Stephen Netherway reports from Rendezvous de Septembre in Monte Carlo, where discussion has frequently turned to how brokers can maintain their role amidst unprecedented margin pressure.
The broker’s role has always been to identify and develop viable solutions to protect against risk.
However, the ongoing relevance of brokers, and what value they can offer is a matter for urgent debate. In a future where demands for digitisation mean a compression of distribution chains by client and carrier alike, the options for brokers now appear in many cases to be, change or die.
This focus has been magnified by the current soft operating cycle and the pressures to reduce or eliminate costs from the distribution of insurance products. There is a parallel need to show customers, (re)insurers and the regulator that what the broker can offer is additive and of real value in a future distribution of insurance products and solutions.
This is a recurrent theme heard repeatedly around the Rendezvous de Septembre 2017 event in Monte Carlo.
So what’s to become of the broker in the (re)insurance market?
Customers want to have increasingly digitised electronic interaction with their carriers; carriers also see this as a necessary route to compressing the distribution chain of their product, a means of getting closer to the client while saving cost and expenses as commissions are no longer required.
If brokers can harness the ever-increasing supply and retention of data, its mining and analysis, while establishing digital platforms for practical benefit they can certainly meet this challenge. The pace of such technological change is exponential, not linear, and keeping ahead will not be easy.
How otherwise to show value and to retain relevance in the insurance market of tomorrow?
If the chains for product distribution are no longer wholly in their hands, then being the party responsible for identifying new risk areas, and creating product solutions to protect against them, will ensure brokers stay relevant.
Options for reinsurance brokers
The pressures identified above are certainly more acute in the direct market but the demands for added value will also apply in the reinsurance market. What might the suite of advisory options look like for the reinsurance intermediary in tomorrow’s world?
- Risk management is an obvious area, not just operational risk but financial risk, with associated capital modelling and platform creation support
- Financial management also offers the broker opportunities, not just in reserving and modelling but in assessing solvency testing and regulatory reporting
- Product and market strategies to manage claim costs, in distribution, market analysis and the utilisation of AI
- Acquisition/business unit disposal and restructuring support, including due diligence support but also including the provision of supporting analysis and support for sales and capital raising.
The reinsurance market is likely to look favourably upon and to partner with brokers who can provide comprehensive platforms reinsurers would otherwise have to establish themselves. Where significant cost and capital allocation can be saved, the use of comprehensive third party platforms that deliver the above services will be considered very valuable.
Brokers will continue to play a very important role in the future but their focus must shift.
The bywords of the broker should be:
“Best in class: best people with the best creative, processing and analytical skills; best profit, offering the best price through harnessing technologies to be efficient and maintain the highest margins.
Each of these combined leads to best practice in terms of service and product delivery. That is what brokers need to do if they want to meets the needs of clients and (re)insurers today.