Does the age of technology, social media and comparison websites signal the end of the line for insurance brokers? Have Covid and social distancing put paid to the relationship, as consumers and businesses increasingly rely on online services and have come to expect near-instant delivery?
If the answer to these questions was “Yes”, this would be a disappointingly short article. In fact, the challenges raised by these factors are opportunities for insurance brokers to embrace new technologies and discover new markets. Entrepreneurship and the gig economy are bringing new entrants to the market for insurance cover. Many people have little or no experience of insurance, beyond arranging car, home or travel insurance.
Comparison sites have improved competition in many areas and are ideal for homogeneous products such as gas & electricity, where it is literally the same stuff in your pipes and sockets. However, there’s a danger that more complex products, such as insurance, can become “commoditised” and that consumers will buy on price rather than cover.
What insurance brokers offer is a different commodity – peace of mind. This is especially the case for small & medium-sized enterprises (SMEs), where insurance can be seen as a tedious-but-necessary distraction from the daily cut-and-thrust of meeting customer demand. “Insurance” is probably tacked-on to somebody’s job description, as an afterthought. Another boom area, partly driven by lockdowns and partly by the ready availability of smart technology, is start-ups and the so-called gig economy. These businesses may have only a vague idea of what insurance cover they need and no idea of what to look for in terms of cover features. If only there was someone who could advise them … !
Traditionally, insurance brokers acted as go-betweens, advising clients on cover requirements and policy selection from a range of insurers. Their remuneration was by commission from the insurers whose products they sold. Also traditionally, insurance brokers tended to operate business hours – Monday to Friday, 9.00 ‘til 5.00, and a Saturday morning if you were lucky.
Both of these features began to attract criticism. There was often evidence that products had been recommended because of attractive commission rates, rather than suitability for the client’s needs. The office hours model was also falling out of step with the increasing flexibility of consumers’ lives. Declaration of commissions solved one problem, but, like squeezing a balloon, another problem popped out somewhere else – the feeling that insurance broking was “money for old rope”. Brokers collected their commission even in years where their only task was a straight renewal. Websites and technology such as chatbots and AI helped with accessibility, to a limited extent.
Then along came another new kid on the block – usage based insurance (UBI) for some classes of cover. Lockdown didn’t cause UBI, but it definitely boosted its profile, as drivers realised they were still paying full whack premiums whilst enduring very restricted use of their cars. Many insurers volunteered flat discounts to policyholders and others asked for mileage data to calculate refunds.
Hubb have brought the UBI model to broking – Honest Usage Based Broking. Consumers already familiar with menu-based servicing of their (underused?) cars can now access menu-based insurance broking. Clients pay only for the services they need, and enjoy round the clock access to their insurance policies and data. Transparency is one of the keystones of the Hubb philosophy.
As we ease out of lockdown, insurers are warning that temporary extensions of cover and relaxations of policy conditions will be ending. It’s important for policyholders to ensure that their activities and “new normal” routines comply with their policy terms & conditions. Side hustles may need to be declared or possibly insured separately. Businesses that were previously part-time need to be aware of the risks they run as their operations grow. Similarly, hobbies that have blossomed during lockdown may need specific insurances. New entrpreneurs need affordable specialist advice and help to arrange insurance protection for their expanding businesses.
Once the relief & euphoria of re-opening subsides, more established enterprises should also review their operations for any new risks arising from revised premises layouts or changed operating procedures. Have staffing levels increased or decreased? What are the implications for employers liability and public liability covers? Is there increased reliance on self-employed delivery drivers or other staff? What impact would there be on the business if they returned to their normal jobs and were suddenly unavailable? Has lockdown revealed any weaknesses in supply chains that should be protected with business interruption cover?
Bob Dylan long ago warned us that “the times they are a-changing”, but fortunately, “the answer, my friend, is NOT blowing in the wind”. The answer lies in planning, preparation and sound advice followed by implementation. It’s never too soon to schedule a chat with your insurance broker, and if you don’t yet have an insurance broker, it’s never too soon to get one.
So, traditional insurance broking isn’t broken, but it’s been knocked-about a bit and might be reeling from some body blows. However, the need for insurance and insurance advice is as strong as it ever was. In fact, the growth of new services and new protection products to meet their needs may herald a boom. A new breed of insurance brokers is emerging to meet the challenges facing entrepreneurs and SMEs and to turn those challenges into opportunities. Hubb is in the vanguard of the advance to disrupt outmoded insurance broking models.