Whenever technology looks to disrupt an industry it often starts with the lowest hanging fruit: distribution, and by association, gate-keepers; the insurance industry is no different.
The first wave of innovation that entered the insurance market was brought by comparison sites which removed the (perceived) gate keeper role occupied by the broker, revealing to the consumer a variety of prices and letting them make unbiased decisions.
In his article, Andy Thornley (Head of Corp. Affairs, BIBA) articulates how the role of the broker has evolved - and the risk that exists for brokers racing to reduce prices in order to compete. As Andy rightly points out: "brokers have always innovated, being able to place niche risks"; however, I don't think he goes far enough to recognise the threat of disruption for commoditised risks like auto, contents and homeowners.
Brokers of the future will be essential is providing advice and program structure for complex and niche risks but their role as a gate-keeper for commoditised capacity will eventually disappear. Additionally, as capacity continues to flood through the (re)insurance industry, their primary revenue stream of percentage based brokerage will also come under threat.
The broker of the future will need to double down on their core competency in order to survive: risk expertise and product knowledge.
The continued commoditisation of capital will likely force brokers to work on a fee-based model and in this environment, much like that of the legal and accountancy sectors, expertise wins.
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.
