Brokers need to adapt or face ‘extinction’
The CEO of one of the world’s largest independent insurance broker organisations, Brokerslink, has warned brokers that they need to adapt or face “extinction".
Speaking at the third annual Asia Insurance Brokers’ Summit in Kuala Lumpur last week Jose Manuel Fonesca, chairman of Brokerslink, warned brokers that without an adaptation process, they face ruin.
“Adapting a broking business is not easy, but the extinction alternative is unthinkable,” he said.
Fonesca warned that companies need to update their business models or risk disaster and noted that brokers seeking the security of a broker network may be surprised by what the future holds for the broking industry.
“While broker networks remain attractive to clients and their risk managers, the underlying business fundamentals need to change radically if they are to survive.
“There are alternative business models, which not only allow addressing the shortcomings of both mega brokers and networks, but that will do so with growing levels of effectiveness. Aspects such as the fee structure, membership criteria and ownership structure deserve rethinking.
“In the future the generation of inward premium income, selective membership and give members an equity stake may be among the features to seek. Brokerslink has already changed its business model to facilitate these essential elements as we believe this to be where the future lies.
“Even insurers, who rely on brokers for their product distribution, are often heard lamenting the fact that the ‘alphabet’ brokers, in particular, control too much of the world premium volumes.”
The Brokerslink chairman, which is partnered in Australia with PSC Insurance Brokers warned that a one-stop-shop brokerage that deals with many aspect of the insurance industry may not be the answer in the long run.
“I do not dispute that this approach can provide economies of scale, but clients should be offered a choice of independent specialist service providers, separate from the insurance purchasing transaction.
“Reinsurance and employee benefits, for example, are areas where conflicts of interest can be an issue.”