The insurance industry is set to be swept aside in the next few years as internet-based e-commerce brings about the biggest shift in its history. So says a new Financial Times report published this week – "Insurance Broking into the Year 2000".
Author John Jackson says e-commerce will lead to a new type of insurance service provider – the e-broker or infomediary. Brokers will become "virtual insurers" and develop their own products, taking on many of the tasks of the insurer, whose role will be largely restricted to that of capital provider and risk taker.
The changes will see a substantial number of brokers exit the market – possibly as many as a third of the current numbers – either through merger, acquisition or retirement.
According to Jackson, traditional insurance broking will be replaced by risk management and consultancy customer-focused services. Customer relationship management will become paramount. These companies will cease to call themselves "insurance brokers" and insurance will play a gradually declining part in their service provision.
Other key findings in the report are:
- towns will be dominated by one or two brokers, with a network of broking firms operating under a central banner in a region, or brokers will operate through membership of a marketing group
- brokers will work with fewer insurers – perhaps placing all their business with one insurer or a small panel of insurers and building lasting relations with them
- annualised commercial insurance premiums will be replaced by multi-line, multi-year risk management portfolios. Commercial brokers will change from being commission-based to becoming professional fee earners. Personal lines business will move to net rates
- brokers will become multi-channel, offering face-to-face, telebroking via call centres and e-commerce services. They will provide these different channels to different types of customer. Many will become highly specialist and offer more affinity and scheme-based niche products
- Brokers will become much more professional and entrepreneurs with MBAs, rather than insurance-qualified technicians, leading the new broking firms.
The predictions are balanced against an appreciation of the sector's conservatism. Says Jackson: "Business planning and marketing are areas of notorious weakness amongst brokers, but they will have to embrace these business specialisms. The whole psyche of the industry must change and that includes the price-driven mentality, which is suicidal."
Jackson's words were backed by Colin Ryan of Ryan Insurance Group. He said: "Brokers need to get to grips with technology, the processes behind it and customer culture. Internally, brokers have to ensure their marketing people can access the sales figures and monitor conversion rates.
"I think there's a huge market for the insurance broker of the future – as long as the insurer is prepared to work together in a seamless way."
l See Leader, page 4