Is the Northern Irish insurance broking industry facing ‘digital Darwinism?

The future does not fit in mindsets contained by the past. Faced with disruptive technologies, rising consumer expectations, and the advent of digital-first companies, the survival of the fittest in the age of digital distribution is being felt more keenly than ever. Businesses not only have to compete to survive for today, but they must also fight to stay alive for tomorrow.

Digital Darwinism is a fate that threatens most organisations none less so than Ireland’s insurance brokers. Technology and society are evolving faster than Ireland’s broking organisations can adapt.

Having barely survived the birth of direct insurers attacking the private motor market, then price comparison sites and of course changes in the buying habits of the public disruptive technologies now threaten to dis-intermediate insurance brokers, whose future relevance is at risk.

We live in a world where thin interface companies such as Amazon, Netflix, Ebay, Spotify and Uber have reinvented our consumption and working preferences. Each has achieved unprecedented growth by exploiting gaps in the market left by legacy businesses. Our expectation of good has risen exponentially. Customers and colleagues alike expect company services, processes and products to be digital, automated, intelligent and transparent. If our experience isn’t amazing it is no longer good enough. Seamless, intelligent, personal, digital experiences have become the minimum benchmark and anything less than that simply wont cut it.

Insurance brokers must deliver the same minimum benchmark experience or suffer Digital Darwinism. Incremental change is not enough. Adding technology to the edges of your broking business and wrapping it up as ‘innovation’ just won’t work. Minor adjustments to existing business models and strategies that were developed in a bygone era of stability, linearity and predictability won’t help Irish broking firms survive.

In Accenture’s report, “The broker of the future: Winning in a disruptive environment”, 84 percent of surveyed insurance executives agree that traditional organisations must evolve their business before they’re disrupted.

However, whilst agreeing few are truly digitally evolving. The shift of the insurance industry online for many is seen as a threat to their existence, and the empowerment of customers through digital technology as a move with the potential to cut their business out of the insurance value chain.

It is worrisome to see that many insurance brokers have not moved on digitally in the past ten years. Many of today’s graduates are doomed to encounter archaic, monotonous, manual administrative processes. Digital is something they get to practice at home. Energies which should be focused on innovation, creativity and judgement, communications and empathy for colleague and customer, are lost in a morass of value and spirit draining activity.

Insurance broking is significantly rules based, conferring to patterns and rules that have existed through the ages. This patterned work is oft considered dull and monotonous, subject to boredom and errors; and strew with opportunities for rising risk and cost associated with checking and fixing. Work that should be challenging, interesting, intellectually demanding and rewarding, value creating and customer centric is often anything but.

Consumption patterns and workplaces are changing. Layers are fewer. Flexible, digital, agile ways of work are the norm. Technology is changing both the pace and performance of the most agile organisations who are thriving not simply surviving.

This is a time of digital Darwinism. This is an era where technology and society are evolving faster than Irish broking businesses can naturally adapt. This sets the stage for a new era of leadership, a new generation of digital insurance business models, charging behind a mantra of ‘adapt or die’.

Rather than react to change or be disrupted by it, some forward-looking companies are investing in digital transformation to adapt and outperform peers. There are meeting and selling to consumers in ways they are used to being reached and interacted with (i.e. online, personal, digital, social, mobile).

Gen X, Gen Z, Alpha are the most technological-infused demographic to date. They are more connected than everyone else. and, as a result, they’re more informed and empowered. And, their expectations, at the same time, are soaring. They demand attention. They demand hyper-personalisation, transparency and efficiency…their way. And, they require that your values match their own.

Truly digital ‘insurtech’ disruptors, such as FriendInsurance, BoughtByMAny or Knip are changing the way people interact with insurance.

For example, Lemonade, a US peer to peer insurance company, offers property and casualty insurance company online. It is powered by tech. It is a radically different, simplified, digitised and modernised insurance delivery model. With a mantra of ‘instant everything’ it’s clients are able to obtain personalised insurance in seconds with claims settled in minutes. It’s offers are quicker and more accurate than even the most highly experienced broker can manage. It is a transparent digital experience that is open to all. Lemonade is designed for social impact. It takes a flat fee and treats the rest of clients’ monies as theirs. Client money is used to pay claims, and what’s left is given to charities that clients choose.

Digital transformation is as much internal as it is external. It is as much about attracting talent for competitive advantage as it is for delivering on client expectations. Vibrant innovative, fast moving, digital work environments and cultures that involve, engage and entertain in equal measure are crucibles for success but sadly lacking in number.

Future proofing your company doesn’t mean brokers need to be the next Uber or Amazon but digital transformation must be at the core of a broking business, not at it’s edges.

Insurance plays a unique and vital role in the daily lives of millions of people. Insurance brokers are fundamental to a healthy, competitive and diverse insurance sector. Society needs an insurance industry that is sustainable, innovative and competitive; one that they can trust.

Insurance brokers need to digitise and intelligently automate to spend more time with their clients, becoming true risk advisors. AI driven chat-bots that use machine learning to contextualise conversation and content, read client files or emails, view images or extract and organise data from documents or vast vats of online data then act on prescribed business rules offer an alluring Aladdin’s cave of opportunity that simply needs grasped.

The genie is out of the bottle.

Despite the fact that many brokers fail to recognise and communicate the value of the expertise they hold as industry professionals brokering will not become obsolete. Customers will continue to seek out brokers’ independent advice. Clients simply don’t know what brokers know (and often don’t care).

Brokers need to communicate the value of the risk management expertise they hold. They must start seeing themselves as ‘the outsourced risk managers’ for their clients and prove the value they can offer using all the technology and expertise they have available to them.

Insurance brokers must identify the aspects of their traditional role which are still relevant to customers and adjust their value proposition accordingly. They must adapt to market changes or die.

It’s not a question of digital technology replacing brokers, but those brokers who successfully adopt it will certainly replace those who don’t. A lack of investment in IT, digital or marketing skills is no longer an acceptable. The technologies and skills are there if the will power to change is found.

Technology elites, such as Lemonade, are disrupting the insurance industry. They are not complaining. They are choosing to compete to transform customer experience and expectations in the same way that Amazon or Ebay transformed buying; Uber the taxi business, AirBnb the property rental business or Netflix our viewing experience.

Irish insurance broking businesses need to be more transparent than ever; clients expect unrestricted access to their risk data and profile. Black box aggregate risk pricing, where loyalty is rewarded by ever higher premiums, will not be tolerated. Brokers need to work for their clients not the other way around.

The way things are, are not the way things need to be.

Expert colleagues, both virtual and real need combine to exceed customer expectations delivering to prescribed business rules or work patterns. Cognitive agents, smart contracts, improved risk selection through IoT solutions, AI, NLP, online document wallets, intelligent automation, transparency and robotics need to be the standard not the exception.

Customers know what they want. They have a choice in how, and from whom, they buy their insurance.

Those insurance broking firms who are listening to their customers and adapting will survive, those who don’t are doomed to extinction.

#InsuranceBroking #IntelligentAutomation #DigitalDarwinism #RPA

Note: The above are the authors’ personal views.

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