Insurance brokers are some of the great innovators and pioneers in UK insurance. They bring an entrepreneurial spirit and are great at spotting new customer groups and serving them. But they are also a sector facing challenges about how to keep up with digitalisation, the ‘componentization’ of certain insurance processes, with challenges also about how to interact with new data sources that are going to be important for delivering personalisation. These were some of the themes that came out of the Broker Expo conference presentations this year.
In the conference there was a discussion around the Financial Conduct Authority (FCA) market study into how general insurance companies charge customers for home and motor insurance.
The FCA announcement refers to what it calls “consumer harm” in certain processes insurance providers are using today, with elements of “non-compliance” on the rules of transparency around renewals. Alongside launching the market study, the FCA has published a discussion paper on fair pricing in all financial services markets. The discussion paper sets out the FCA’s approach to taking consideration of fairness of pricing in general. The FCA said in a statement that it is aware that the general insurance industry is “taking steps to address concerns about pricing practices”, particularly referring to the issue of dual-pricing and quoting for new customers and renewing customers.
Customer knowledge is the heartbeat of the broker business
Many people are frustrated about what is going on in certain parts of the industry. There’s a challenge about how insurance portrays itself to customers, and how data is accessible and how it surfaces for quoting in different parts of the ecosystem.
For brokers, who are arguably the most customer-focused part of the whole supply chain, there is an opportunity be part of that rebuilding of trust.
Speaking at Broker Expo, Mike Crane, Managing Director at LV= Broker, said that better use of data is key to knowing the consumer better and building better propositions. In terms of shopping behaviour and the predominant mindset for customers looking at their protection needs, he said that insurance has become heavily commoditised. But it is time for change, and consumers are demanding it.
“Insurance isn’t something that should be sold alongside the phone companies or utility companies. It is far more important than that,” said Mike Crane. “But it is a brutally competitive market and will only get more competitive.”
“Fundamentally, the better the data, the better understanding we can have of our customers and build propositions around them, using the right data and in the right way,” he added.
“For brokers this is a key area of differentiation, to bring new insights and an understanding of customer needs. These are needs that are just not being delivered through price comparison sites…My belief is that brokers can respond quicker [to the market] and they can customise for smaller sub-sets of customers, compared to direct insurers. We have seen it in motor telematics, where brokers have really moved forward in that market, and in certain other customer-focused solutions.”
Telematics offerings, flexible, on-demand products, micro-insurance – and in future autonomous vehicles – are going to be seen as examples where the fundamental delivery and pricing model of insurance changed, becoming responsive to customer behaviour.
No transformation without disrupting the norm
“The future is going to be about more bespoke propositions for more groups and segments. So we need to be looking for those,” commented Mike Crane. “We worry about future technology such as autonomous vehicles changing insurance….Those changes are coming and there’s a tendency to say, ‘it’s not really going to happen that quickly’. But in reality when these transitions happen, they tend to move very quickly, like the shift from horses to car transport, which for the most part happened in less than 15 years.”
No transformation of great scale occurs without innovation, clear focus and significant change – or disrupting the norm – and the change that we are now entering with motor insurance will be no exception. Insurance will still be needed in future, and consumers will embrace it, only it’s likely to be delivered and structured differently.
“The environment is changing,” said Mike Crane. “But the solution as to where brokers go in insurance in the future rests with the brokers themselves. So often, the answer is not do with the big-scale, small scale solutions. It is about listening to customers and servicing the identified niche, deploying all the efforts and energy into getting that focus right. Our customers are becoming really, really challenging. Those propositions with just a broad view, and without that focus, tend to be the ones that struggle.”
In the consumer world, looking around at how people interact with Netflix, Uber, Amazon or the new insurance propositions like Ping An or Lemonade, taking six to nine months to make service changes is no longer acceptable.
There is an opportunity to use data to customise, and serve commercial insurance customers better, especially with SMEs and the tier of business just above the SMEs in size. That was another common theme from Broker Expo.
John Warburton, founder at Konsileo, the tech startup in insurance broking, said it is a big mistake to become fixated on the broker-to-underwriter interaction, losing sight of the end customer.
“Brokers innovate all the time. There’s just so many niches and so many levels, there’s still so much room for innovation if you have the technology to support it,” he added.
“If we think of our industry as being fundamentally about data, with the relationships running around that, it’s really the way to solve problems for the customer and prepare for the future,” commented Simon Harrow, Head of Digital Strategy & Innovation, IGO4.
“The price of change and technology is going up,” said Alan Thomas, Chief Commercial Officer at Simply Business. “One is going up fast and the other is going down fast. So there is so much for brokers to get stuck into. There is a data element in all of this. Brokers need to understand what information we are sitting on.”
It is a collective challenge for all of us – brokers, the insurers and risk carriers, data aggregators like ourselves – to see things through the lens of the customer. There’s a lot of complexity between the price comparison sites, the software houses, data platforms, the ratings engines and getting the delivery to the customer. In some ways this complexity makes for slower changes, and it’s a big area of focus for us at LexisNexis Risk Solutions, with a purely data agnostic approach, delivering a single point of access to the ecosystem and to our data enrichment solutions.
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurers.