Brokers risk losing profitable business to special risk advisors because they are failing to meet the needs of risk managers, according to a new report outlined yesterday at this year’s
IBANZ Forum by
PwC partner and insurance sector leader
David Lamb.
The report, Broking 2020: Leading from the front in a new era of risk, surveyed risk buyers from multinational organisations and found many of them think the evolving risk environment can no longer be managed solely through traditional approaches.
Lamb told delegates that while CFO and risk managers continue to rely on brokers as their main information source when placing risk, less than half of those surveyed identified brokers as the ones to develop solutions for their risk concerns.
Instead, risk managers said they would look primarily to industry groups and carriers to develop the solutions particularly for emerging risks such as cyber security, data and supply chain risks and nanotechnology.
He said this was a potentially worrying trend for the broking industry since these are the risks that organisations place highest on their risk agenda.
Nearly three quarters of risk managers said they want analytics to help inform their decision-making due to concerns over new and emerging risks, but many brokers are falling short in this area with less than a third of respondents saying they were very satisfied with brokers’ analytical and modelling services, the report said.
Lamb said: “If some market players don’t adapt their businesses to what their clients want they’ll face increasing competition for new business.
“This may require a shift in some brokers’ approaches from hindsight to foresight as they evolve from being placers of coverage to preventative risk managers and advisors.”
PwC’s research showed that developing advanced risk and loss analytics and capitalising on big data analysis would be key to strengthening brokers’ position in the market.
Risk analysis, developing shared technology between client, brokerage firm and carriers, and loss analytics were identified by survey participants as the top three things brokers can do to assist them on a more efficient basis.
More than a third of risk buyers also identified big data analytics as important suggesting that those brokers who could use analytics to identify new threats and then develop solutions for these will emerge in a prime position.
With organisations investing more in people, advanced systems and data gathering and therefore becoming better informed about their risk profiles and management options, the result was a greater retention of risks and added pressure of prices for what is still insured.
Finding new sources of business was therefore becoming more important than ever for brokers, Lamb said.
“To achieve growth, brokers will need to look to the emerging risk area. We’re at a crossroads and brokers have a choice – to compete for increasingly commoditised standard risks or lead risk facilitation which will open up commercial opportunities.”
PwC suggested that brokers should:
- Adapt their business models to simultaneously support cost-efficient standard risk management and be seen as knowledge-intensive risk consultants
- Expand their information gathering network to better anticipate and understand the new and emerging risks facing their clients
- Improve their ability to collect, integrate and analyse data to create new solutions – shifting to more of an analytical/consultative broker
