Canadian Underwriter

Why this digital broker does not fear directs

March 2, 2018   by David Gambrill

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Digital brokerages have a big marketing advantage over the directs, Dario Battista, president and CEO of isure said Wednesday at the Insurance Canada Technology Conference in Toronto.

“We’re not really concerned about the direct markets, quite frankly,” he said. “We’re advantaged because we control our marketing. We do everything internally, so we can pivot a lot more effectively than [directs] can.”

In contrast, directs commonly outsource their marketing to an agency. These marketing agencies may focus on generating lead volume, without necessarily considering the quality of the new business they generate.

For example, one marketing tactic is to buy search words. Whenever consumers type these words into a browser such as Google, they are directed to a company website, or a targeted ad may appear on their social media pages. Battista said he often gets a chuckle watching a marketing agency target keywords in markets where the direct insurer doesn’t even compete.

“The big advantage we have as brokers is that we understand the market, we understand the underwriting side of the business,” Battista said. “Marketing firms have a hard time understanding that there is not a good customer.”

Before becoming a broker, Battista said he grew up in the travel business. He likened the scattershot marketing approach of direct writer marketing agencies to that of the travel business in the 1980s. For a travel agent, there was no such things as a bad client: as long as they paid before the flight, everything was fine. “Our business is very different that way,” he said.

However, there is one way in which the brokerage model is similar to the travel model — and not, as is commonly observed, that brokers, like travel agents, are starting to vanish. According to the U.S. Bureau of Labor Statistics, as cited in the Atlantic, the number of full-time travel agents in the United States dropped from a high of 124,000 in 2000 to around 74,000 in 2014.

Rumours of the so-called death of the travel agent are very much exaggerated, according to Battista. To the contrary, travel agents are very much still alive, just in a different, digitized form.

“A lot of the trends we see today [in the brokerage business] happened in the 1980s in the travel business,” Battista said. “Airlines wanted to cut the agents out, all of that. But today, if you are buying from Expedia, you are actually buying from a travel agency. Expedia uses the exact same technology as everyone else does. They just found a different way of marketing and packaging it.”

And while digital brokerages may look different to the client than the bricks-and-mortar brokerage, both still operate on the broker value proposition of consumer choice. And the broker’s value proposition aligns very nicely with the way technology expands consumer choice.

“I find myself hard-pressed to think of one example of digital innovation and disruption where the disruptor limited choice for the customer,” Battista said. “I have yet to find one. Every single one of them expands choice, expands offering to the customer.”

“Ultimately, the customer is going to drive this bus, not the insurance companies and not us.”