Has digital disruption rendered brokers at mercy of insurers?

Has digital disruption rendered brokers at mercy of insurers? | Insurance Business New Zealand

Has digital disruption rendered brokers at mercy of insurers?
Digital disruption is a topic of great interest in the industry, with many views as to its meaning and significance – with some believing the role of the broker may be in jeopardy.

An industry professional, who chose to remain anonymous, underscored the vulnerability of the broker, in his comments to Insurance Business, in the face of digital disruption.

“I think you’re in a daze if you don’t think that digital will turn everything on its head,” he said. “It’s already happening. Think Lemonade – the intangible value of human relationships has been replaced with artificial intelligence.

“I’d be rather naïve to believe that insurers, with multichannel distribution models, aren’t going to capitalise on opportunities to gain direct market share through the use of technology and shifts in SME buying behaviour.”

He pointed out that evidence from Vero Australia’s most recent SME insurance index suggests that less than 30% of respondents purchase insurance through a broker, down from 40% in 2013.

“You’d better believe the trend is being mirrored here in New Zealand,” he remarked.

“I agree that there will always be a place for high-quality, customised advice and advocacy; however, in terms of the increasingly commoditised classes, brokers are at the mercy of insurers and their appetite to partner and create innovative end-to-end supply chain solutions that offer a best of both worlds’ value proposition.”

He concluded by saying that a way needs to be found that satisfies consumers in terms of both cost and value. “To achieve this outcome we have to turn everything on its head, there is no other way!”

However, in the eyes of many, the pros of digital disruption far outweigh its potential cons.

According to PwC partner and innovation leader Andy Symons, artificial intelligence and the Internet of Things (IoT) are the most advanced of the emerging technologies in New Zealand and some Kiwi insurance companies are already banking the returns.

“It is exciting to see technology open up new ways to buy and sell insurance and expand the range of products on offer,” added Auckland barrister Veronica Cress. “I believe change will continue at an exponential rate as we collectively become more aware of the full potential of technology and increasingly skilled at using it.

“However, innovation in the insurance industry may be hampered to some extent by the regulatory environment. The key areas of concern will be rules around: data collection, storage, privacy and protection; financial advisor qualification; knowing and verifying the identity of the customer; and anti-money laundering.”

Despite some constraints, Richard Deakin, solutions director for Core Logic’s insurance sector, is unabashedly enthusiastic about the benefits of disruptive technologies.

“Although it’s early days, the benefits provided through digital channels are already apparent for both customers and our business,” he exclaimed.

“In line with this success, we’re very busy building other new insurance products designed specifically for the digital era.”

He highlighted that also of interest are all the emerging models of innovative insurance that are geared to cover individuals for a specific period of time or just for specific items.

“Developing these kinds of insurance products is further proof that our industry can adapt to the changing needs of a digital society and not be displaced by it. Not only must we meet customer needs, we must anticipate them,” he said.

“I am certain digital disruption will change the way we sell insurance, necessitating the industry work in new ways.

“On balance I’d say the digital era presents a unique opportunity for the industry if correctly handled.”

Zurich motor underwriting manager Matt McEneaney, meanwhile, called attention to the fact that, even though digital technology has much to offer, older insurance professionals have entrenched skills and a knowledge base that are critical to the success of the industry.

“So the industry should invest in the new technologies but also its older-generation people,” he emphasised.

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