Brokers face a tough year, but with the right strategies can triumph, Hughes suggests
Head of consumer Intelligence Ian Hughes has highlighted five key challenges for brokers this year.
Twenty twenty is “the year of roll-out” he said during Insurance Times’ BrokerFest 2020 event held in central London yesterday, citing direct insurers being ready to roll-out new systems which could considerably advance their business, including Direct Line which intends to ’re-platform’.
This will allow them to improve their rate-setting process, where they have been hitherto hamstrung by their systems, he said.
In the meantime, brokers are hampered by their legacy systems which will make it harder to keep up with the directs, Hughes said.
The second big area of change he foresaw this year was the rise of ’small’ business taking bites out of the market.
”Small is going to be big. Telematics was too small when it started to make a significant impact, but companies like [van insurer] Ticker and Bought by Many have proven that being niche is a fundamental competitive advantage”, he said.
He added that brokers should not despair though, as ”the customer still wants to do business with real people”. He said that brokers should not think about how to be as big as the likes of Direct Line, but how to get better at servicing customers.
Hughes also stressed that brokers should optimise their panels to price effectively for niche markets, adding that according to CI’s research, 53% of time brokers give the cheapest prices in the market.
The next hot ticket item is the FCA’s action on dual pricing. He reassured brokers in the room that as long as they advocate for the customer, they should have nothing to fear from the FCA’s impending crackdown on dual pricing practises.
He added that we are already seeing renewal prices comes down as insurers respond to the final report expected towards the end of the first quarter this year. The knock-on effect is that fewer people will shop around, which is bad news if a company is looking for a big acqiision strategy this year, he said.
Some of the proposed changes could be catastrophic for industry, Hughes added. Businesses found to be engaged in unfair pricing practises will probably be required to refund premiums, but as this money will have been spent already or no longer available, bankruptcies are sure to follow.
The fourth big change this year will be around ’culture’, Hughes said. The Senior Managers and Certification Regime (SMCR) which came in last year means that those who run a are business will be held personally accountable.
”If you want to be a customer-centric broker, the consumer will love you for the rest of their life. If your model is to screw them, the FCA will come down on you,” he said.
He said that customers needed to be treated fairly, not just to avoid risk to the business, but because “that’s a bloody good idea”.
The final major change on the way this year Hughes predicted was what he termed being “planet positive” - being more environmentally friendly.
There is a real demand for businesses to think about their impact on the environment, he said.
This poses a challenge for the industry. It could be doing things like issuing renewal notices etc. electronically and not using paper, or planting a certain number of trees.
Businesses need to find a way to make the environment more profitable for themselves, not more costly. Thinking ‘planet positive’ should be about reducing cost, not spending more, Hughes said.
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