Digital Demand Impacts Brokers
More consumers are buying auto insurance from sites like Esurance.com, and it won’t be much longer before businesses look online to buy commercial property and casualty insurance protection, according to a Swiss Re report.
Brokers and agents stand to be impacted, but it really depends on the complexity of their customers’ insurance needs, said both the report’s authors and industry experts.
Online sales of commercial insurance products in the United States are expected to increase within the next several years, according to Swiss Re’s recent study on digital distribution in insurance.
Indeed, the Zurich-based insurer is seeing a “sharp increase” in the number of small businesses that are willing to buy insurance online, and there are several U.S. companies “pioneering innovations in the digital era of insurance distribution.”
Most small businesses with revenues up to $20 million are willing to buy insurance online.
Ginger Turner, Swiss Re’s senior economist in Armonk, N.Y., and one of the authors of the study, said that surveys of small businesses with revenues up to $20 million show that most are willing to buy insurance online, particularly if they are more price-sensitive and are looking for more “commoditized” insurance products.
More insurers will likely respond with online offerings of commercial auto, workers’ comp, and possibly standard commercial property or business owners’ policies.
Many small businesses “don’t need as much complexity and can meet their needs with off-the-shelf insurance products,” Turner said. Already, they are able to compare prices and the types of coverages on insurers’ websites and other informational Internet sources.
Impact on Brokers
The impact on the brokerage industry will depend on the complexity of their commercial client base — and the insurance products they need, she said.
“Products such as cyber liability are too complex to be commoditized and may need the advice of brokers and agents,” Turner said. “Moreover, larger companies with more complex risks might be more likely to stay with brokers, who can give them value-added advice and face-to-face personal attention.”
“We’re looking to see brokers move up the value chain to address more complex and niche risks, using more technology and data analytics to add value for their clients.” — Ginger Turner, senior economist, Swiss Re
Brokers may “feel a bit squeezed” by the reduction in business from smaller clients, but such brokers can then focus more on bringing “value-added” analysis and advice for the more complex needs of larger businesses, which can give them higher margins, she said.
“We’re looking to see brokers move up the value chain to address more complex and niche risks, using more technology and data analytics to add value for their clients,” Turner said.
Christopher Gagnon, director of strategic technology at The Council of Insurance Agents & Brokers in Washington, D.C., said that brokerage firms and independent agencies have been focused on these issues for quite some time and have been trying to position themselves accordingly.
While direct models for insurance products may work for organizations buying standard business owner policies, some businesses will benefit with the expert advice of brokers and agents, Gagnon said.
Most brokerage firms that have mid-market and large clients have divisions that specialize in industries in which brokers have expertise in the latest exposures and insurance coverages, exclusions and limits that are appropriate for those industries, Gagnon said.
Brokers and agents need to be “a part of the transition to the digital model, and find more ways to interact electronically with their clients.” — Christopher Gagnon, director of strategic technology, The Council of Insurance Agents & Brokers
Most also offer value-added loss control and risk management consultancy services that would be much harder to obtain solely from online sources.
Still, he said, brokers and agents need to be “a part of the transition to the digital model, and find more ways to interact electronically with their clients.”
Full implementation of online capabilities that would enable brokers and agents to more thoroughly analyze, price and negotiate risks, however, needs the coordination of all of the players within the industry, including insurers.
“We’re part of a chain, and it’s hard to get the entire industry moving in the same direction in a cooperative fashion,” he said.
Wally Bryce, a director of business development for Arthur J. Gallagher & Co. in Tulsa, Okla., said that clients also like to work with brokers that can provide them access to all of the markets that can meet their particular needs.
“People want choice, and that’s what we provide,” Bryce said. “They also want someone that they can trust to help them navigate through the complex issues of insurance.”
Brokerage firms like Gallagher can also “play in the electronic digital world,” by building capabilities to serve their customers on both the transactional and consultative side.
“We can bring together all lines of business and the scale we can develop is going to be our advantage,” he said.
Swiss Re’s report also looked at advances in technology that enabled changes in insurance not only at the point-of-sale, but also “all the different customer touch points” — pre-sales, information gathering, advice, supporting sales and services and claims processing, she said.
New technologies within the industry could involve new Internet portals and mobile apps, as well as advancement of predictive analytics of customer information within “big data,” which insurers can use to enhance sales and marketing strategies.
“Previously, customers were put in buckets and analyzed according to segments, but increasingly individuals can be analyzed according to their own behaviors,” Turner said.