Thriving in a digital world

We are currently in the middle of the so called fourth industrial revolution where technology is taking over the world in a major way.

While we tend to feel safe in the insurance industry resting on the fact that a human element will always be needed in the insurance value chain, we cannot get complacent. If today’s brokers wish to succeed and flourish in a new economy, there has to be a significant shift in their operating methodology as the world becomes more digital.

More and more of what we do as members of society, consumers and business people is enabled - and in some cases challenged - by the vast flood of data and the changes in the way we interact daily.

Quick out of the blocks

We are all aware of the pace of change. Research by PwC shows that around 70% of consumers carry out some form of digital research before buying insurance and over a quarter of people buy their policies online.

Customers are better informed and more connected every day, and their service expectations are ever more demanding and sophisticated.

The practical challenge for brokers is to work out what all this change means for their customers and their businesses. A more digital commercial and corporate landscape - which mirrors the transformation that is taking the personal lines world by storm - is seeing different buying behaviours from consumers who are more aware of the need for cost effectiveness coupled with transparency, ease of doing business and faster turnaround.

Top score for agility

Insurers who can adopt a flexible, agile and simple approach to meet the demands from this new generation of purchasers will be far better positioned to accommodate and benefit from this change.

The broker of the future will still need to deliver a differentiated customer experience and engagement strategy that puts the customer at the heart of everything they do. Brokers will also need to look at their own staffing. The reality is that insurance is being consumed by younger and younger consumers, but still serviced by an older broker market. There is a distinct cultural divide.

The product relay team

When it comes to products, the greatest shift will be around the insurance of digital assets as opposed to material assets.

At present, the lion’s share of corporate and commercial insurance premium is paid for the protection of physical assets; and until recently, there has been no real effective cover for digital assets or liabilities.

The arrival of Cyber Risk protection in the local market has certainly sparked in interest amongst large insurers, but currently the take up on this class of cover is relatively slow. Many businesses today operate without the use of physical infrastucture and rely purely on data, connectivity and communication applications to generate substantial profits and value.

Cloud computing has enabled a totally different kind of operating model, and companies are soon to realise the shift from physical risk exposure to cyber risk exposure.

Clients are also no longer just interested in a pure product solution; they want solutions that directly address their business challenges. The question remains – will the insurance broker of the future manage to get this right?

No specialisation

Few brokers will be able to specialise exclusively in one of these disciplines as clients still prefer a one-stop shop. However, there needs to be an element of understanding of all new and emerging risks.

Will we see further industry consolidation? This may really only happen amongst the larger brokers who are all looking to increase value and reduce cost per transaction. This obviously comes from repeatable, high frequency, low value transactions typically found in the commercial sector. We would be surprised if there was that same appetite in the corporate bespoke space.