Canadian Underwriter

How Brokers Can Face (and Avoid) Extinction

November 25, 2014   by Denise Garth

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The theory goes that the dinosaurs were walking the Earth, chomping away on the vegetation (and each other) when a big asteroid blazed in the sky, and boom. Wiped out. They couldn’t adapt. No imagination. Well, our comet is already here, lighting up the business skyline, and it’s thanks to a new breed of competitors and challengers. These challengers are the big tech companies: Google, Amazon, Twitter, Pinterest, YouTube, Apple, Facebook, eBay, and others.

Each of these challengers has disrupted and changed many industries and businesses: books, music, media, retail, and much more. And their influence is beginning to impact insurance. Consider retail companies like and Walmart selling insurance in the U.S., or Tesla selling insurance in the U.K., or large tech companies like Google with their new insurance comparison site in Britain. Traditional insurance firms, on the other hand, are still taking tactical, conservative, and safe approaches, using social media for branding and marketing. In some limited cases they are beginning to use social data for fraud detection and market segmentation.

But these new challengers—and a rapidly expanding list of others like them that are backed by massive amounts of investment capital—are at the centre of a digital “comet” slamming into our comfy business landscape. They are disrupting and redefining everything from business models to customer engagement, revenue models, partnerships, customer empowerment, the use of data and analytics, and more. While these new challengers may not be competing directly with insurers, brokers, and agents by offering and underwriting insurance right now, they are competing in more subtle but highly disruptive ways by capturing customer relationships, loyalty, trust, pocketbook, and through innovative offerings, engagement, and business models. And their influence and impact is only beginning.

We all know the story. When it comes to books, movies and music, what was once a bonus item is now expected, and what was once a “reasonable wait” is now far too long (mere minutes) and needs to be delivered within seconds. The customer experience is being transformed, customer expectations redefined, and all this is introducing new demands that insurers must now meet.

The New Rules for Competition

Adding fuel to this growth and influence is the challengers’ drive and commitment to innovation. Each challenger is rapidly developing new and innovative capabilities that continually reshape, transform and enhance customer engagement and experience. Just look at the response to the new Apple iPhone 6, which according to CNBC set a record in sales: more than 10 million units sold in three days, with an estimated two-month backlog. All of this sets the stage for further disruption with the Apple Watch and Apple Pay, which will intensify the customer experience and place the customer further in control.

Insurance has been all about tradition. It has a culture of risk aversion, based on decades, even centuries of business assumptions and models that have changed little over time. Suddenly it’s operating in a rapidly changing world of new rules. So, we all need to ask:

• Will insurers, brokers or agents be the primary customer relationship owner?

• Will insurance protection products be a small piece of a much broader offering, with risk prevention, mitigation or new valued-added services?

• How can traditional channels, like brokers and agents, remain relevant and add value to the customer relationship?

• How will risk models change? How will they impact insurance premiums and operational costs?

• How will insurer, broker or agent business and revenue models change?

How can insurers and independent agents and brokers prepare and respond? The question is not how to fight the challengers, because their impact and influence are here to stay and increasing every day. The more important question is: How do you play to win in the new world these challengers have defined? Because, in today’s hyper-connected, technology-driven, digital world, those who reimagine, experiment, innovate and then challenge the status quo will gain the competitive advantage over those who hold onto their legacies and traditions.

As first steps, insurers, brokers and agents should consider the following.

Think Outside Your Paradigm. What are your vision, mission, and strategies? Are they steeped in tradition, or do they align with the new digital world your customers have embraced? Do they reflect growing customer power and expectations? What new business and revenue models can be used? Your vision should create a meaningful relationship with value-added products and services that deepen your customer’s trust and loyalty while creating a consistent, connected, personalized experience. 

Know Your Customer Deeply and Create an Experience. Are you collecting new and different customer data to use with analytics to garner new customer insights? Are you using these insights to enhance and reshape the customer experience continuously? No longer is it just about the product; it is about all the services built around, included within or leveraged by the product. How will you redefine your insurance products? Will you wrap these products with new, personalized services? Do you have a digital platform that engages the customer? If not, you are not thinking like a digital business or the new digital customer. But your new competitors are.

Modernize, Optimize and Innovate Your Business. As customers gain market influence and power, they are increasingly comfortable with technology, have a stronger voice and use it to demand collaboration. You must view all technology as reaching your customer, because it influences their experience, both directly and indirectly, and ultimately shapes and defines relationship. Insurers, have you modernized your core insurance systems? Agents and brokers, have you upgraded and modernized your agency management systems? Are you still doing EDI upload and download? Do you support real-time transactions? Those still on legacy should begin modernization now so they have a chance to compete. Those using modern systems should begin to leverage new technologies such as mobile, social, the Internet of Things and more to optimize and innovate your business and the customer relationship.

Expand the Possibilities. Look beyond the traditional boundaries of insurance. Customers expect more than just connecting with a company; they expect an ecosystem of relationships that are organized and available through a company. Remember eBay, Amazon, Apple and other challengers. Their product offerings (with services) are the centre of a relationship and a portal to an array of other services, often integrated with them. So which of your relationships provide access to a unique ecosystem? Do they provide services possibly beyond insurance, like tax preparation; discounts for annual service checks for the air conditioner, furnace or plumbing; preferred services and pricing for regular auto maintenance; or free consultation for other services? Does your website or portal identify and connect your customers with that ecosystem of partners?

For those operating with the long-standing approach of waiting to roll with the changes by taking a wait-and-see attitude, the pace of change from industry challengers puts insurance companies at risk of losing customers and revenue—the very risk of becoming irrelevant.

Instead, insurers, brokers and agents must embrace the seismic shift in business, be adaptable and flexible, and find ways to take part, just like another segment of the transportation industry: automotive manufacturers. Companies like Ford, Volvo, BMW and others are leveraging new technologies to become one of the challengers. They are innovating and reinventing themselves by creating crash-avoiding vehicles and a new, engaging and connected car experience.

So, instead of making a dinosaur roar against the cosmic fallout of the tech industry, be adaptable and flexible. Create a new era of relevance and customer loyalty so that you won’t be facing extinction.

Denise Garth is a partner at the strategic advisory firm Strategy Meets Action.

Copyright 2014 Rogers Publishing Ltd. This article first appeared in the November 2014 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.