Insurance brokers are an essential part of the insurance industry, and their share in insurance premiums is significant. In Europe, insurance sold by brokers represents around 19% on average, but this rate can be as high as 80% for selected lines of insurance. Yet, they face several challenges that make it difficult to operate their business successfully. These include issues such as complex regulation, customer expectations, and digitalization. The following blog post will highlight these challenges and how software can address them by providing tools for insurance brokers to run their businesses more effectively.
The primary role of an insurance broker is to act as their client's advocate and find suitable insurance policies for their clients, negotiate on their behalf and arrange cover at a competitive rate. This requires an extensive knowledge of the products and services offered by different insurance companies making them better equipped than insurance agents when it comes to advising their customers.
Insurance brokers have a long history. The first mention of an insurance broker in the UK dates as early back as 1762, when they were called "underwriter agents" and provided insurance coverage for ships that would travel overseas. In the intervening centuries, their role has evolved and grew in importance with some brokers even acting as underwriters.
Over the past two decades, the role of brokers has evolved. While brokers used to act as individual workers, broker groups such as MARSH, AON, and WTW have grown into some of the insurance industry's largest players. Also, technology had a significant impact on the evolution of the brokerage model. Aggregation services are a great example of how digitalization has changed the industry. Aggregators are online insurance brokerages that connect insurance providers and customers, offer a wide range of products, and allow customers to negotiate the price by themselves. They rapidly transformed the brokerage industry, and some estimates show that almost half of all online insurance is sold through aggregators.
Let's look at the top reasons why insurance brokers are so vital to the industry.
With the rise of technology and shifting customer demands, insurance brokers wanting to stay relevant need to constantly adapt and reinvent their strategies to help them achieve growth and profitability.
Brokers are facing several persistent and emerging challenges:
Now, let’s look at how the insurance brokering business is evolving in response to the challenges described above. Here are some of the characteristics shared by insurance broker who want success and growth in 2022:
Insurance brokers must provide a personalized, helpful and high-value experience to each of their clients while also asserting their added value by assisting customers in fulfilling certain financial obligations and overall financial well-being.
To meet the challenges, the insurance broker of 2022 must use technology to improve their business operations and efficiently provide insurance products and insurance services to their customers. Technology plays an increasingly prominent role, and brokers are now expected to be fully digital businesses relying on insurance software solutions to deliver the following services and functionalities.
The next 20 years will see even more change in the insurance brokerage industry. Here are some predictions of how the trends of today will play out in the future.
Insurance brokers are facing an increasingly challenging environment. Their industry and customers are changing along with increased competitive pressures from big tech companies and Fintech companies. Transactional roles will simply not guarantee growth and success. Instead, insurance brokers need to play to their strengths and becoming trusted advisors that deliver a superior customer experience.
Technology will play a core role in this process. While more and more customers are ready to buy standard insurance products online and expect fast and sometimes contactless service, brokers can advise them about their risks and then help them locate the right products. To do this, they need to focus on creating attractive digital experiences that create customer loyalty and drive satisfaction.
Technology will also drive operational efficiencies and automate the processes that communicate information between the client and insurance companies. The focus here should be on delivering data in real-time and fostering rich collaboration through documents, video or chat that will help customers address their needs in the most efficient way possible.
Insurance brokers are looking at a bright future if they adapt to the changing landscape. Digital transformation should truly be the top priority. Without it, the knowledge, the regulatory know-how and customer relationships will not count for much as customers shift to more agile start-ups and big tech competitors that deliver a better experience and more value.
Đorđe Trninić is an insurance technology expert, deeply involved in software development and specialised in understanding corporate customer needs in the financial industry.View profile