Brokers have been hearing for some time now about the risk of broker disintermediation, which has grown as more digital channels for the buying and selling of insurance products have emerged. However, according to the “Broker of the Future” report from Victor Canada, disintermediation is just a myth – an argument underscored by the fact that predictions about the broker channel falling away have not yet come to pass.
“Disintermediation was a term coined several years ago that [pitted] the direct writer model versus the broker channel model,” said David Cook (pictured), president of Victor Canada. He noted that while this risk is not a real one, change is nonetheless afoot and brokers need to pay attention. “Right now, it’s not about disintermediation – it’s a change in the industry where you’re getting more insurtechs coming in, and it’s more about disruption [in the broker channel].”
Brokers in Canada have already seen the power of technology in enabling more direct sales of products, including insurance, and, for some brokers, how standard personal lines and potentially small commercial products will be sold in the future is uncertain, noted the Victor Canada report. It is possible that these products may shift in whole or in part to online sales channels. However, the report added that complex exposures necessitating specialty coverages will likely remain “firmly in the domain of traditional brokers, who can also provide valuable advice on risk management.”
There’s also another crucial competitive advantage that brokers bring to the table.
“Brokers are often on the leading edge of driving new product ideas,” explained Cook. “They’re the ones that are closest to the insureds and can see where there are coverage gaps that can lead to new solutions entering the marketplace.”
He pointed to three examples that prove this point to a tee – directors and officers insurance (D&O), environmental liability, and cyber insurance. D&O, for one, didn’t truly exist in the Canadian marketplace until the 1980s, but now it’s a well-established insurance product thanks to the work of brokers. Similarly, environmental coverage used to be swept into CGL policies, until brokers and insureds recognized the need for that coverage to be a standalone product, rather than relying on CGL coverage that was often limited, noted Cook. Finally, cyber insurance was once a ‘nice to have’ coverage and is now fast becoming a consideration for businesses of all sizes, again, because of the work of brokers in recognizing the need for it among their insureds.
“Change tends to drive innovation and that digital innovation is going to lead to greater efficiency, and what happens is that brokers will shift their focus to other things, like expanding their expertise, reaching more markets, and creating better client experiences,” Cook told Insurance Business.
Those areas are ones in which Victor Canada sees brokers continuing to differentiate themselves, particularly now that COVID-19 has had such an impact on people’s lives and the Canadian economy.
“Brokers can offer their clients unique expertise when it comes to understanding complex risk exposures, where coverage gaps may exist, and how to navigate the claims process – [they know] how to be an advocate for the client,” added Cook.
