Larger brokers continue to consolidate to gain scale and efficiency and address growing client needs for products and services across geographies. Wholesalers and insurers are more selective about which brokers they work with. Regulation caps consolidation at the top end of the market and adds mandates that require investment and cut into profitability. These pressures are driving the need for further process efficiency.
Demonstrating Value
In addition to transactional services (e.g., acquiring coverage for their clients), large commercial brokers provide claims management services, design of programs, and loss mitigation consulting, as well as specialized services like access to alternative risk transfer solutions or advice on establishing captives or risk retention groups.
Brokers need to demonstrate their value to insurers by identifying high-value prospects and bringing business to them (and to the prospects). Brokers also help clients identify their loss drivers and mitigate or prevent risks in addition to seeking the best coverage at the best cost and addressing potential coverage gaps. Winning prospective business presents two continuing challenges: obtaining enough data for underwriting purposes (without imposing undue burdens) and working with a range of non-standardized insurer and distributor forms and processes.
Automating Processes
It can be a complex undertaking to automate broker processes. Brokers can use multiple broker management systems and can work with multiple insurers, each of which may have a different workflow. Renewal applications for management liability and cyber lines tend to change every year as the market evolves with new lawsuits and new technological advances, respectively, which can be a burden for brokers to automate.
The process of purchasing commercial or specialty insurance can involve multiple parties, including policyholder clients, retail agents and brokers, wholesale agents and brokers, technology companies with agency licenses, and insurers. Lines like commercial auto fleets and property can feature spreadsheet attachments containing schedules of vehicles and drivers or properties with a long list of captured data; it can be difficult for organizations to standardize data formats and automate transmission.
Adapting with New Technologies
Younger brokers and prospects expect mobile support—24/7 staff and insured access to insurance information via smartphones and mobile devices. Brokers are prioritizing marketing and customer engagement capabilities to win, serve effectively, and retain clients. They are also pursuing product development, claims, and underwriting capabilities to a lesser extent.
Large commercial brokers, particularly the top-tier brokers, already have substantial consolidated data from their clients, which they use to benchmark coverages and rates and provide loss mitigation and prevention suggestions. Brokers can provide insurers with detailed market data to identify product and market segment opportunities. Brokers may pursue other opportunities with insurers and clients to monetize insights from that data. Novarica has talked to several brokers that are selling data to insurers or plan to.
APIs for Communication and Distribution
Brokers prefer communication and data exchange between insurer systems and their broker management systems to automate client servicing, improve market access, gain efficiencies, and eliminate manual processes. As noted in Novarica’s Emerging Technology in Insurance: AI, Big Data, Chatbots, IoT, RPA, And More, brokers often request comparative pricing or appetite indications via external API calls to insurer core systems. APIs and microservices have also enabled externally facing insurer systems like customer and agent portals or smart assistant capabilities. Insurers have widely deployed external APIs, with some planning to pilot capabilities in this space.
Broker adoption of cloud-based solutions enables them to offload business continuity, maintenance, and security while improving performance and scalability. Cloud-based solution adoption also allows brokers to integrate with existing cloud and SaaS solutions (e.g., Salesforce) and consolidate on a smaller number of platforms. Novarica has seen retail brokers integrating insurance underwriters via distribution APIs, more so for smaller commercial business that ACORD-based interfaces can support. Brokers are monitoring blockchain as a potential solution to transferring data via multiple workflows with multiple participants (e.g., insurers, insureds, MGAs or MGUs, retail brokers, wholesalers).
The Future for Digital Brokers
Digital Distributor deals still dominate InsureTech investments, but newer InsureTechs have emphasized broker enablement. Many digital brokers target the small business market over large commercial—but these digital brokers are in a prime position for growth as the gig economy expands. Their capabilities may start to match the large commercial appetite in the next few years as risk management practices and technology evolve. Some digital brokers cut out wholesale distributors and work directly with clients and insurers.
Top technology priorities include automation and digitization of processes between large commercial brokers, insurers, other brokers, and clients; data and its analysis, including benchmarking of rates and coverages, employing predictive analytics around loss frequency and severity, and AI and machine learning for identifying prospects; claims monitoring and analytics to help clients identify trends and high-impact claims and mitigate losses; and monitoring, partnering with, or acquiring InsureTechs to gain analytics, automation, and sales and service capabilities.
For a more in-depth look at the trends in this space, read Novarica’s latest report, Business and Technology Trends: Large Commercial Brokers.
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