their solutions. These solutions then need to be enhanced and refined to keep pace with product or service innovation, as well as changing customer demands for a revitalised insurance experience from a provider who truly understands them.
With new entrants to the insurance market, ever increasing regulatory pressure and the potential for dramatic political change following the activation of Article 50, brokers need to ensure they adapt with the times to remain relevant in a rapidly changing landscape.
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