Future of Commercial Insurance Broking
Commercial insurance brokers will need to have evolved into real business advisors for their SME customers by 2027 or face extinction, warns a new report by the Insurance Broking Faculty.
The Future of Commercial Insurance Broking report, produced in association with accounting consultancy PKF Littlejohn and broking start-up Konsileo - analyses the present state of the UK's SME commercial insurance broking market and looks forward ten years to how the market, and those working within it, will need to adapt and change to be both relevant and successful in 2027.
One of the key findings of the report is that the majority of SME customers see their relationship with their insurance broker as a transactional rather than an advisory one and would, in principle, be comfortable buying all or some of their insurance products online in the future. Over half also see their broker only once a year, yet 50% said they would be willing to spend more time with a well-informed risk adviser to discuss elements of their business and the risks they face.
The study also shows that 40% of account executives and account handlers at broking firms believe their jobs are at risk from artificial intelligence and technological developments. The report's authors, John Warburton and John Needham, predict that whilst advances in artificial intelligence will automate processes that transfer information between the client and the underwriter, the value-added element of a broker's role should come to the fore. They suggest that if insurance brokers can see artificial intelligence as a way to free themselves from mundane, time-consuming tasks, focus on work where human input makes a real difference, and embrace lifelong learning, they have a positive future.
However, the report warns of a skills gap that will affect the future of broking if left unaddressed. Currently 81% of brokers are aware of a skills gap and the report looks at how traditional broking careers have developed and how these are evolving and the challenges facing both employers and employees. Entry to, and development within, broking as a profession will move toward brokers specialising as a way to differentiate themselves and their services.
John Moore MBE, CII president, commented on the report:
"The future of insurance broking lies with individuals developing and maintaining expertise and trusted advisor client relationships. "This is not to say that the challenges facing brokers are not significant. Further commoditisation of insurance products could lead more clients to self-serve. Technology, particularly Artificial Intelligence, could displace employment across the market. The gap in technical and commercial skills could widen. These challenges are real. Nevertheless, the way forward for any individual or firm in the market is to relentlessly focus on clients and to continuously develop skills and technologies to support clients even further. This is the route to a successful and vibrant profession and to creating a future for the people working within broking both today and in the future."
The report reveals that brokers with less than five years' experience in the industry were the least fulfilled (with an average satisfaction rating of 6.1 out of 10), and rated the quality of management practice lowest (at 5.8 out of 10), giving the same score for quality of collaboration at firm level.
John Warbuton, Konsileo co-founder and report co-author, added:
"One of the key roles of this report is to help individual brokers understand how the profession is changing and what they can do to equip themselves for the future. But there is also a challenge to broking firms themselves to meet a growing desire for flexibility and virtualisation in working style, more diverse career options and paths and management styles based on collaboration and coaching, with a clearer link between contribution and remuneration."
John Needham, head of financial services at PKF Littlejohn and report co-author added:
"There is considerable scope to further enhance leadership and management at broking firms in order to attract and retain the best staff, particularly the next generation of talent. It will become increasingly less tenable for brokers to rely on the transaction-enabler role in the insurance buying chain to provide them with a decent income. Advice will become the product even more than it is today."
This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.