Cutting edge broking
Andy Thornley of BIBA discusses how insurtech will bring about new ways of broking and enhance the current insurance industry, with InsurTech Rising 365 (FinTech Futures‘ sister company).
“Gillette, the best a man can get”
It’s a jingle which is universally known to many people of a certain age. It is synonymous with shaving razors that contain the latest innovation to give you the closest shave yet. Using their products, you have options of three blades, five blades, rollerballs, “micro-pulse” emitting razors, lubricating “shield” strips and razors that involve combinations of all of the above. The choice is vast. But it wasn’t always like this.
Razor blades are expensive and their rival, Bic, spotted an opportunity.
It entered the shaving market offering low-cost, disposable razors. This saw Bic’s presence to grow significantly, enabling them to corner 25% of the market in less than ten years – significant growth in market share. Gillette could have carried on regardless; happy with the way they were doing things, refusing to adapt to a changing market where people wanted something different from the status quo. They could have chosen to compete on price, sacrificing quality.
But Gillette didn’t. They innovated and redefined their offering. They weren’t tempted in to a race to the bottom and instead, positioned themselves as a quality product giving the public what they wanted; closer shaves with less irritation. In the process, they differentiated themselves from their rival by being seen as the quality product to go for.
To some this anecdote may sound glib, but it has important message for our sector when it comes to disintermediation; we need to continue to adapt to stay relevant to our customers and what they want.
Broking has faced various threats over the years, from direct providers with red telephones to websites featuring meerkats; yet the sector has remained resilient. Brokers have always innovated, being able to place niche risks ranging from international space stations to holiday-makers with pre-existing medical conditions.
Much in the same way as razor blades were refined, we’re already seeing the traditional models of insurance being given a makeover.
From Laka’s cycle insurance where the premium is calculated from how many claims have been made from the claim pool each month, to Cuvva who offer “on-demand” telematics motor insurance – fitting with the on-demand lifestyle many millennials now want. As you may know, the collective term given to this area is insurtech.
It’s easy for incumbents to become baffled by the new lexicon of InsurTech-related terms; artificial Intelligence (AI), machine learning (ML), mutually distributed ledgers. But that doesn’t mean that tech-led innovation is out of reach to these firms. Change can be incremental as well as “big-bang” stuff.
Insurtech isn’t a new phenomenon.
Electronic data exchange (EDI) is now seen as the norm for many brokers as the means to transact with insurers. If EDI were invented tomorrow, it would be described as an insurtech initiative. We’ve been doing it for years; we just have a new name for it.
Innovation isn’t just something for other firms; it’s something every insurance company should be looking at if they aren’t already.
We need to ‘move the needle’ – to make a tangible difference to the ability of our sector to engage with new tech-driven innovation, which falls broadly in to two threads; helping start-ups/scale-ups to establish themselves and assisting incumbents to make the most of opportunities that are available.
A few years ago, there was an avalanche of start-up firms vying to enter the market with a message to incumbents; your businesses are out-dated, customers don’t trust you and we’re going to come and eat your lunch. The relationship felt adversarial.
But things have changed somewhat and the tone has softened. Many start-up and scale-up insurtech firms are now seeing more value in partnerships rather than direct competition. This is through a variety of routes including (but not limited to) platform-based solutions, AI-enabled apps or as an appointed representatives of existing firms.
Quite often, new entrants in the market can find it difficult to arrange capacity or may have knowledge gaps with how the market works. They often don’t know who the right people to partner with are or how to get in touch with them. Similarly, if you’re a broker wanting benefit from new technologies, where do you go to speak to the right person?
BIBA are working to bridge that gap so if, for example you’re a broker interested in AI-enabled apps, you can find out more information and who to potentially speak to about it. If you’re a start-up, we can put you in touch with people who are keen to be partners. In order to tackle the issues in embedding tech-led innovation in our sector, we formed a cross-industry group of senior members of the industry to help identify the barriers and offer up potential solutions. Our group is made up of insurers, incumbent brokers, tech-led brokers, consultants and those involved in data standards. We are confident we can make it easier for start-ups and scale-ups to enter this thriving market, foster partnerships and help demystify what InsurTech is to an existing broker audience.
Reports of Amazon’s imminent foray in to insurance create the classic threat vs opportunity situation. We do not yet know what their strategy, or indeed their chosen market(s) will be, but there is no doubt that a huge company with experience of setting up one of the largest virtual market places in the world may present a threat to many in our sector.
But it also presents an opportunity. An opportunity to grasp the nettle and engage with innovation.
As a sector, we will continue to innovate, continue to evolve and continue to thrive. Unlike Gillette however, we’re planning on it not being a close shave.
Written by Andy Thornley, head of corporate affairs and lead on insurtech for the British Insurance Brokers’ Association (BIBA). You can connect with Andy on Twitter at: @bibaAndy and BIBA at: @BIBAbroker.