I was recently mandated to moderate a series of focus groups with P&C insurance brokers. In the context of these groups, one of the topics discussed was how brokers would compete with direct writers in the short to medium term. After some discussion, there was a new twist on an old conversation. I’m still trying to understand it. Perhaps you can help.
Price as a competitive necessity ….
Some brokers intend to compete by being open evenings to provide service to those unable to make insurance-related phone calls during the day. Others stated that they plan to be more present on social media. Overwhelmingly, however, brokers mentioned lower premiums as the key to being able to retain customers in the “battle” against the “directs”.
“The price I offer cannot be higher than what the customer can get from a direct,” said a few of the brokers.
But is there nothing but price?
Is price the only variable on which brokers are competing? I challenged the brokers participating in the discussion to think about what they offer other than a competitive price? I asked them to consider what their value is from the perspective of the policyholder.
For the broker channel to continue to thrive and win back some of the market share lost to the directs, it will be imperative for brokers to determine how they will compete, what they will do differently to retain and attract insurance customers.
The brokers’ Strategic Excellence Position …
Any business that will be successful must identify and compete using its strategic excellence position (SEP). An SEP has three characteristics:
- Something of value to customers
- Something that the organization does well
- Something that competitors don’t offer and have difficulty offering.
I asked brokers to come up with their SEP. While many had difficulty identifying one, some suggested that the personal contact or “relationship” they have with customers is their SEP. The ability for a policyholder to call a brokerage and speak with his/her broker was considered by participating brokers as the certain difference between dealing with the broker channel vs going to a “faceless”, “nameless” direct where a policyholder speaks with whoever answers the phone.
So is everything good now?
While these brokers felt confident that therein lies the secret to their future ability to minimize the erosion of market share to the direct writers, one of the brokers participating in the group discussion changed their perceptions.
Up until 18 months ago, this broker had been an agent of one of the directs. He explained to the group that the direct writers are moving to a model where their agents act as businesspeople handling “their own” policyholders. Each of these direct writer policyholders calls “their” agent who handles their file and who goes to bat for them in case of a claim. The only thing these agents cannot do is offer/suggest the product of another carrier.
The insights shared by this former direct writer agent stumped the group. They questioned themselves as to how they, as brokers, would be able to compete in a world of direct writer agents who perform many of the same activities as the broker and who are offering customers a unique contact. Certainly, they also considered the fact that direct writer agents also benefit from being part of relatively large organizations with 24/7 personnel availability, fully integrated client systems, access to correct billing information, etc.
So this is where I need your help….
The brokers left the discussion without having answered the question: What is the broker SEP in a world where the direct writers are mimicking some of the qualities of broker relationships?
What is the answer to the above question? I would love to hear your thoughts.