Those insurance industry disruptors known as insurtechs are more than happy to coexist with brokers.
A decade ago, many brokers probably felt threatened by the first wave of insurtechs. These young firms with their advanced digitisation plans presented brokers with the prospect of losing many revenue streams. However, at a recent insurtech roundtable, current industry leaders said the future of brokers is assured.
The roundtable was about connected insurance and chaired by Rita Yates, outgoing CEO of Insurtech Australia.
“It’s [connected insurance] insurance which is connected into internet connected devices and other platforms that hold data such as accounting software platforms, or fintechs and proptechs, which enables these types of businesses to also offer insurance,” she explained.
This type of insurance product would allow, for example, a small business to buy insurance through their accounting platform. The insurance would update and change automatically as the business changed.
“This data driven, digital and connected approach is changing the landscape for insurers - creating some great opportunities for them, as well as their ecosystem partners, but also a great opportunity for insurance technology firms to build these solutions,” said Yates, whose not for profit organization is member driven and represents Australia’s growing insurtech industry.
Part of the opportunity will come from the sheer number of devices that will be connected said Nigel Fellowes-Freeman (pictured top), CEO of the insurtech, Kanopi Cover. He quoted one estimate that this number will reach one trillion devices in 2025.
Simon O’Dell (pictured immediately below) managing director of Insurtech Gateway Australia sees this impact in epic terms.
“I don’t want to be overly dramatic but I see the events happening now as almost a one in 400-year event in that there’s a marked shift in our capability to be able to move from analysing rather large chunks to more one to one pricing where we can go from large chunks to pricing for an actual individual,” he said.
Dell, whose company helps insurtech start-ups, said connected devices and connected insurance are presenting the opportunity for insurers to execute based on data science.
So, should brokers start running for cover?
Fellowes-Freeman said that while early direct to consumer digital products touted the death of the broker, that’s proven not to be the case. He said brokers are in the process of evolving from mainly being the sellers of policies to being advisors.
“I can see that [broker] role very much evolving more to be much more advisory and much less transactional and so I don’t think brokers specifically will disappear,” he said. “I think they’ll move up the value chain to more complex roles and I think they’ll be able to manage a lot more risks individually.”
Fellowes-Freeman suggested that the number of clients brokers can manage could skyrocket.
“So rather than being able to manage a portfolio of 150 clients they could manage a portfolio of 1,000 because they have all the inbound data that can help them inform their customer of a changing risk,” he said.
James Orchard (pictured immediately below), CEO of QBE Ventures agreed.
“When the insurtech wave started that [the end of brokers] was one of the low hanging fruit theories. Potentially for some of the commodity lines of business that are actually unprofitable for brokers a lot of the time, that’s certainly starting to happen, but I think it will be more around brokers really sharpening their value proposition,” he said.
Orchard said this sharpening will involve having an equal understanding of the data and the technology. At the same time, it will require being able to focus attention on the customer, building a relationship and truly understanding their needs.
“I think there’s definitely going to be a role,” said Orchard.
O’Dell, who was a broker for 10 years, said the industry sectors consisting of vanilla risk areas probably don’t need a broker, but in more complex sectors, risk advice is important.
“So, brokers offer significant value,” he said.
In a recent interview with Insurance Business, Open Insurance CEO Jonathan Buck said technology can’t provide all the answers.
“Brokers do have a part to play where it’s not a straightforward risk,” he said.
He pointed to situations where the risks are very specific to a particular business.
“They’re almost literally unique risks that need to be understood and priced,” he said. “That would be difficult to automate completely.”