March 24, 2021 by Adam Malik
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.
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