Dan McNally, group insurer and products director at Bravo Group, talks personal lines and how a combination of broker feedback and analysis of the industry led him to identify five key barriers to trade that the industry can work together to overcome.
My role at Bravo Group provides me with a great insight into the relationship between the large insurers and small to medium independent brokers. I believe there is a lot that the industry can do to further strengthen these connections to the mutual profitable benefit of both parties.
Personal lines remain a crucial part of any independent regional broker’s book of business, and, from speaking to insurers, I know that it’s the ‘community’ dimension of smaller brokers’ portfolio that makes them such a fascinating segment of today’s personal lines marketplace.
Despite insurers viewing regional broker business as more profitable and stickier at renewal, much of insurers’ activity and investment appears to have been upon product, price and proposition that is focussed purely on the end customer.
So, what are the barriers, and how can they be overcome?
Price
Many insurers believe that personal lines purchasing is dominated by price. From talking to brokers, I believe price will always be important, but I have also heard that they are not necessarily concerned with being the cheapest; rather they are keen to offer the right solution for their customer at a price that is equitable in the market place vs a direct insurer or aggregator.
An insurer that understands this and is prepared to invest in it, can then really think about creating solutions that stand out on other factors as well. Networks are playing a key role in helping insurer teams better understand this complex dynamic.
Software house constraints
In my experience, there’s a lot that can be done to streamline the software house screens and make it easier to compare product specifics on a customer’s behalf. Trying to extract data from multiple extranets can be extremely time consuming, and it seems that aggregator sites are leading the way in terms of user-friendly technology. This in turn drives the focus on price that insurers worry about.
We need the software houses to respond positively on this, and will be making this message heard while raising awareness across the membership on key insurer product differences where we can.
Reflecting brokers’ value
In the past the ability for insurers to respond to the huge value that smaller brokers offer with bespoke work has been inhibited by system constraints and backlogs of work.
Unfortunately, large volumes of business take precedence on IT speed and resource which leaves smaller brokers at the back of the queue, despite their rich value in ensuring accuracy and reducing fraudulent activity. Working collectively with a network allows insurers to meet the needs of smaller brokers, while satisfying the need for volume.
Cost of tailored product delivery
Insurers have to pay significant costs to build a branded product for a sub set of brokers on each software house, even if it is more or less a duplicate of their standard offering. Further costs are then incurred to maintain the separate versions of each product. Add to that the additional internal time and resource, and it is little wonder they are less keen to do so in such a competitive market where margins are narrow.
This has led to more focus on solutions like Insurer Hosted Pricing (IHP) where insurers can effectively make the changes themselves with less cost and delay straight into their core products. We are actively working with insurers to capitalise on delivering fast and improved offerings to network members as a result of new IHP capabilities.
Market change
The most obvious example in recent years are the changes on Ogden and the discount rate. This effectively threw insurer reserving and pricing into the air and all resource had to be diverted to deal with the change.
When considering other important, but distracting, factors like GDPR and IDD, it is unsurprising that the personal lines market sees relatively small amounts of bespoke offerings – it simply does not have the resource left to do it.
Once again, the collective network approach allows us to help insurers improve their offering to members and customers due to the volume and data insight we bring.
The power of a network
The message is clear for small independent brokers: networks are key to establishing firm relationships with insurers. The barriers I’ve discussed within this article can make it difficult for regional brokerages to get a foot in the door with the large corporate insurers, but having the strength of a network behind them can go a long way to enabling brokers to forge deep and lasting relationships that can make a significant impact on brokers’ businesses and their offering to customers.
