Fewer brokers in 10 years, insurance exec predicts
March 24, 2021 by Adam Malik
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Brokers may not disappear over the next 10 years but their ranks will definitely thin out, an insurance brokerage executive predicted during a recent webinar.
Commoditization of the insurance industry will cut out transactional procedures that many brokers find themselves doing today, said Danish Yusuf, president and CEO of Zensurance. Instead, brokers of the future — what’s left of them — will focus more on the high-margin policies that require much more advice and care for clients.
Yusuf forecast the future of brokers based on fate of travel agents and the rise of online outlets like Expedia.
“If you look back 25 years ago, most travel was bought from travel agents,” Yusuf said during the latest Insurance Institute of Ontario’s At the Forefront series, entitled The Insurance Industry Innovator’s Dilemma. “I still remember the days you had to physically go into the travel agent, get a paper ticket, you had to show the ticket at the airport and the counter, and then you had to guard that. Because if you lost it, your money’s gone.”
Today, people are using companies like Expedia to book their travel online. Still, travel agents, although there are fewer of them, have an important role to play, Yusuf said.
For example, when it comes to typical annual travel, a customer will probably use Expedia to plan and book the trip. But for that once-in-a-lifetime trip, like a honeymoon, they may contact a travel agent just to make sure everything is exactly how they want it to be.
Insurance brokers are in a similar position, according to Yusuf. Transactional or commodified insurance products may be better distributed by new players and digital options, he suggested. But for the more complex topics, that’s where the broker will be essential.
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To illustrate the point, Yusuf returned to the travel agency example. “Your transactional flights will be multiple times a year, so that portion gets so much more volume,” he said. However, there may be more financial value in working on those bigger and more complex policies, although there are fewer of them, compared to the lower-margin products.
“I think these are the dynamics that I’m most looking at and most interested in seeing what happens [with brokers],” he added.
Generally speaking, Yusuf agrees with the statement that the broker channel isn’t going anywhere soon. But the number of brokers within the channel may diminish over the next decade.
“I do think the employment, the number of brokers employed, will be less as a percentage in 10 years than it would be today,” he said. “So the broker channel is here to stay. I think customers fundamentally want choice, they want advice, they want support in the event of a claim…But I think it’s tough if you are a broker focused more on the transactional products.”
Yusuf figures the transactional insurance product will be served primarily by technology, with human support behind the scenes. He urged brokers to start thinking about what their future role will look like a decade from now.
“If you’re in that segment that’s more transactional…how will you compete with somebody that’s invested a billion dollars in creating this massive platform that’s easy, [and in which] customers can transact in the manner in the time of their choosing?” Yusuf said. “They [online insurance platforms] have pricing advantage. They’ve got a service advantage. They have all of these advantages so they can be better, faster, cheaper, [give] more advice, [have] simpler interactions, [and provide] a lot of self-service. How do you compete with that? It’s really, really hard.”
That’s why brokers in the transactional segment should look at moving themselves into areas where there is greater need for greater customer service and advice — a place where brokers can let their expertise and knowledge shine.
That means moving into areas of the business “where customers want higher levels of interaction,” Yusuf said. “They want to see you in-person. They want a lot of conversation. You can move there, or you can you move [into the area of] specialty products, where your advice and your depth of expertise will be valuable.”
Feature image by iStock.com/wenjin chen
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I very much agree with what Yusuf is saying in this article. However, the one dragon we must slay as brokers is our inefficiencies with respect to transacting with our insurer partners. How can we offer that online experience on high volume business if we cannot transact with our insurer partners in real-time? As long as we are stuck with duplicate entry of data, data being overwritten in our BMS platforms and manual follow-ups and phone calls on simple things like claims status, billing issues, etc. the customer experience will never be what it needs to be. The DX Connect Alliance that was previously written about is certainly a step in the right direction that all brokers need to get behind.
Interesting I first heard this talk 30 years ago. Back then they added “you can’t make money selling personal lines! ” We are.
