Brokers Under Pressure To Maintain Relevance in Changing Market

Streamling of technology and processes and moves by insurance companies to have more direct relationships with their clients are likely to impact substantially on the role of insurance intermediaries, or brokers, who will have to concentrate on adding value to maintain their relevance in a highly competitive and rapidly changing insurance market..

This is the view of Emile Pepermans, a director at Johannesburg-based business performance improvement firm, Ovations, which has assisted several insurance companies to upgrade their process-driven back offices to give them a horizontal rather than a vertical view of their customer profiles.

“The gap between insurance companies and their customers is collapsing as insurers increasingly reach beyond brokers and develop more personal links with their customer base,” says Pepermans, implying that brokers will have to critically focus on adding value and differentiating their service delivery.

“Judging by the way the market is changing, brokers will need to respond to pricing pressures by focusing heavily on understanding their clients’ needs more fully so that can wrap value-added services into packages under one umbrella.”

Importantly, adds Pepermans, brokers will have to embrace different value-added models, including improved risk evaluation and collection and interpretation of data. He believes the profitability of brokers is coming under pressure from the growing ability of insurance end-users to do their own pricing and arrange and maintain their own cover directly with insurers.

“Brokers are getting squeezed on the profitability and services fronts so it has become vital that they place a strong emphasis on listening to their clients and building up portfolios of risk services,” adds Pepermans.

Another unfolding trend which is set to have an impact on brokers, he says, is for insurance to become much more web-based than it is now, following the lead of the banking industry where internet banking has become a dominant factor in transactional banking.

“A few years ago, internet banking was on the fringes, now it is absolutely core, used by most people and companies with regular access to a computer. I think the same will happen with insurance and many other services which have not yet fully embraced the advantages of technology and processes,” says Pepermans.

While the personal insurance market has become quite “cut-throat”, he sees the commercial arena becoming the next big battle ground in the insurance market. This market is highly specialised and requires experienced underwriters, actuaries and industry experts to ensure that appropriate underwriting and premium pricing decisions are implemented.

“Brokers and insurers need an intrinsic understanding of the commercial insurance areas they are involved in as the risks are much higher and more complex and varied than in the personal insurance sector,” says Pepermans.