Wired for the future

Brokers are facing so many challenges in the current market that it is a challenge itself to list them all. But the Insurance Times survey of senior executives in the broker market highlighted the key issues raised by brokers themselves.

Within the personal lines market, things are becoming difficult for the broker. The two main reasons are well catalogued: competition from direct companies and the rise of the internet.

In many ways, the use of the internet is synonymous with direct providers. But the challenge of the internet is among the wider challenge of technology. And Tim Rankin, managing director of WNS Assistance, a motor insurance claims management specialist, which numbers many brokers among its clients, says brokers have to meet the challenge of technology for the benefit of their businesses.

"One area in which brokers may be said to be slow in appreciating the advantages of technology for their business is where workflow systems are ' 'concerned. With FSA compliance such a massive issue for brokers, they need to invest in a single IT platform in order to ensure that client information is readily to hand, particularly where complaints are concerned, and workflow technology is key here."

This involves the application of process management software. Rankin says that it is proven in its efficiency over many years in labour-intensive procedures where many documents are involved, such as with the management of insurance claims.

"Brokers often confuse workflow technology with automation, which is why they are reluctant to take it on. But the two are very different. Workflow is all about quality control, automation is all about quantity control. The one is all attention to detail, the other mass production."

Simon Burgess, managing director of British Insurance, agrees that brokers should be using more technology. "Brokers can get the type of technology they need for less than £1,000. Brokers should view using technology as an essential part of their business to stay ahead of the direct writers."

Within commercial lines there are also pro-blems. Brokers highlight that many schemes are under binder arrangements, which means that clients get approached for massive reductions in their premiums. "On this one I feel that the people taking on the business don't heed underwriting principles. Nor do they give a jot about previous claims," says one broker.

The irony is that the industry has educated the public to shop around for lower prices.

"Personal lines and small commercial will drift to direct online distribution as we do not add significant value to make the additional cost with us worth paying," says one depressed broker.

Competition from other brokers is also forcing premiums down in the soft market. "We are retaining business but reducing commission income," says one broker. "Retention is very difficult, as one would expect in a soft market, with the only harder job being obtaining new business."

Quality service
But there are opportunities for well-managed broking firms to exploit. For many, close client relationships and top quality service are the lynchpins of their business plan.

Mark Grice, head of Mazars' broking group, says: "For the broker to win and retain business it needs to match the perceived service quality of the retail brands. It needs to focus on being more innovative, and should not wait for renewal time to come around before talking to customers. Brokers always add value where they can match client knowledge and product knowledge, either saving the client money or by obtaining better coverage for the same price."

The good news for the broker is that there are still clients willing to pay a premium for personalised service and professional advice.

Getting new business in a market where there are so many players means innovation and having a good marketing operation. "This usually means that the big corporations corner the market on brand awareness and we increasingly have to find niches to fill. Fortu-nately UK brokers are good at that," says one broker.

"In a soft market, personal relationship are absolutely paramount to securing renewals," highlights another.

Some of the brokers surveyed focused on the mediocre calibre and training and the high turnover of front line staff they had to deal with at insurance companies. The key is developing good relationships at various levels in the company.

"In most cases there are not enough decent people to go around," says one broker. "If you can develop a relationship whereby your inquiries get looked at first, you are going to fare much better.

"Very often, the most important support an insurer can offer is that of a named contact on the end of a phone," notes Rankin.

Jon Houghton, head of Endurance's UK individual risk property team, says some insurers are failing brokers on this one-to-one level. "People make organisations and brokers need that connection with particular individuals. That is what makes relationships work between insurers and brokers.

"And when people move on, some insurance organisations are too big in size to realise the impact this will have. Brokers do need quality people to work with in this relationship."

Which raises wider questions about training and development within insurance companies.

But the news is not all bad. Brokers could be set for a resurgence within the motor market but they will have to adopt modern marketing techniques to do so, claims Defaqto.

According to analyst Defaqto, the rise in importance of web aggregators, sites that collect data on premiums from large numbers of insurers, has given brokers an opportunity to be featured on these sites and increase their exposure.

But to be successful, they will have to leave the traditional image of the broker behind and embrace electronic marketing.

Brokers hoping to profit from the huge increase in purchases of policies over the internet will have to have attractive websites, be able to provide online quote and purchase facilities and be large enough to negotiate specialist schemes.

Reputable brand
Even without the exposure on aggregators' websites, brokers can compete effectively in the market provided they establish a repu-table brand. In addition, with cost domina-ting the marketing messages from all the large insurers, brokers might be able to establish themselves as the place to go for information on specific cover options.

Brian Brown, associate director at Defaqto, says: "It is interesting that the direct insurers are now suffering from the web aggregators in the same way as brokers suffered from the direct writers a few years ago.

"However, brokers should be able to carve out a niche for themselves in the market by offering an internet-based service as well as a service proposition that purely web-based writers could not offer."

Brokers should seize the opportunities on offer.