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The human advisor is still needed in the non-life insurance industry

By February 23, 2021April 13th, 2022No Comments

As the title of the article suggests, here are some statistics on why we believe the human intermediary will always remain integral to an insurance transaction process… 

  • Across property and casualty, 44.2% of business is transacted through intermediaries 
  • Diving deeper, specifically for commercial lines, intermediaries accounted for 70.8% of commercial property and casualty net premiums written

These are not numbers we made up and is according to a publication by the Insurance Information Institute, a U.S. industry association.  

Say first. This is a U.S. research but we believe it is quite representative.

It seems, even with the rise of the D2C (direct to consumer) approach and new distribution channels via aggregator sites, that the intermediaries remain resilient. 

And rightfully so.

We wrote a commentary sharing how an Intermediary’s role is highly valuable, especially in the complex world of non-life insurance. 

Here we look at how the entire ecosystem can work collaboratively by leveraging technology to supercharge an intermediary.

Cost of distribution 

The rise of the D2C and aggregator sites have no doubt posed threats to the industry; price pressure has created lower margins – potentially commoditising insurance products. 

It is therefore something on everyone’s mind on how the cost of distribution can be lowered. 

Streamlining channels, lines of communication and processes with intermediaries is one way more and more insurers and intermediaries are doing. 

The value of the intermediary remains clear for all to see. There is a certain realisation that instead of banging down the D2C wall, building a hybrid approach might be the way to go.

With technology, cost can be saved on several fronts:

  • Onboarding of intermediaries
  • Conflicts and outcomes
  • Business leakage due to lack of visibility to opportunities

Industry regulation

Regulations are arguably, ‘necessary evils’. It is there to protect both the policyholders and the insurer from mismanagement or the gaming of the system. 

It is also a burden that parties in the insurance ecosystem have to bear.

For example, here in Singapore, under the General Insurance Agents’ Registration Regulations, licensed General Insurance agents in Singapore are allowed to represent a maximum of three insurers. This regulation is there to protect the consumer from being mis-sold something.

While there have been many heated debates on this regulation, instead of cursing at it, technology can and should be leveraged to help both insurers, intermediaries and ultimately, the policyholder be more efficient in their roles, while remaining compliant. 

There is no need to thread the line or sidestep the issue. 

This is not a localised situation.

In the UK for example, intermediaries operate in quite a burdensome and many times, expensive regulatory system as well – the cost for some smaller brokerage in the UK to stay compliant has increased by 70% in a three-year period.

And this goes back to the point on cost efficiency.

We believe technology not only serves to ease this burden, it will improve efficiency.

Focus should be placed on helping to optimise the intermediary’s performance

While it would be foolish to take an extreme stance on fully focusing on any single distribution channel, we have observed that the most successful Insurers in the industry have started to adopt a hybrid approach.

We will be just lying to ourselves if we were to say the D2C approach will NEVER work; certain products, predominantly, personal lines, have proven otherwise. 

Similarly, it will not be wise to say that intermediaries can be TOTALLY cut out. The stats we shared at the start of this article already suggested otherwise.

As such, it would seem that efforts need to be placed to optimise the workflow of an intermediary. 

When this is achieved, management of the intermediaries’ performance becomes easier, both on the part of the Insurer and the intermediaries (including Financial Advisory firms) themselves.

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