Has lockdown broken the magic of brokers?

Insurance brokers have always had a special relationship with their customers, one that some might have felt was impervious to change. Due to the current pandemic and the lockdown measures related to it, brokers, along with many other professionals have had to reimagine the ways in which they do their jobs and interact with their customers.

The real question for brokers is what place they have in the ‘new normal’. With more and more consumers having turned to digital channels to communicate directly with their insurer, will there be a downgrading of the role of the broker in the insurance ecosystem? Or, with many people now more aware of the pitfalls of not being properly covered for losses that they thought that they had insured against, is it actually the case that brokers will be more in demand than ever?

A Special Relationship

For many there is undoubtedly a special relationship between policyholder and broker.

A PwC's Insurance 2020 report showed that although nearly three quarters of consumers consult some form of digital research before committing to an insurance policy, only 26% would complete the transaction independently online. This shows that there is still very much a place for face-to-face or at least interpersonal interaction with a trusted broker. 

On the other hand, the insurance industry has increasingly adopted digital tech such as chatbots to help meet the needs of customers who take a more DIY approach to procuring their insurance. Advancements in natural language processing (NLP), optical character recognition (OCR) and machine learning (ML) technologies mean that these chatbots are now capable of offering a very smooth experience for those who are willing to use them. Equally, there are many who continue not to, or who are looking for cover that is highly specific, and in these cases the insurance broker still has the edge – although for how long this will remain the case is yet to be seen.

The Broker is Dead, Long Live the Broker

The end of the broker has of course been heralded before. Before the insurtechs that were focused on disrupting distribution, comparison websites gave consumers a way to advise themselves on the kind of cover they needed. As it turned out, the threat posed by consumer advice resources like MoneySuperMarket and comparison sites like ComparetheMarket.com wasn’t terminal for the brokerage profession.

More attention should be paid, however, to new players such as Zego and Quantemplate. These insurtechs have focused their attention on meeting higher value or B2B insurance requirements, threatening to cut brokers out of the deal in the process. But where higher risk and new areas of insurance are concerned, tailored advice from brokers is unlikely to be a service that business and investor customers are ready to forego.

The niche space that insurance brokers serve is protected by irreplaceable value to customer peace-of-mind. However, as alternatives are revealed on the horizon, brokers will need to do some soul-searching to identify the specific ways in which their role adds unique value. For sure, brokers’ abilities to adapt both to a new working model and to a redefined role within the insurance industry will be interesting to observe.

Inevitably brokers, as with the rest of the insurance industry, are having to confront their role in a socially distanced, technologically accelerated world. Whilst technology clearly poses potential threats to the profession, it is also undoubtedly the case it creates numerous opportunities as well. Broking, ultimately, is about growth. As such, the profession is well equipped with the entrepreneurial mindset needed to adopt new ways of working in order to leverage new opportunities and so I expect it will continue to carve out a successful space for itself in the industry for some time to come yet.