After attending recent industry meetings and planning sessions, we are convinced that independent brokers in Canada are at a pivotal point. On one hand, there are increased threats to the broker from a number of fronts. At the same time, brokers are seeing the market space with fresh eyes and a stronger commitment to serving the consumer which provides the foundation for sustained success.
For brokers to truly succeed, all parties — brokers, carriers, and suppliers — need to actively cooperate. However, leadership and direction must come from the broker.
Can brokers seize the opportunity and mold the future?
Obvious threats …
There are obvious threats to the independent broker which relate to shifts in distribution generally. Captive agency companies and direct writers in the US have taken the vast majority of personal lines business from independent agents. While penetration in Canada is not as dominant, there has been slow erosion, to the point where alternative approaches have almost half of personal lines and are staking territory in commercial lines.
Compounding this, some organizations are blurring the lines between direct writers and independent broker companies. Part of this stems from acquisition, but part of it is a concerted strategy to balance distribution risks.
More fundamental issue – the broker promise …
As difficult as the market threats are, we see a more fundamental threat coming from within broker offices.
Some changes impacting brokers now started years ago, but are only becoming obvious now. Commentators are suggesting there are larger changes happening now that will impact brokers in future, but are not yet recognized.
These changes circle around the customer. Peter Van Aartrijk, ceo of Aartrijk, advises agents and brokers on marketing and communication strategies. He addressed the consumer issue when he wrote:
The insurance industry creates products and services, but people buy brands. ….
A strong brand is something you earn, not something you receive. Smart firms realize that customer and prospect communications are an investment, not an expense, and they will build agency value. Best Practices agencies consistently are spending 1% to 3% of annual revenue on these activities (the larger the agency, the percentage typically drops). Some firms are redirecting more of the annual spend towards younger talent to handle social media initiatives; where in the past they might have directed more to paid media, for example.
Too many brokers are attacking today’s challenges with yesterday’s tools. And new tools need to be purchased and implemented intelligently.
Earning the customer’s business one transaction at a time …
Pat Durepos, president of Keal Technology, addresses the operational level, advising brokers to take action to serve today’s customer needs. In a recent article, Durepos notes that consumers require simple, effective methods for on-line, real time transaction processing, but “most brokers are not providing this ease of doing business.”
Durepos notes that brokers must take the lead in bringing others to the table: “Brokers excel at lobbying – I suggest you write to your provincial associations, your insurance company presidents and representatives, to demand immediate action and investment on real-time initiatives.”
We believe the broker must be the catalyst and project manager for this, demonstrating leadership by showing how her operations (using real time, for example) are focused on the customer and how her demands will enhance these relationships.
What’s different this time?
Some of us have heard this story before. Last year, we posted a brief history of agent connectivity (a necessary component of the solution Durepos recommends). At that time, the stated need for connectivity was 45 years old! The bottom line is that in spite of best efforts, there is no channel-wide solution in full production.
Organizations like IBAO and ORBiT are doing noble work to establish protocols for implementation of CSIO/ACORD Standards. But there is still a paucity of Canadian evidence that these implementations materially impact business results. (ACT and its parent – IIABA have done some work in this area. See our post on this, e.g.)
This is not someone else’s problem. Carriers are making decisions about distribution based on results of various channels. Broker Management System Vendors are making decisions based on purchase patterns of users. Brokers need to come to the table with cards to play and chips to bet.
What do you think?
We believe that the independent system has a strong value proposition, but needs to concretely demonstrate this value to end consumers and others in the industry. Now.
We’d like your comments.