Getting Tech-Ready

Brokers continue to lose market share to direct writers. With the number of brokerages being reduced, primarily through mergers and acquisitions, brokers’ profitability is threatened at the same time that consumer demands continue to escalate. Amidst these challenges, both brokers and insurers struggle with new technology rollout.

The good news is that brokers still offer choice and are considered to be the consumer’s trusted advisor, providing a level of advisory service unmatched by direct writers. But is this enough? Will choice and service stop brokers’ market erosion and swing the pendulum in the other direction? If the past 25 years are any indicator, the answer is no.

The two main reasons direct writers continue to erode brokers’ market share are enhanced service and lower price. Directs offer real-time accessibility to information, which speeds service levels and, ultimately, customer satisfaction. Most offer insureds self-serve capabilities for 24/7 access to their information and communicate with consumers in their desired method, whether that be by traditional phone, the web or smartphone.

In its 2013 Canadian Auto Insurance Satisfaction Study, J.D. Power & Associates reports that as much as one-third of all consumer interactions with their providers are non-traditional. This is an increase of 7% over 2012. Communicating with consumers how and when they want is critical.

With a streamlined distribution channel, direct writers can typically offer consumers 10% lower premiums compared to a broker. The technology exists today for the broker channel to compete on the same technological playing field as directs. Some brokers and carriers are competing – and winning – yet most are not. Why not?

Because available broker technology is grossly underutilized. Until the industry as a whole steps up, everyone involved is in jeopardy of being obliterated by the direct writers. The status quo has not, and will not, cut it. Consider the following:

• less than 50% of brokers are paperless;

• less than 20% of brokers have telephony integration;

• less than 1% of brokers transact with insurers in real time; and

• no brokers offer 24/7 consumer access via call centres, websites and mobile devices.

CARRIER AND VENDOR RESPONSIBILITY

Recently a large insurance company shared its brokers’ adoption of eDocs across all broker management system (BMS) vendors. It was not as high as the insurer had projected during its launch phase. As a result, the insurance company was seriously considering halting further development and diverting allocated funds elsewhere, a move that was contrary to Keal’s beliefs and experience with the project to date.

Our experience has been that our mutual broker partners are saving hours each day per carrier offering eDocs, and are anxious to add more markets.

After surveying mutual broker partners, Keal confirmed that 98% of its brokers who had been offered eDocs by the carrier were using eDocs with tremendous benefit. Even more compelling, 100% of Keal brokers who had not yet been offered eDocs by the carrier wanted them. Sharing the survey results prompted the carrier to open the floodgates and offer eDocs to all Keal brokers.

There is no question insurance companies selling through the independent broker distribution network have more technological challenges than directs – a challenge that is hardly unique to carriers alone. Not only must they modify their internal systems, they also have to integrate with numerous BMS vendors, each in unique ways, to reach their broker partners.

The aforementioned carrier was evaluating the eDocs project as a whole, not by each vendor. The problem with the approach is that not all BMSs or their workflows are created equally. Yet from the carrier’s perspective, the vendors were being evaluated as such.

Keal’s hands-free eDocs process automatically attaches each eDoc to the correct customer and policy, saving hours each day per carrier. But simply stated, the advantages differ from BMS to BMS, and without the hands-free automatic attaching, as in sigXP, the broker benefit is almost non-existent. So why change workflows for little gain?

If brokers do not see value in adopting new technology, they will not. Vendors and carriers each have a responsibility to develop efficient, beneficial broker tools to streamline processes if the broker channel is going to start winning back market share from the directs. Brokers have a responsibility to openly evaluate the offering and either use it, or demand an alternative. 

REASONS FOR OPTIMISM

A big shift is occurring, with insurance companies identifying, developing and offering broker beneficial streamlined transactions. eDocs is one example; automated real-time policy change is another.

In a Keal broker study, on average, pure policy change accounts for 24% of a brokerage’s daily transactional volume. This important – yet time-consuming – transaction only represents an average of 1% of commission revenue.

Implementing an automatic, real-time policy change transaction offers more benefits to brokers than it does to the carrier. Brokers will continue to take policy change orders from their clients; it is part of the service relationship.

An important question to insurers is this: Why is this not part of your priorities? The message to brokers and provincial associations is that this will only happen if brokers make their collective voice heard and demand through business relationships with insurers that they make automated real-time policy change part of their priorities. If brokers start moving business to forward-thinking, tech-savvy insurers, things will change. A handful of BMS vendors simply do not carry the same weight.

THE FUTURE LOOKS BRIGHT

Integrated real-time rating

A few insurers have the capability of providing real-time, guaranteed rates directly to BMS vendors. This would bypass the current need for broker-licensed rating software. Brokers could push quote requests to multiple insurers, complete with 100% of the required information, and offer insureds comparative guaranteed quotes in real time – another significant time and money savings for brokers, provided that insurers step up and invest in this approach.

Consumer self-serve

If one listens to consumers, the majority of whom use the broker distribution network, they want a number of things: to have their trusted advisors available when they deem it necessary; to access their brokers for simple transactions 24/7; and to complete transactions by smartphone, web, e-mail, telephone, mail, etc.

In development now, the Keal CAP (Consumer Access Point) will offer these capabilities by the end of the year. This arms brokers with the same technology direct writers are using now.

A broker-branded section built into the broker’s existing website, secured and configured by the broker, will allow whatever transactions the broker wishes to move from the consumer directly into the BMS and on to the insurer (provided the insurer has adopted Keal Connect) for such functions as inquiries, policy changes, real-time rating and claims reporting.

Another trend gaining significant momentum is UBI, or usage-based insurance. Insurers and brokers need to adopt the existing technology and support the evolution.

FINAL RESULT

Insurance Brokers Association of Canada has prepared the guiding principles on most technological enhancements, the Centre for Study of Insurance Operations is establishing the standards and brokers must convince carriers to accelerate their development so the broker distribution network can compete more effectively with directs. Only then will market share in personal lines change favourably toward the brokers.

If the cost of doing business is reduced – while at the same time offering 24/7, real-time service to insureds – it will deepe
n loyalty, increase retention and lead to increased profitability for brokers.