Despite the wave of economic, social, political and technological factors facing them and their clients right now, insurance veteran Andy Fairchild (pictured) is feeling distinctly positive about the future of the independent insurance broker. It’s a confidence that is reflected in the name of his advisory and consultancy practice - Julyfourth Services Ltd – and the message he has for the market about the future of insurance broking.
Between his senior leadership roles at insurers, brokers, broker networks and software houses, Fairchild has amassed several decades of industry experience and developed a broad overview of where the sector stands and where it’s headed. And from his perspective, the insurance market is facing an interesting juncture where the chance to blend the contributions of data and logic with that of people and emotion is coming to the fore.
As a result, he said, independent brokers are now facing a unique opportunity to navigate that balancing act.
“What comes easy to independent brokers is developing their entrepreneurial nature, their people relationships, their emotional contact with their customers and insurers and the like,” Fairchild said. “That’s really the bedrock of independent broking. But the thing that I’m seeing emerging which is different is that hard-edged, data-driven part of independent broking.”
More and more insurers are using data to decide on risk acceptance criteria and pricing, he said. So, the question now is - how can the independent broker harness that data-rational thinking from insurers and utilise it to make sure they’re getting the right level of risk acceptance and putting the right terms on it - but also getting the right price?
“Independent brokers are closest to the customers, and therefore, closest to the data, and as a result are able to get more and richer data from customers,” he said. “The first big question then is, how do you capture it and then, how do you codify it? […] The second part of that is how do you use it individually as an independent broker?
“And what opportunities are there to collaborate and connect with other independent brokers to use it more effectively? Because it doesn’t matter how big you are as an independent broker or how much you dominate your region or scheme, you’re often still small-to-midsize just by definition when compared to the likes of Marsh, WTW, Ardonagh or Gallagher.”
When it comes to capturing data, he noted, a lot of roads point to the software houses and using your broker management system to collect relevant information about your end customer. But when it comes to the piece around using that data effectively, there is more of a question mark over whose responsibility it is to help brokers make the best use of their data and develop that critical data-rational thinking.
Who should step in to play the role of ‘data consolidator’, Fairchild asked. Is it the remit of the software houses, or the traditional networks, or stand-alone data-driven businesses who look to support insurer placement? Maybe it’s time for a new entrant to step into the market, or maybe it’s some combination of all the available players.
“It’s a great question,” he said. “And at this point, I think it’s a rallying cry to the market to say ‘look, you’ve all got these opportunities here. So, who wants to view this as being part of what you do and to put time, effort and resources into this opportunity?’ If you look at a business like Broker Insights, for example, this is their business, they’ve put this opportunity at the heart of their business model.
“Less so with the software providers and the premium finance providers and the traditional networks. My call here is to really put in the time, effort, management focus and capital into this opportunity and I think you’ll find some real benefits. But who do I think is best placed to do that? There’s a case to be made for all of them. Now it’s just a question of commitment and capital – and who’s going to stand up?”
There’s a natural hesitancy among some brokers when it comes to embracing data and the collaboration that is required to make the most of that data, especially considering that few broking businesses are of the scale necessary to travel that road alone. Fairchild’s message to brokers wary of moving into the next phase of data-rational thinking is to embrace that they are a natural conduit for the blend of people and tech this requires.
Independent brokers have a bedrock of emotional intelligence and closeness to the customers that calls out for the overlay of data-rational thinking that is emerging around risk acceptance and pricing, he said. As to whether brokers are embracing that opportunity, he highlighted that the answer varies from business to business.
“You can walk into large numbers of independent brokers and find that they are very data rational, very logical, and very data-driven,” he said, “while others just are not. So, I think there’s an education piece for organisations including the networks and software providers and insurtechs to provide more insights. But some brokers really do lead the way and if you’re looking for where the entrepreneurial spirit of the UK insurance industry is, I think it’s with those small-to-midsize independent brokers who are driven by entrepreneurial leadership teams.”
Lots of those businesses are now getting very smart with their data and truly tapping into the power it holds, he said. They understand how important it is for them to have the right access to areas such as claims information and the like from insurers, and to be able to capture and codify that information so they, in turn, can utilise it. This is emerging as a key competence for independent brokers, and those who can get ahead of the opportunity and lead the way are going to be highly advantaged.
“For me, it’s that entrepreneurial nature that we need right now. That’s what we need to harness in order to make sure that independent brokers are not being left behind by the big guys,” he said. “But I must say, it’s an exciting time to be part of this conversation. I’ve always loved the industry, and loved [its] people throughout my decades of experience – [and] I don’t know who will be the ones to lead the way on this, but what I have is absolute faith that, as an industry, someone will step forward.”