As a business owner, would you rather work with an insurance broker who knows exactly what they’re doing, or an insurance broker who has quite a good idea about what they’re doing but wouldn’t call themselves an expert? The answer is obvious. Medium and large-sized businesses want to work with specialised brokers.
The days of commercial insurance “generalists” are fast coming to an end – and it’s easy to understand why.
We are in the middle of one of the most complex and interconnected commercial risk landscapes in history. We are two years (ongoing) into a global coronavirus pandemic, and months into a war in Ukraine, which has caused geopolitical shockwaves worldwide. We are experiencing economic inflation of such significance that many countries are in a cost-of-living crisis, and we are also battling a changing climate which is causing more frequent and severe natural disasters around the world.
At the same time, we are navigating a period of immense and rapid change in the digital ecosystem, with technological innovation that is creating both opportunities and challenges (especially in the form of cyber exposures) for businesses across all sectors.
Generalist commercial insurance brokers are not well suited to this complex risk environment. There are so many challenges to keep on top of that it has become difficult for brokers to dabble in a little bit of this and a little bit of that – and no business wants to work with a broker who can “half” help them solve their problems.
Many businesses gained new cyber exposures during the pandemic because they had employees working remotely for the first time ever, using home networks that are typically less secure than corporate networks. Employees had less cybersecurity oversight than they would have in an office location, and hackers made the most of this by spraying people with phishing emails and social engineering attacks, which (if successful) could then lead into more serious ransomware incidents.
Aware of this new vulnerability, many organisations inquired about or purchased cyber insurance for the first time. The cyber risk and insurance landscape is like a microcosm of the wider commercial risk landscape. It is so complex and intricate (with specific risk control requirements and convoluted underwriting guidelines) that it requires an expert cyber broker for successful navigation.
Cyber is just one example, but the same goes for other challenging commercial risk classes. Commercial real estate owners and managers with assets in weather-prone locations are turning to specialised brokers to help them secure the best coverage solutions from the hard commercial property market. Companies with cross-border exposures or assets impacted by geopolitics or the global supply chain issues (exacerbated by the COVID-19 pandemic) need specialised brokers with international relationships and access to the best intellectual capital.
To put it simply, I believe that this current risk environment needs commercial insurance brokers who are living, breathing, and sleeping their specialty every single day.
I stress that I am referring to commercial insurance brokers – and to a large extent, those dealing with medium- and large-sized businesses – because there will still be a need for generalist brokers who can deal with all of a small business’s needs, and a need for personal lines brokers who can sort out their clients’ home, auto, and life or health insurance in one fell swoop.
I believe this move towards broker specialisation is a good thing for the insurance industry. It will help the industry to develop very specialised and granular solutions that are actuarially sound and priced appropriately for the risks they are transferring. This should lead to a healthier and more stable commercial insurance industry in the long-term, and it should also lead to more targeted innovation and technology development.
I think it will also help from a talent attraction standpoint – a very big theme in the industry at the moment – because talented individuals want to solve unique problems. There’s something very fulfilling about becoming the best-of-the-best at something and being the go-to problem-solver for a specific risk.
In my opinion, broker specialisation is good news all-round.