Digital Past

The original dotcom boom started 25 years ago and laid the foundation for many of the things we take for granted today. At the time many established businesses were unconvinced of the need to adapt; Microsoft were famously slow to react, believing that installed programs, such as their Office Suite, would remain the norm. Even Bill Gates book The road ahead, published in 1995 didnt contain a chapter on the internet until it was revised in 1997.

General Electric, under the leadership of the controversial Jack Welch, were similarly late to realise the potential of digital transformation, but the inroads that the newly formed Amazon were making on Barnes & Noble spurred Jack into action, launching the Destroy your own (DYB) initiative in 1999.

All business leaders within GE were challenged to explore how the dotcom market entrants could destroy their established businesses and were encouraged to disrupt their own enterprises before someone else did.  The opportunities uncovered by DYB quickly became apparent and DYB evolved to GYB Grow Your Business. GE quickly become its own disruptor, opening up new markets and opportunities, and in 2002 the initiative became mainstream strategy.

Both Microsoft and GE were late to the dotcom age, but with strong leadership and commitment to change were able to re-focus their organisations. The digital native bookseller Amazon went on to revolutionise not only the high street but also the fundamentals of computing.

Digital Present

So now, 25 years on, and arguably in the second dotcom boom, what lessons can we apply to Insurance Broking?On first pass, nothing much has changed; a broker from 25 years ago would quickly feel at home in a broking house of today. There may be more stringent regulation, and faxes have been replaced with emails, but the day to day placement activity is fundamentally the same.

So does this mean that Insurance Broking is immune from change? Clearly not. Almost every other financial profession is undergoing rapid transformation. Neo banks in the UK are winning customers from the high street banks at a terrific rate by focusing on customer needs & convenience; stocks and shares are tradable by Joe Public at minimal cost on platforms that provide more data & analytics than was available to stockbrokers just 10 years ago.

The gap between the now of insurance broking and the art of the possible is growing rapidly and the opportunity to disrupt is becoming increasingly attractive to outsiders. Technical & innovation debt needs to be addressed across the industry, and there are signs that this is finally gaining momentum.

In their Q4 2019 Quarterly InsurTech Briefing, Willis Towers Watson tracked InsurTech Investment at a record $6.37bn in 2019.  Over half of this investment (57%) was in distribution or MGA platforms.

We saw Aon acquire digital broker Coverwallet in the US; Victor, MMCs MGA set up its own syndicate, and of course the iconic Lloyds of London published its vision of a market of the future, with two new API-enabled exchanges to handle complex and smaller commoditised risks.

Has the revolution finally begun?

Digital future

It is essential that brokers assess their future value proposition to ensure they remain relevant in a disrupted marketplace. Proximity to Lloyds and a feel for the market will be rapidly replaced by trading platforms and data analytics.

Digital transformation is not simply applying technology to what we do today to make it faster & cheaper. It requires a fundamental re-thinking of the value chain.

Digital transformation is likely to drive all but the largest brokers to specialise. Some will excel at agile product delivery, portfolio management & analytics; others will develop deep domain knowledge for specific industries, building, integrated propositions where insurance is just one component of the overall solution to the expanding exposures their clients face.

Capabilities that are considered to be best practise today will soon become the entry point. Data science and real time predictive analytics will be integral to the value proposition of a broker of the future. Mobile, portals and API-based data flows are to be the bread-and-butter of the new generation of brokers.

These Neo Brokers will be comfortable partnering with broader eco-systems of suppliers to deliver their client focussed solutions. Drones, IOT sensors, hyper-spectral imagery, public & private data sources, telematics and parametric triggers will all be combined into innovative solutions to service clients needs.

So, whilst the insurance broking industry has not been at the forefront of adopting new technology, the next few years will see a rapid transition to new and evolving models, partly driven by InsurTechs, partly by DYB initiatives from the incumbents.

The broking landscape of the future is likely to look very different from todays. Time will tell who the winners & losers will be, but can you afford to be without a plan?