There are more brokers now in my city than their were 40 years ago. They are not working out of large offices but their homes!
As it was once said “the demise of the broker is greatly exaggerated”.
I m very optimistic about the future of the broker!
The whole point of the talk was that change is around the corner due to current trends, not due to trends 40 years ago.
I agree with Scott. Heard this same approach decades ago and it won’t happen.
What should happen is the opposite. Every single product brokers look after needs a professional with the same level of knowledge as any lawyer.
The business needs to be cleaned up. Selling legal products and needing only to pass a RIBO test is not enough. Hell you don’t even need grade 12 to become a broker. Embarrassing and ridiculous.
First, an easy web search reveals that Zensurance seems to be a broker not a company; so Mr. Yusef is not really an ‘insurance company exec’ but rather a ‘broker exec’. Seemingly, also a digital broker. Banking on the direct to consumer approach. Which is fine. But its always interesting to look at the source of comments made for context; not to attack, but simply to understand. Mr. Yusef is absolutely entitled to his opinions, from his particular perspective. But is it news? Is it really an accurate prediction of a troubled future for independent brokers?
It’s fair to mention that CU (as seems more prevalent) seems to be propagating a mostly negative narrative with its headline; no doubt believing that people will focus on ‘clicking’ on sensational, rather than balanced and informative news items. Tell me its not true.
But moving on……….
Insurance – for all lines – has and will continue to evolve and improve from the perspective of differing coverage offered between competitors. How else did we get from ‘Fire’ insurance to ‘All-Risk’ coverage? Competition drives industry quality and it will ever be thus. The only truly ‘transactional’ products are those that are consistently similar products offered from multiple sources. Personal Auto is one of these. So, perhaps, is the Basic form of Homeowners insurance. Whoever still sells that.
Direct writers (and digital brokers) so far continue to market products without much in the way of defined choices and succinct explanations of coverage. The reason is perhaps self-serving – why offer the best coverage available and work to separate pure premium cost from product value when consumers are primarily price driven – but also the choices and options are so numerous and complicated that presenting these digitally is too complex. Consumers then, are perhaps always better served by getting professional advice. That’s my perspective. Biased? Of course. Just like Mr. Yusef.
In Alberta with the recent spate of cat losses, we see this with signs in front of badly damaged properties, suggesting that their clearly identified direct writer carrier has not responded well. Especially when the property next door in the photo is almost completely repaired, with a broker channel insurance company also noted on a sign in front.
And this is even without mentioning the millions of tax dollars now spent to compensate consumers that had insufficient or improper coverage for their incurred cat loss.
For commercial insurance, the differences for any client – other than those that could be covered by a pure small business package – are even greater. One insurance carrier recently published a statistic that over 75% of Canadian businesses have insufficient or no business interruption coverage. Another has guessed that over 60% of SME companies that plan to sell in the next five years have no D&O coverage. Cyber coverage has less than 15% market penetration. These businesses are not ‘high margin’ customers. These are the core of Canadian business enterprises, and they do and will always need professional consultation and advice.
The comparison of professional insurance brokers to travel agents is also an old trope that has more than run it’s course. The consequences of a mistake in booking travel yourself and making poor choices that result in additional expenses is NOT the same as the financial tragedy of losing all equity in your home or business due to poor insurance coverage choices. And to so state is to diminish all insurance professionals, both brokers and underwriters alike.
Fair to say, I didn’t like this story very much.
This is an interesting article. Yusuf is saying that transactional business will be eliminated by online presence. I 100% agree, but the main point he is missing is the amount of direct portals insurance companies have started. This is going to eliminate the necessity of brokers for transactional products which include Yusuf and Zeninsurance main market segment.
Give it 15 years and online insurance brokerages won’t exist. The direct access to companies will eliminate e&o exposure (as clients will be filling in the blanks them selves). If clients want to leverage the knowledge of a insurance professional, they will continue to shop with someone who can correspond with them.