'Scale won't save you' from insurance distribution shift

Brokerages are at a tipping point, warns CEO

'Scale won't save you' from insurance distribution shift

Insurance News

By Gia Snape

Insurance has reached a tipping point amid the rise of digital distribution platforms, and brokerages – big or small – need to adapt their business strategies accordingly, a CEO has told Insurance Business.

Dario Battista (pictured), founder, president and chief executive of isure insurance, warned of the looming shift and the consequences of failing to innovate and stay ahead of customer preferences.

He also said larger brokerages wouldn’t be exempt from external disruption if they don’t change how they interact with consumers, drawing parallels from sectors like travel and retail.

“Scale will not solve your problem,” he said.

“When the consumers decide that they want to interact differently, they make the decision. They don’t care how many acquisitions you’ve made.”

Adapt or die? What brokerages face amid insurance’s digital transformation

Battista spoke to Insurance Business ahead of the inaugural Broker Summit in Toronto this April, where he will feature on a panel discussing award-winning business strategies.

Some of the biggest names in Canadian insurance are set to attend the broker summit, aptly titled “Thriving Amidst Volatility: Strategies for Success in 2024.”

The one-day event will see leaders and experts unpacking the most significant issues facing the industry in 2024 and how brokers can best navigate the volatile environment.

For Battista, the most pressing risk to the industry is the shift to digital distribution, especially for personal lines and, increasingly, small commercial insurance.

“I grew up in the travel business, and I saw the transformation of the retail distribution model in that space, and many in our industry misunderstood it as a tech play,” he reflected.

“But it was never really a tech play. It was a foundational shift in the business model in how clients approached us, and we’ve seen that in several industries.

“So, when I look at insurance, I wonder, are we at the tipping point where if we don’t transform from within, someone will come from the outside and do it?”

Where are the opportunities for brokers in the future?

Ultimately, as more and more consumers shift to online quoting and purchasing, brokerages will slowly lose the traditional “meat and potatoes” of their business, i.e. home, auto, small business commercial, Battista said.

“Traditional brokerages relied very heavily on the relationships of the frontline producer, and while I’m not going to say that I don’t think there’s a huge opportunity for frontline producers in the future, I don’t think it’s in in the mass market retail world,” he said.

“The personal lines and small business producer will struggle in the future; they simply can’t get the scale of clients. When you look at these large brokerages that rely on these third-party client relationships – that can walk out the door tomorrow. So, we need to get better at retail distribution through digital.

“When looking at distribution models, specialization supported by committed ownership and the right leadership is key. Other industries have demonstrated this, and over my years in this space, I have learned that you cannot succeed by dabbling. You are [either] in or out of digital distribution.”

But it’s not all doom and gloom. Battista emphasized the enduring value of human interaction in complex transactions, particularly in the insurance sector.

Customers need human interaction, he explained, due to the limitations of purely digital experiences in meeting consumer needs.

“In the future, consumers will increasingly do their research online and be in a position where we can fulfill that in a very efficient way, meeting the expectation in terms of service, which is being present, picking up the phone, and having solutions,” he said.

Two worlds of insurance distribution

Looking ahead, Battista envisions two distinct paths for distribution: one centred around digital acquisition and fulfilment and another emphasizing specialized expertise and personalized service.

He also challenged the notion that direct-to-consumer digital plays are the best course for all brokerages, cautioning against overlooking the importance of choice and comprehensive offerings.

“I think there are two worlds in distribution for brokers,” Battista said.

“There’s a world of retail distribution that’s increasingly going online, and brokerages that want to play in that space must start thinking about what that looks like. How do I acquire and fulfill that customer? However, the multi-branch model becomes very expensive in that space and difficult to manage.

“The other side of distribution is the producer account executive world, where the future is about bringing value not just to the customer but to the underwriter and the brokerage.

“That looks like high-net-worth personal, where those customers require a different type of experience and knowledge base, or commercial, where the needs get more sophisticated and more complex with a lot more moving parts that you can’t service from a call centre.

“At the same time, you have to speak intelligently and with authority to the underwriter because you have to win on both sides in that world.”

Want to learn more about award-winning business strategies and winning the insurance customer of the future? Register for the upcoming Insurance Business Broker Summit in Toronto on April 24, 2024.

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