Twenty years ago, where would you have gone to find thousands of brokers gathered in one room? One of the national trade association conventions. Where would you go to find thousands of brokers today? At the technology conventions. Technology drives the insurance business. Even at the broker level.

And the biggest changes are yet to come.

Many brokers may not be aware – yet – but a lot of professionals and market experts are betting against them in the upcoming “technology tsunami” of InsurTech. Some predict that the gradual trend-line of slow erosion will become the rapid drop-off of disruption.¹ Clearly, some industry macro-trends leave legacy providers behind, such as buggy whip makers, for example. Others challenge us to wake up, catch up – and win.

What will the InsurTech revolution mean for today’s broker channel? Most InsurTech investments are somewhere between “unfriendly” and “hostile” to today’s incumbent broker. But not all. Some, in fact, help make the broker an important part of the InsurTech revolution. The right technology helps brokers fulfil the promise no other channel really makes. That’s the promise of real people serving real people. It’s the promise of human connectedness. It’s the promise of personal advice and personal advocacy. And it’s the promise of the comfort and confidence of having people on your side. This is the soft but powerful magic that binds a tribal species together: to be wired and connected at the deepest psychological level. Nonetheless, the threats are real.

The Rapidly Changing Insurance Consumer

Many of today’s brokers are bewildered and bedazzled simply trying to keep up with today’s insurance consumer. Ten or so years ago, this author’s most requested report was called 25 Ways to Write a Killer Yellow Pages Ad. Today that report withers on the vine of neglect. The insurance consumer of today probably can’t find the yellow pages in their kitchen drawer. They are rarely separated from their smartphone.

No doubt, the numbers in the list below will be outpaced by the date of publication. (They usually are within weeks.) But they provide a glimpse into changing consumer behaviour (and a window into why so many of today’s brokers are already worried they’re being left behind).

In the US:

• 81% of consumers research online before shopping.²
• 88% trust online reviews as much as they trust personal recommendations from friends and family³.
• The average consumer reads between four and “52 or more” reviews before making a purchasing decision.⁴
• 98.4% check their email daily. 39% check it between 10 times and “throughout the day”.⁵
• And, remarkably, they deliver 2,617 “discrete touches” – swipes, clicks, taps – to their smartphone daily.⁶

It’s not a distant memory that the broker touched and nurtured their clients at the Rotary or the local youth sports league. They never dreamt that “digital marketing” would rank as a business skill, as necessary as quoting and selling. The growing gap – between today’s digital savvy consumer and the broker – is the sweet spot that so many InsurTech startups want to dive into.

Rapidly Changing Technology – CanBrokers Keep up?

Clearly, new, attractive, and useful technologies are driving change in consumer behaviour. As far back as 2013, McKinsey & Company declared: “There are signs now … that the economics of the traditional agent model are beginning to unravel.”⁷ Some technologies, arguably, simply put the broker out of the insurance equation. Driverless cars. Technology-enabled sharing. Instant, mobile-assisted insurance. Products with insurance “baked in”. In most cases, these leave the broker on the sidelines. The InsurTech revolution is frequently described as “InsurTech versus legacy”⁸ – with the implication that traditional carriers will discover themselves to be bogged down in legacy habits and systems, while whipper-snapper startups sneak up and eat their lunch.

But the burden of legacy behaviour doesn’t just infect carriers. Brokers suffer the same disease. In the US, for example, many brokers eagerly await the Reagan Consulting “Best Practices Study” for direction, but fail to see that it’s a study of historical behaviour, not innovation. Forbes, Fortune, Inc., or Wired never highlighted the innovation of the broker channel for good reason. Gradual change and tradition were appropriate dogma … for hundreds of years. Misreading mega-trends can be deadly. The threats of InsurTech to the broker channel must be taken seriously:

• Some consumers want the convenience and efficiency promised by certain InsurTech business models. Just how many remains to be seen. It’s less than 100%. But it’s more than zero.
• The independence of the independent broker channel will deliver uneven responses. The independent channel has 40,000 firms in the US. Hundreds of thousands globally. Each one is led and managed by its own leadership. There’s no “big boss” or corporate structure to say “do this”. Some will rise to the challenge. Others will no doubt be left behind.
• Some carriers will shift allegiance. Many carriers boast of their “partnership” with the broker channel. Ultimately, though, their primary loyalty must be to their shareholders or their P&L. Brokers must be prepared for top-ranked carriers to experiment with more alternative distribution systems, especially as startups partner with existing carriers in order to overcome the difficult regulatory, actuarial, and underwriting barriers of the industry.

