As the UK and global economies face record inflation increases, it is interesting to note that the insurance market got there first. Rising premiums have been a fact of life ever since the world began to come out of lockdown.
While this is perhaps a much-needed correction after years of under-pricing, it is of course putting brokers under pressure. Whenever there is a hard market, brokers are forced to demonstrate their value in a world in which ‘intermediary’ is increasingly becoming a dirty word.
With rising premiums increasing costs on top of general inflation, clients will be looking to contain expenses. So how can brokers increase their value to clients – and prove it?
The need to demonstrate value
With the FCA’s general insurance pricing reform coming into effect in January last year, the impact has been far reaching – much more so than many realised. However, the emphasis on all parts of the value chain – including brokers – to prove that they are providing fair value to customers, is actually a potential benefit.
Why? Because in a hard market, brokers who can prove that they offer value are at a competitive advantage. Now they have to prove it for regulatory reasons too, so the question becomes not whether they should, but how. Technology can provide the answers, but more of that later.
One area of concern for some is broker schemes, which typically provide cover that is tailored to address the specific needs of a certain demographic. Schemes need to demonstrate that all its policyholders are benefiting from fair value. Similarly, each new client policy now needs to be re-marketed as new business. This is a change of approach for many (perhaps most) brokers and increases the volume of administration associated with each client.
FCA rules – a burden or an opportunity?
Granted, the FCA rules have added to the regulatory toll for brokers, as they involve significant reporting and data processing. Forward-thinking brokers, however, should take advantage of this. If not, the costs of complying with FCA rules will become increasingly punitive as time goes by.
Brokers who look at automating and improving their processes with an end-to-end, cloud-based platform can massively reduce costs in the longer term. Not only that, but those brokers would also be able to prove their value to clients – an invaluable feature in a hard market.
Deploying a leading end-to-end software platform will reduce the manual processing associated with any kind of reporting. The platform automatically captures the data and surfaces relevant insights in real time. It also makes it simple to create bespoke reports for each client account, since it will automatically log every policy and resulting action. This enables brokers to track, report, and justify their remuneration because they can evidence the time and effort spent serving client needs.
Similarly, this allows brokers to monitor distribution channels, such as delegated authorities, binders or facilities. Brokers can audit these channels in real time, enabling them to assess the fairness of commissions or set fees for administration.
Becoming fitter and leaner
When game is scarce on the east African savannah, it is the lions who are leaner and fitter that have the advantage. It’s the same in business.
A modern cloud-based system helps brokers to benefit more widely from process efficiencies. Such a system reduces re-keying, automates common tasks, and captures meta-data to provide beneficial insights to the users.
Brokers need to think holistically about their future trading needs and consider using a platform that is evergreen and will not limit future innovation or growth. In other words, they need an agile and customisable platform that can scale with their business.
Growing the business by providing and proving value
Adopting such a system also acts as a catalyst for brokers to review the way they do business and where else they can improve efficiencies, generate more revenue, and grow the bottom line.
With cloud-native, data-driven insurance platforms (like Novidea’s Insurance Management Platform), for example, brokers such as Marsh, HIBL, Howden, and SRG have been able to get a 360-degree view of the customer and other stakeholders.
This enables full integration between customer-facing policy front-office transactions and the middle- and back-office with straight through processing. This means that brokers can extract more value from their customer and policy data with actionable intelligence from any device, anywhere.
Turning data into actionable insights. Enabling better-informed decisions. Delivering greater value through the selling of new products and services.
In a world that increasingly values value, doesn’t it make sense to be able to provide and prove it?
(First published by London Market Forum, February 2023)