Brokers find their swagger in online battle with directs

“I think brokers can more than compete,” said Bennett McBride of G.R. McBride & Company Ltd. “The price point for online technology has come down. And there have been enough [broker] pioneers who have tried and failed [with new technologies] that there is a workable online model that people are able to latch onto.”

 

Doug McPhie, Canadian insurance leader at Ernst& Young, said the online competition may in fact be “overblown,” given how many people actually purchase insurance online.

 

“The Internet may be overblown a little bit, in terms of its threat to brokers,” he said. “Maybe about a third of people are going through the Internet to research products right now, but only around 7% are actually buying insurance over the Internet. So the vast majority are still going through brokers.”

 

Or as one broker, who chose to remain anonymous, quipped: consumers “use the Internet as a reference, and then they call their broker and beat them up.” (continued.)

 

About one-third of respondents in a 2012 Global Insurance Consumer survey conducted by Ernst & Young reported that they expected to use insurance quote comparison websites in the future.

But even here, brokers say they have dramatically improved in offering online quote capabilities online. 

 

“I think that we’re offering more quoting online, which, when you’re talking about competing with direct writers, is what people seem to be interested in,” said Cheryl Scarborough of Ledoux Lew & Patterson Insurance Brokers Limited.

 

Some brokers do offer important caveats. For example, Scarborough said brokers still aren’t using the online space for marketing their services as aggressively as direct writers do. And Brian Yetman of First Durham cautions against the temptation to automate away the broker’s value proposition of advice.

 

“I feel some brokers might be looking at how technology can help us automate our way out of dealing with customers,” Yetman said. “If we are looking at ways to use technology solely to emulate the direct writers, all we will do is strip out our value proposition and, in my opinion, slowly asphyxiate ourselves.  

 

“In fact, consumers tell us that this is exactly the opposite of what they want. In fact, they want to hear from us more frequently about relevant things that matter to them. So when we look at technologies, we must consider what technologies will help us enhance the customer experience, engage them and make us easier to deal with.”

 

McPhie says any competitive advantage directs may gain online will be muted by the complexity of the product. He cited an example in which a skunk crawled under a work colleague’s deck and sprayed during a fight with another skunk. The smell permeated the porch, the home’s foundation, the basement walls, the floors and the carpeting. 

 

The insurance company didn’t cover the cost of the repairs to the home because of a policy exclusion for damage caused by “rodents” (such as skunks). “Other insurers will cover rodents, but you don’t see that on the Internet,” McPhie said.

 

Another caveat: the online battle for the hearts and minds of consumers is a private lines phenomenon. Commercial lines brokers, who conduct a near monopoly – well over 90% market share – of the country’s commercial business do not, as of yet, face a serious challenge from direct writers.