A new-look insurance broker will emerge in the 21st century, according to John Jackson, the author of a report on insurance broking in the year 2000 and beyond.
He adds that those which fail to adapt – up to 30% of the current number – will leave the profession.
The infomediary, or e-broker, will recognise the huge potential of the internet to revolutionise insurance. These virtual brokers will be customer-focused, cutting costs, sharing resources and developing and marketing new products.
Jackson says: "It will be quality business, not quantity that will decide who are the 21st century insurance winners – brokers and insurers alike."
An example might be Kent-based insurance broker Towergate. The high-tech broker aims to "fill the void between insurance companies and intermediaries and create a virtual insurer".
It does this by providing a full administration and underwriting system through its own software company – Compleat Solutions.
But Jackson warns that too many brokers see the internet as too expensive or low priority and are in danger of being left behind.
Another worrying gap is developing between those brokers with strategically-planned business plans and those which simply operate day-to-day.
He spells out the four basic problems facing brokers wishing to survive into the next millennium:
- Unhealthy preoccupation with selling price
- Failure to embrace marketing
- Slow pace of adopting leading-edge technology
- Lack of general business skills.
He says: "Insurers have expressed concern that there is an alarmingly high level of outmoded thinking and a resistance to change among brokers, however clear it may be to the market as a whole to embrace new thinking."
He concludes his critique by predicting that up to 30% of brokers could be forced to leave the market – through retirement, acquisition or merger – within the next few years, if they fail to seize the challenges of the 21st century.
However, brokers contacted by Insurance Times criticised Jackson for being too quick to write the obituary of the traditional high street broker.
Nigel Adams, Cardiff-based BIBA representative for Wales, says: "There will always be a place for the small broker who is able to deal with customer needs face-to-face. It should not be forgotten that brokers provide independent advice and access to a larger source of insurers than direct writers."
He adds: "The problem with the net is that it is fine for requesting a quote, but when a customer has a claim he can find he has no broker to fight his corner. Brokers are available to give claims advice and talk their customers through the procedure."
Another issue for Adams is that internet use has not yet penetrated the whole of society.
"Not everybody has access to the web to buy insurance. This leaves out a great chunk of society, including many people who are price conscious."
The high street broker, he stresses, is invaluable to these people in filtering out unwanted or non-independent advice from insurers.
Gerald McCarthy, a partner at Prestige Insurances in Kent, also remains to be convinced of the internet's challenge to the broker market.
"Direct writers are a bigger threat than e-commerce," he says.
McCarthy reasons that many brokers are already working with new technology in the form of full-cycle EDI – which is just one step behind the internet.
His concern is for those brokers who have not even reached the EDI stage.
"If they have not got EDI it's probably because they have a serious phobia about new technology."
He also feels the internet has serious limitations, particularly in the case of motor policy forms, which can involve very detailed questions. "E-commerce is great for retail, but not for selling complex financial services," he says.
McCarthy believes it will be some time before insurers offer a full policy administration service on the internet. However, he believes the internet comes into its own as a brilliant marketing tool.
"Brokers will have to engage with e-commerce but this involvement is currently limited to attracting business. The internet gives brokers access to a potentially huge audience," he says.
As for Jackson's prediction that brokers should be more akin to business executives than insurance experts, McCarthy gives the idea short shrift.
"Brokers must be able to offer independent advice. And they have got to cross-sell as much as possible in targeting every market. But that person must be an insurance expert, not a businessman."
