September 22, 2014 by Harmeet Singh, Online Editor
OTTAWA – As technology such as telematics and driverless vehicles become more widely commercially-available, brokers will come under increased pressure to provide value, or else watch their profession diminish, according to a panel of experts at this year’s National Insurance Conference of Canada.
Broadly speaking – looking outside of just the insurance industry – if a product can be direct, it will be, Doug Stephens, a Canadian retail industry futurist, suggested during a panel at the NICC Monday in Ottawa.
However, that doesn’t mean there isn’t still room for other (often brick-and-mortar) choices. He gave the example of buying a new computer from Amazon, versus getting the expertise and personal touch of an in-store professional, such as the Apple store “geniuses.”
In his view, two models are poised for success in the coming years.
The “high-fidelity model” offers consumers a very rich, hands-on and service-oriented experience curated to their needs (what Stephens calls a “Ritz Carlton” experience).
The other, the “high-utility” model, offers a plug-and-play, 24/7 experience that requires no hand-holding for customers (such as Amazon).
“What is dying is everything else in the middle,” Stephens said. That means that to remain competitive, brokers need to offer a specialized experience and expertise for consumers.
“I think there’s a huge opportunity for brokers in the telematics space,” Randy Carroll, CEO of the Insurance Brokers Association of Ontario, noted during the same panel presentation.
“The consumer needs to understand what that box in their vehicle’s doing,” he said, referring to telematics products.
Apart from that educational opportunity, brokers are already adapting to the demand by consumers to have different ways of interacting and buying insurance, he noted.
The same brokers offering in-office consultations may also be servicing consumers online, he suggested.“You can’t be a one-model-fits all,” he said. “It’s not going to work.”
As options for insurance become more abundant, brokers can act as specialists who can help sift through the abundance of choices available and find what’s best for a customer, Stephens also noted.
However, they are still up against technology, including rate comparison websites, so brokers will have to be extremely proactive, he added.
Expanding beyond telematics and usage-based insurance, driverless cars are another emerging technology set to shake up insurance distribution.
With legislation requiring a driver to still be able to take control of a driverless vehicle, questions emerge as to how insurance would look for those cars, and who might take on the risks involved (the manufacturer or insurers), Stephens noted.
However, eventually, it may be attractive to a consumer to be able to walk into a showroom and buy a vehicle already packaged with insurance, he suggested.
Given the complexity of emerging technologies such as driverless vehicles, there will still be a paramount role for the broker as an intermediary in selling insurance, noted Vincent Vandendael, director of international markets at Lloyd’s of London and another panelist at the NICC Monday.
“I personally believe that the broker will have to reinvent itself,” he said, but added that the first auto insurance developed by Lloyd’s roughly 100 years ago emerged from a broker responding to a new customer need.
In the meantime, while driverless cars evolve to be commercially available, other vehicle technology can create challenges for the industry, Carroll noted.
Safety features becoming more commonplace, such as collision avoidance systems, lane drift warnings and parking assist, will drive severity of claims and frequency of loss down, which will premium down he suggested.
That in turn presents a challenge for both direct insurers and brokers.
“Before we worry about getting to the Jetson stage, I really think we have to try to get our head around how we’re going to manage the same portfolio that we’re managing today – whether it be broker distributed or whether it be direct distributed – with lesser premium,” he said.
The National Insurance Conference of Canada continues in Ottawa Tuesday.