2023 has been a busy year for the insurance broking sector and the companies that work to support the health and sustainability of this market. Between regulatory pressures, the acceleration of generative AI as both a point of discussion and a point of differentiation, and the troublesome economic conditions impacting providers and insureds alike, ‘what next?’ was the question of the mind of so much of the market this year.
In the midst of so much upheaval, it has been interesting to see how brokers have pivoted to meet these challenges head-on, and one key directional shift seen by Toby MacLachlan (pictured), CEO of Ignite – a Verisk business – has been the increased number of brokers setting up second brands. There was a small wave of brokers that set up second brands at the start of last year due to the fair pricing regulations, he said, and he expects to see more of this activity going forward, albeit for different reasons.
“Lots of larger brokers are stuck on legacy platforms,” he said. “Re-platforming presents a business risk/interruption that is a major obstacle to innovation. So, lots of larger brokers are considering/doing second brands. This allows them to use the latest technology, like Ignite, without the risk of data transfer and the headache of full staff retraining.
“They can start with a single product and do interesting things with it (like variable policy terms, multi-vehicle, self-service etc) that would be all but impossible on their main platform. And they can then run both side by side, share learnings and best practice, and invest where appropriate.”
Identifying some of the key factors at play behind this trend, MacLachlan noted that brokers are keen to innovate. They’re entrepreneurial and full of ideas, he said, and it’s important to recognise that brokers have no lack of willingness or funding to innovate. Rather, they are held back by legacy tech that is slow and expensive to manipulate.
“The key factor behind the wave of second brands is not just fair pricing, it’s a desire to try new things and keep up with those that are innovating,” he said. “Another reason brokers are setting up second brands is to do with business risk. The FCA is considering regulating key software systems like policy admin platforms.
“The risk that these big, legacy, core platforms represent has come into the limelight. Much-publicised outages from other software houses are just one example. In an age of regular cyberattacks, all systems are potentially vulnerable. Having a second brand on a second system mitigates risk to brokers that, if their core system goes down, really have no disaster recovery strategy in place at all.”
What’s been fascinating to see is the knock-on effect the setting up of second brands is having when it comes to fostering innovation among larger brokers. Second brands are an ideal place to innovate, he said. They tend to be smaller and nimbler than the core brand and are therefore ideal forums for testing changes and new ideas.
With that in mind, MacLachlan also highlighted the implication this trend is having to help ensure these brokers are meeting fair pricing regulations. Regulatory challenges tend to be most challenging when there is poor access to data or automation, he said, while second brands, with a smaller back book, are easier to adapt to regulatory change.
As to the impact this move towards brokers establishing second brands is having on the customers on the other side of the insurance value chain, MacLachlan noted that the end insureds “undoubtedly” benefit from second brands. New products tend to be digitally enabled, he said, giving customers more choice, and lower overheads, giving customers better priced policies.
2023 was a year of acceleration for Ignite itself, seeing the insurance software house launch an accelerator programme to drive innovation in insurance broking and be selected by Hagerty Insurance Services (Hagerty) as its new broking system provider. With his attention turned to 2024, MacLachlan said he expects AI to inevitably dominate discussions and headlines next year.
“There are clear use cases for claims and pricing, but also more subtle ones in broking administration,” he said. “Brokers’ staff are essentially training people interacting with data. This is something that generative AI does well, and should be harnessed as such. Ignite launched its AI Layer technology in 2023 and will be publicising the positive real-world impacts and use cases of this in 2024. “
