The net changes everything – or so the saying goes. But what about the role of the broker? New technologies are changing apace not just because of the ways by which brokers go about business, but also the business opportunities that now present themselves.
The traditional role of the broker varies according to perspective. For clients, the broker designs, sources, and assists with optimising, risk management and risk transfer (primarily by sorting out insurance needs). His unique selling points are a wide choice of product and service providers; independent, professional advice; and competitive panels of insurers. For insurers, the broker provides a cost-effective conduit to market. And for shareholders, the broker (hopefully) makes loads of money.
What about the electronic environment? It too merits redefinition because for business-to-business trading, the broker software solutions of the last century are history. With insurers, EDI never progressed very far, and with clients, it was stillborn. EDI is withering on the vine.
The net, on the other hand, breeds connectivity. Nevertheless, some insurer systems are notoriously closed, cumbersome and costly. The way forward is marked by open, net-based front-end applications that feed insurer back-office systems.
For client trading, the net has opened up a new set of capabilities: direct, client-controlled enquiries and transactions, as well as lower cost, more versatile, future-proofed, office-based solutions for brokers. The net is also a cost-effective platform for marketing and cross-selling.
There are, perhaps, three types of broker:
The first two categories make up the Winners' Club. This is what inspired the Institute of Insurance Brokers to establish insure-right as a broker-owned facility for etrading.
I submit that in this new electronic environment, the role of the broker has not changed fundamentally. But in the future, it will be fulfilled using net-based technologies that enhance services, slash costs, and expand horizons. The potential for the sector is huge, but competition within will intensify. The pickings belong to brokers who seize the initiative and deliver the goods.
Brokers must retain control of their destinies and beware software providers and insurers “bearing gifts”. Brokers who become trapped by software companies that suck away their lifeblood while failing to deliver leading-edge solutions, will fail. Brokers who surrender their independence and their clients to insurers will fail. Insureright addresses these issues quite specifically – through broker ownership, external software contracts, and open access to insurers.
To profit from this environment, the channel must reduce the costs for broker and insurer, expand the range of products and services, compete on convenience (à la TESCO) at the client's home/office/wherever, 24 hours a day every day.
In effect, brokers must become multi-channel and must address each chosen channel on its merits. The local brand – already established – is key as ecommunities develop, based on “bricks and clicks” presence and ecommerce relationships. Local brand awareness will support conversion rates; new systems will breathe life into client relationship management; and joint ventures will make targeted direct marketing affordable. The big brand dot com ebroker is a high-cost, high-risk venture that makes a poor model for smaller or specialist brokers since the marketing budgets are not sustainable.
Much is made of the significance of a far-reaching consumer brand in the world of e-business. The intermediary will disappear as customers flock to major brand sites, we are told. But the American experience, as econsumption matures, is rather different. Reintermediarisation is the vogue. Even the big boys cannot survive without partners and introducers at every level. Key is the value added by the intermediary. The innovative broker is likely to be the most effective aggregator of value-added products and services – and to enjoy recognition and trust within his chosen markets. Esolutions are infinitely scaleable so smaller players can also prosper on their wits and enterprise.