2023 Executive Outlook | Barry F. Lorenzetti, BFL Canada

Barry F. Lorenzetti, founder, CEO, BFL Canada

Watch for several trends to happen in 2023, including an increase in broker value, how P&C insurers adjust their strategies following the COVID-19 pandemic, and how the industry promotes community resilience during uncertain economic times.

A value shift favouring brokers took place three to five years prior to the COVID-19 pandemic and continues today. Both public and private investors have recognized the broker’s position of strength in the insurance value chain. Total shareholder returns are much higher for brokers than for other industry segments, and private equity firms are investing.

This is happening because insurers do not control their distribution channels as tightly as other financial sectors. Consequently, insurers run the risk of becoming pure balance-sheet providers, while brokers keep an asset-light client relationship model.

Insurers must contend with a raft of challenges due to COVID-19. We are in uncharted times and insurers now face several fundamental strategic questions. How can they create more value for shareholders? Can they unlock latent demand and improve the client experience? How can they regain momentum on the long-running quest to improve productivity? Also, what about talent? How can they reimagine the employee proposition to attract and retain the brightest and best post-pandemic?

We need to do more to promote our industry to prospective talent. We have a tremendous value proposition that is still a secret to young people as they leave school.

On the flipside, the turmoil caused by the pandemic, in conjunction with the war in Ukraine, will likely renew focus on genuine economic issues. The three main drivers are: a realignment of supply chains to insulate against future trade disruptions; added focus on renewable energy due to worries over energy security; and higher food prices and the potential for global food shortages.

Against these economic headwinds, the insurance industry will remain an agent of resilience. For example, insurers will help businesses maintain financial stability with coverage for risks inherent in supply chain restructuring initiatives. Insurers can also facilitate the green transition by increasing their underwriting of renewable energy and decarbonization projects and improve food security by extending the reach of agricultural insurance.