Canadian brokers are drifting towards the cloud because of a changing customer demographic, a rapidly changing marketplace, and increasingly complex technological systems, according to a Canadian broker technology vendor.
Cloud computing describes when computer resources are delivered as a service over a network such as the Internet. It is gaining traction as a mainstream delivery model for organizations of all sizes in the Canadian brokerage industry, according to Jeff Purdy, senior vice president and general manager of Applied Systems Canada.
Applied Systems implemented new technology in 500 North American brokerages in 2012. “Ninety per cent of our new broker customers select the cloud, across all the market segments, small, medium or large,” Purdy said.
What accounts for the popularity of the cloud for Canadian brokers? (continued)#pb#
Changing demographics, Purdy said. Brokers’ customers and books of business are changing. And so is the marketplace in which brokers are operating.
Surveys show the average broker sells in the personal lines business. His or her brokerage has been in the community for a long time, has a high retention of customers, and is receiving a high number of referrals.
By and large, these new consumers are going to be younger, Purdy said.
And these younger customers are looking to purchase their insurance online. More than three quarters of Canadians aged 16 years or more – 21.7 million – used the Internet for personal ends during 2009.
To meet the needs of these younger consumers, financial institutions have started to compete for personal lines insurance marketshare by offering online, interactive services. In personal lines, Canadian brokers currently have an overall market share of 62%, but this number has been dropping by half a percentage point per year over the past 22 years, according to figures from the Insurance Brokers Association of Ontario (
IBAO).
“The market share for personal lines is going away to big financial institutions,” said Purdy. “If you look at the capabilities that those larger institutions are providing to their consumers, they include things like access to policy information, access to billing online, access to first notice of loss, access to print your own liability or pink slip.
“If I’m a one or two-person brokerage operation, and my demographic is changing, and I’m losing business to one of the financial institutions, I would want to be able to do the same things and provide the same service levels [as the financial institutions]. Frankly, to get there, I need to be in the cloud.”
Brokerage operations are complex businesses, especially given the increasing demand for brokers to provide their customers access to their data. Outsourcing tech operations to the cloud is a way for brokers to concentrate on insurance and not on the maintenance of their tech systems, which isn’t really their core competency, Purdy noted.
“To meet these needs requires a very complex infrastructure,” he said. “If you are a two or three-person brokerage and you need to provide consumer access to your data, how do you do that?
"That’s a complex infrastructure to deploy, and frankly brokers can’t do that on their own. They need to be in the cloud and they need a provider who can make them look and feel like a much larger organization.”