Adaptive Brokers have a Fighting Chance to Win

The broker channel is huge. Independent brokers write half of the world’s insurance. Apparently, not just because “it’s always been this way”. More importantly, a sizeable demographic believes in it. It’s their preferred “flavour” of insurance. Bain & Company’s⁹ 2014 research reveals the psychology behind the modern insurance consumer’s purchasing decision:

• Some want the best price. Brokers generally lose that battle. The hyper-efficient direct channel dominates that battlefield. The emerging digital channel will soon challenge them.
• Some want convenience. No weekends? No evenings? Can’t buy online? Not a bit convenient. Again, the direct channel wins this battle. But the digital channel threatens their lead here, too.

But many want peace of mind. They care about the central value prop of insurance: protection. The emotional comfort of the local or expert broker delivers best on this promise.

What happens when brokers deliver on their “peace-of-mind” promise? The economic magic of loyalty. Loyal clients stay longer. They buy more insurance. They refer more friends and colleagues. What’s that worth? According to Bain’s research, loyal clients deliver a stunning 7X multiplier in lifetime customer value over low loyalty clients. And a 3X multiplier over neutral clients. But, as we observed earlier, the economics presents a stubborn dilemma. The current low commissions on most insurance prevent the kind of “reaching out” and networking that built the broker channel. It’s not that Bob the Broker doesn’t want to touch his clients more. He’s upside-down when he does. Even more important, while his clients may value the “relationship”, they don’t want his phone calls. In 2015, Mblox’s report, Closing The Care Gap: The Insurance Industry Factor, stated that 84% of consumers don’t want phone calls from their insurance provider.¹⁰

This, it seems, is an unresolvable predicament for the broker channel. Enter “InsurTech for brokers”. Simply put, InsurTech isn’t just a challenge to the broker channel. It’s a solution. McKinsey reports that InsurTech is focusing more on innovations in insurance distribution than any other category.¹¹ Certainly, most of it is disagreeable to the broker channel. But not all. What makes an InsurTech innovation supportive of the broker channel’s inherent relationship-focused value proposition?

1. It replaces or supplements “old media” with the “new media” embraced by today’s consumer, i.e. mobile-friendly email, SMS, personalization, etc. (The Direct Marketing Association claims email returns a 43:1 ROI.¹²)
2. It integrates existing technologies – agency or broker management systems – with the new technologies of marketing automation. This “unlocks” the rich customer data currently stored in management systems – and allows it to be used to deliver ongoing value and create meaningful relationships.
3. It automates valuable tasks and communications – delivering “delight” to customer moments-of-truth throughout their customer journey. Brokers can easily deliver the loyalty-building touches and campaigns that support their underlying promise. Sophisticated systems can trigger meaningful communications based on the customer’s constantly evolving journey. As they travel from “new customer” through stressful claims, account renewals, even birthdays, integrated marketing automation can help customers “feel the love” from brokers who otherwise would regretfully ignore them.
4. It delivers content that doesn’t just reach for the wallet – but reaches the heart. Most brokers aren’t prepared to become content marketers or copywriters. Effective solutions craft customizable messaging for the myriad of possible broker-customer touchpoints, from account rounding to nurturing newsletters to disaster preparedness and so forth. As Steve Jobs said, “… technology alone is not enough. Its technology … married with the humanities that makes our hearts sing.”

This is the promise of InsurTech for brokers. It’s an equally compelling promise for the vast share of the market that cares about peace of mind and wants a broker to stand beside them: that we can make the heart of an insurance customer do the remarkable – sing.