The Covid-19 pandemic has fast-tracked the use of digital solutions in broking. Insurance Times explores how digital shifts during the pandemic has opened up the market for new broker opportunities

The Covid-19 pandemic has forced a shift in digitalisation for brokers, which has opened up the market for new entrants.

Derek Henry, managing director of Brightside, told Insurance Times: “With the pandemic, necessity is the mother of invention. There is a real shift here, customers want to serve themselves digitally. Every broker is an entrepreneur.”

One example is Broadway Insurance Brokers, which caters to high net worth (HNW) and ultra-HNW customers. The broker launched during the pandemic with a mission to “change broking for good” while investing heavily in digital.

This new focus on digital can be seen across the HNW arena. Prior to the pandemic, there were few digital solutions due to the complexity and the individualised nature of risks that do not fit the homogenous model.

Meanwhile, as new brokers pop up, some have merged - like Alan Stevenson Partnership and Seacombe Insurance - to form a powerhouse. 

Insurance Times explores how digitalisation has opened up opportunities to new broker candidates, as well as changing how existing brokers do business. 

Henry stressed that brokers must innovate to keep clients. However, “if you want to be a digital broker, you need to have digital insurers”, he added.

“There is no point talking digital to a customer, if you can’t then complete the placement online. You need that for the next wave of digital insurers to really come alive.”

Mark Pierce, operations director of Criterion Adjusters, said that he believes the demand for digitalisation has been driven by the more “digitally aware” younger generation. 

He continued: “Covid has accelerated something that was going to happen anyway. It’s 10 years of progress in a year and when change occurs, those that are quick to adapt are more successful.”

Tony Sault, head of general insurance at EY, added: “The pandemic has impacted consumer and client demand in a number of ways. Perhaps most significantly through fears over financial wellbeing and loss of income, which has resulted in people placing greater emphasis on future financial planning.”

Innovation vs tradition

Ashwin Mistry, chairman of Brokerbility, agreed that brokers have evolved rapidly. Agreeing with Pierce and Sault, he said: “Customer demands [and] buying habits have changed. They expect speedy response times and will decide how they interact with suppliers.”

While Pierce stressed that HNW brokers cannot be replaced entirely by a digital solution, Mistry warned that any broker not reinventing themselves may fall prey to new entrants in the market.

Sault added: “In many ways the pandemic will shift consumer attitudes for good, so it’s crucial that the industry responds and acts quickly.

“Brokers and insurers must be bold in living their purpose - protecting individuals, families, business and communities against disasters and unforeseen events - and demonstrate the tangible value from their products and solutions.

“We believe those players who commit to strategic change during and after this crisis will emerge as the winners.”

Despite encouraging a commitment to innovation, Mistry also believes all brokers have a more traditional “significant advantage in their armoury” – relationships. 

Peter Blanc, Aston Lark’s group chief executive, explained: “In effect, what’s happened is that the pandemic has enabled us to go back to providing the traditional service that small, local brokers used to provide face-to-face and which, arguably, gave a much better outcome for customers.”

Pointing to the use of Zoom and Microsoft Teams changing communication with clients, Blanc said that this option means clients can have meetings with Aston Lark at their convenience.

Blanc said: “It’s an obvious thing to say but peace of mind is fundamentally what you are buying with insurance, so having a new mechanism of helping us to deliver peace of mind to customers is very welcome indeed.”

Wheels of a digital dream 

Roger Flaxman, principal consultant and chairman at Flaxman Partners, said it is a “racing certainty that the industry will digitalise every conceivable aspect of the insurance commodity.”

With the incentive of digital businesses to remove human intervention from the insurance lifecycle - and the insurance industry working from home as proof - he said this “will reinforce the confidence of investors”.

But while selling insurance can be done remotely, dealing with claims and meeting the public’s “reasonable expectations of insurance is quite another thing”, he noted.

Flaxman added: “That is where I believe the wheels will fall off the digital dream in due course and it is when the disruptors of the next generation of insurance folk will reinvent the ‘transfer of risk’ into something new.”

He deemed it a “risky venture” to put more distance and communication barriers between the insurer and policyholder when public trust is at an all-time low.

HNW digital boom

Risks in HNW are typically managed using a strong broker-led, concierge-type service rather than a digital approach - these products are not distributed via aggregators for this reason.

Criterion has been offering virtual visits for the past five years for certain claims, such as theft. But HNW customers “did not want it”, Pierce explained. Instead, there was an expectation for home visits.

During lockdown, however, these virtual visits really took off due to the imposed social distancing guidelines.

“In the first lockdown, it probably accounted for 70% of our visits. What has come out of that is some insurers, customers and brokers have claims of a certain type that we can deal with via a [digital] solution. But with the bigger claims, [you] cannot, you need someone there,” Pierce continued.

He believes that insurers are now looking at what types of HNW claims can be self-served digitally. “Ultimately this leads to more choice,” he added.

One concern Pierce had when thinking about a fully digital solution, however, is fraud, as “in an economic downturn, the amount of fraud goes up.” But, tools such as voice analysis can detect fraud at the first notification of loss, he said.

What new brokers have come to market?

South-Manchester based Broadway Insurance Brokers launched during the pandemic to cater to HNW worth and ultra-HNW clients. 

Meanwhile, Seventeen Group and German broker MRH Trowe joined forces to launch European Lloyd’s broker London Re, offering independent solutions for clients in the European Union.

W Denis Insurance Brokers PLC – a Lloyd’s of London broker - has created a new European-based insurance broking business as Brexit unfolds.

Peter Cullum-backed broker duo Alan Stevenson Partnership and Seacombe Insurance merged to form a Manchester “powerhouse”.

Why is the pandemic an opportunity for brokers?

For Ashwin Mistry, chairman of Brokerbility, “every crisis creates opportunities”, especially as the word “risk” has recently taken on a new meaning.

He said: ”In addition to covers, insurers have invested heavily in educating clients with gadgets that reduce risk, like LeakBot, fire detection alarms, security cameras, etc.”

Brokers have changed the way they communicate with clients too, having been forced to switch to digital methods such as video conferencing. 

Why must brokers and insurers continue to engage with customers during the pandemic?

Tony Sault, head of general insurance at EY, said: “Undoubtedly, both consumers and businesses will continue to face challenging economic times and it’s vital that brokers and insurers continue to engage with their customers and work with them to develop new products that will protect financial wellbeing and guard against future uncertainty.

“Insurers will need to provide truly customer-centric products and solutions that are tailored to evolving customer needs and budgets and deliver them through channels that reflect the switch to digital.”