The same, but different

After the calendar flips to a new year, Canadian brokers agree that the current hard market conditions are not likely going to look much different in 2020. But for brokers, the old adage is reversed: the more things stay the same, the more brokers will need to change.

It’s no secret that the past 12 months have been rocky when it comes to market conditions – customers are seeing rate increases, and it’s harder to place their insurance in certain classes of business. Many industry analysts have predicted no change for 2020. So, with higher premiums not being much of a selling point, brokers will have to think of some new, creative ways to corner their share of the market.

“The onus is on the broker to enhance their relationship with clients,” says Kevin Neiles, Winnipeg-based president of Western Canada and chief marketing officer with Gallagher Canada. Some brokers may have fallen into the habit of delivering bad news, like rate increases, only at the last-minute, when renewals are looming. That doesn’t help with promises to be transparent with clients.

“We want to tell clients bad news as quickly as possible, making sure they understand the market by being as transparent as possible,” he explains.

Brokers have an opportunity to increase their presence in the public consciousness. “We work in an industry that is vital to the survival of our economy and people don’t understand what we do — it’s an interesting conundrum,” says Monica Woldring, vice president of commercial insurance for InsureLine Brokers in Port Coquitlam, B.C. “They don’t want to know [about insurance] unless there’s something that’s hitting them. They don’t want to hear about it.”

That said, brokers can think of many reasons why consumers would want to lean on brokers more heavily for advice in the future. Among them, Millennials — those who are between 22 and 38 years old this year — may become entrepreneurs in niche business markets. Brokers specializing in these areas can provide them with more tailored insurance advice. Canadian businesses face new and emerging risks such as cyber security events and data privacy, for which brokers can offer specific advice. And of course, many consumers these days want insurance coverage in classes of business for which capacity has dried up; they can benefit from a broker’s knowledge about how to navigate through a hard market.

When clients come to brokers for advice, they don’t know much about insurance, so don’t speak to them using industry jargon, Woldring recommends to brokers. “I have a problem with insurance people speaking insurance to customers instead of English,” she said. “I don’t talk about commercial general liability. I say, ‘If you do something wrong and you’re sued, that’s what liability insurance is all about.’ I don’t use the terminology the same way.”

During hard markets, brokers must find a way to satisfy their clients, notes Jody Lohr, Calgary-based vice president of operations at Lundgren & Young Insurance. To do that, they work on strengthening a broad spectrum of relationships. “We work with the markets, with the [broker] association, with our government, and advocate for consumers,” she says. “It’s going to be [about building] a lot of relationships where we all need to work together.”

As the new year dawns, there will be a greater need for a more sophisticated broker, says Shawn DeSantis, president and CEO of Navacord in Toronto. “The trend is more sophistication from a broker perspective: more sophistication in Cat mapping, more sophistication in insurance programs, and more work on claims management and claims mitigation,” he says. “It’s just not about paying claims anymore. They’re expecting the broker to use data and analytics to bring to them claims mitigation tools and ideas — to the point where they are actually avoiding the claims and not getting that disruption in the business.”

Specialization

Standing out from the competition extends beyond just providing great customer service, says HUB International’s chief sales officer Carol Mills in Burnaby, B.C. “Brokers will be challenged to think outside the box, and to be strategic about how they help their clients manage risk.”

Risks are proliferating, as Mills observes. And so the need is shrinking for a broker to be all things to all people. “There is definitely a place for the generalist broker,” she says, “but that generalist needs to know when to act as a general contractor and bring in specialists.”

Nearly everyone with whom Canadian Underwriter spoke brought up cyber as an example of specialization. This high-profile risk continues to plague Canadian businesses. It’s a complex topic with different levels of coverage.

Brokers must be able to speak to clients intelligibly about the topic. To do so, they will need to translate the tech-speak of IT departments. “Standard run-of-the-mill property and casualty brokers are maybe not as comfortable doing that,” DeSantis says.

A specialist in cyber can stay up-to-date on new market trends and coverages better than anyone, Mills says. “People must have deep knowledge on subjects to handle the changes that are happening in our client’s business,” she says.

Data

If you ask Jeff Roy what will shift the broker channel the most in 2020, it’s data. “I would suggest 2020 is the Year of Data,” says Roy, president and CEO of Excalibur Insurance in Ontario. “Brokers will awaken and realize how important their data is. How do we use our data better? We can use structured data, but we don’t have the ability to use AI [artificial intelligence or] machine learning to the extent we need to. There needs to be an evolution in how we share data as an industry, how we make data and how we use unstructured data.”

Structured data, according to Webopedia, “refers to any data that resides in a fixed field within a record or file. This includes data contained in relational databases and spreadsheets.” Examples include names, addresses, telephone numbers, insurance policy numbers, licence plate numbers, etc.

Unstructured data, on the other hand, is collected through telephone calls, text messages, emails and social media. That’s where a lot of key information for brokers exists, such as if a client is unhappy and ready to leave a brokerage.

Data provide real-time insights into the consumer that might help change a broker’s business. If, for example, signs in the data suggest that a client is ready to defect from the brokerage, “how we can take the next best action to retain that client?” says Roy. Similarly, if data suggest that a consumer wants to buy something, brokers will be able to reach out to that consumer to close the deal.

Data also help brokers do their jobs more efficiently, adds Neiles. Insurers are already using data to streamline the insurance-buying process. “They’ve been investing a ton of money over the last number of years and moving off of legacy systems on to newer, more effective, more efficient systems,” Neiles says.

If brokers do not similarly upgrade their own systems to tap into their insurance companies’ newer technologies, he predicts, brokers will soon fall behind. Overcoming inefficiency is a key driver of brokerage consolidation, industry analysts observe.