Insurance brokers face threat over skills, competition

The market space is changing and consumers of insurance are more exposed, requiring specialised services. What this means is that insurance brokers would have to double their efforts and quality of service delivery to get consumer buy, analysts have said.

Brokers looking to stay competitive therefore will need to take on more of a risk advisor role in the market, according to a new report from PricewaterhouseCooper (PwC).

Not doing so means brokers may lose business to special risk advisors, PwC says in its report, Broking 2020, which is based on a survey of risk buyers (CFOs or heads of risk) from multinational organisations.

Respondents to the survey suggested that traditional approaches may not be sufficient in the coming years, and that consulting with a wider group of advisors – outside of traditional brokers – for speciality advice may be better “Less than half of those surveyed identified brokers as a solutions provider,” PwC notes.

“This is particularly true for emerging risk such as cyber security, data and supply chain risks, where risk managers said they would look primarily to industry groups and carriers to develop the solutions for these risks. This is a worrying trend for the broking industry as these are also the risks that organisations place highest on their risk agenda.”

In addition, almost three quarters of risk managers said they want analytics to help in their decision making regarding new and emerging risks, but that many brokers don’t have appropriate or sufficient services in this area. For example, less than a third of respondents said they were “very satisfied” with brokers’ analytical and modelling services.

Brokers who can develop advanced risk and loss analytics and who can capitalise on big data analysis will be poised for more success, according to PwC.

Survey participants noted that risk analysis, developing shared technology between client, brokerage firm and carriers, and loss analytics were the top three things brokers can do to assist them on a more efficient basis, the firm noted.

Overall, PwC suggests that brokers should: Adapt their business models to simultaneously support cost-efficient standard risk management and be seen as knowledge-intensive risk consultants.

Expand their information gathering network to better anticipate and understand the new and emerging risks facing their clients

Improve their ability to collect, integrate and analyse data to create new solutions – shifting to more of an analytical/consultative broker.

“This is crunch time for some in the broking industry,” Rich Mayock, global insurance brokerage leader at PwC, commented in a statement.

“Brokers’ clients’ expectations are changing faster than ever, with risk managers looking for consultative partners who have the skills to both identify and develop solutions for the changing risk landscape.”

“Brokers may be first choice to take on this expanded risk facilitation role, but they are not the only choice in all cases,” he also noted.

“Given the rising demand for risk advice, other speciality advisors are vying to take on this risk partnership role. If some market players don’t adapt their businesses to provide the services and expertise their clients now want they could face increased competition for this valuable new business.

“For some brokers this will require a shift in mindset from hindsight to foresight as they evolve from being simply placers of coverage to preventative risk advisors and managers.”

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