Brokers are more like Amazon than they think: IBAO Convention

Much like Amazon, P&C insurance brokers offer consumers distribution, choice and data, a broker executive observed at the Insurance Brokers Association of Ontario (IBAO) convention in Toronto last Thursday.  

In the same way, brokers offer insureds three things that underpin the offerings of big tech firms like Google, Facebook, Uber and Airbnb, said Sherif Gemayel, president and CEO of Trufla Technology. 

First, he says, is that brokers are distributors — just like these big tech firms.  

“If you dig a little bit deeper, you start to realize that Amazon doesn’t actually build any products — they’re a distributor. Google doesn’t build the websites, it indexes or categorizes websites. Uber doesn’t build or own any of the cars, Airbnb doesn’t build or own any of the properties, and Facebook doesn’t create any of the content.  

“In that same vein, brokers are distributors. They don’t manufacture products,” Gemayel said. “We depend on our insurer partners to develop those products.” 

And, in their roles as distributors, brokers and big tech firms both give consumers the power of choice.  

“Imagine if you went to Amazon, you’re looking for a USB cable, and all you got was one result. The experience wouldn’t be so great,” he said. “These companies are rooted in their ability to cater to the masses, to offer choice. 

“Having broad choice is empowering to the customer, and it gives [a customer] the ability to make the best decision for whatever their situation ultimately is. A broker can offer you multiple choices, giving the consumer the ability to make the best financial situation for themselves.”  

This matter of choice may explain why insurtech shares are down, Gemayel suggested.

“[Remember] the insurtechs that were supposed to destroy brokers? Well, these guys were selling direct to consumer. It didn’t offer much choice — they were offering one product, and if you look at what’s happened to them over the last year, it hasn’t been a very pretty picture.” 

For example, American-based insuretech Lemonade’s shares were down approximately 66% since their initial product offering (IPO), as of early October, Gemayel observed. Hippo Insurance’s shares were down almost 94%, and Root Insurance’s shares were down 98% in the past five years since their IPO.  

Insurtech investments fell by 79.6% in 2021, as investments into the sector had “dried up somewhat,” according to a recent GlobalData report. 

“Root and Hippo recently reported that the Number 1 channel for their distribution now is brokers or agents in the U.S. Lemonade has also pivoted and they’re selling their product through brokers and agents,” said Gemayel. “They learned that consumers don’t buy insurance the same way.”  

The third comparison between brokers and big tech firms, and the biggest opportunity for brokers, lies in big data. 

“We’re in an industry that is blessed with big data. There’s a lot of data that’s required to be able to create the products and distribute the products,” he said.  

Google, for example, will finish your search query once you start typing it. Amazon’s algorithm is so attuned to your shopping patterns that it can make product recommendations.  

“These companies didn’t start off like that. They use the power of their data early on to adjust their business models, and pivot in different ways to get to the point that they’re at now.” However, brokers are lagging in their ability to use data to increase distribution or find operational efficiencies, Gemayel suggested.  

“One of the biggest issues that brokers face is access to the data. Getting that data is not easy,” he said. “Big data has been reserved for carriers. They use that data to create the amazing products that we sell…every time you sell their policies, they’re aggregating that data, extracting more intelligence, and offering the products to distribute.” 

Predictive rating technology being developed by his firm is one example of how brokers can employ big data to their benefit. 

“You enter in the age of the [policyholder], how many years they’re driving, put the postal code in to populate the address, select the year, make and model of the vehicle,” Gemayel said. “Just by selecting the vehicle and pressing predict, it’s going to give you a rate. That’s not the final rate, but it’s pretty accurate.” 

 

Feature image by iStock.com/Julie Clopper