Shifting Landscape: Part II

Fresh leadership thinking. Change in distribution. Loss in market share. These are the top three issues for brokers, according to the second annual broker opinion survey, conducted by The French Group and Keal Technology in August 2009. (The first survey, conducted in July 2008, was a joint venture by The French Group and Canadian Insurance Magazine.)

Fresh leadership thinking. Change in distribution. Loss in market share. These are the top three issues for brokers, according to the second annual broker opinion survey, conducted by The French Group and Keal Technology in August 2009. (The first survey, conducted in July 2008, was a joint venture by The French Group and Canadian Insurance Magazine.)

Lack of Preparation a Concern
The top three concerns for brokers stayed the same from 2008 to 2009 and all were about adapting to change. In 2008, 67% of brokers reported they were “not doing enough to adapt.” In 2009, 67% of brokers confessed that they weren’t doing enough to mitigate the impact of a changing industry. Yet in the same time frame, more brokers–67% in 2009 versus 65% in 2009–believed that changing distribution models, rising consumer expectations and the challenge to keep up, had had a negative impact on their business. In fact, the top three areas of concern for brokers were

 20092008
Keeping up with technology
35%
44%
Decrease in revenue
35%
64%
Decrease in profitability
31%
Decrease in PIF
47%

When asked if they had enough tools and resources to effectively compete against new distributors, 73% of brokers said “no” in 2009, a 6% jump from the 2008 response. (Interestingly, 77% of carriers reported they did not have enough tools and resources to compete against new distributors, in the 2008 survey.) For example, the single most frustrating and costly issue for brokers is the downloading process–where brokers are expected to complete back-end documentation that was once the purview of the carrier. Even now, downloading is still not 100% accurate, which means that brokers have to constantly audit and fix problems. Add to this the complexity and confusion of the different portals and workflow processes that are proprietary to each carrier and this entire process starts to wreak havoc, and add significant costs, to a brokerage’s operations. However, the biggest consequence is that the broker is diverted from their primary job of attracting and retaining clients. As the numbers will attest, this in turn created a window of opportunity for direct distributors to gain market share.

Meeting Client Expectations
This loss of market share, and brokers’ lack of resources, combined with consumers’ rising expectations is of great concern. One such survey, conducted in 2008 by the Insurance Brokers Association of Ontario, identified four distinct moments when clients want to hear from their broker:

1) To recommend changes in coverage: 81%
2) To make a change on their behalf: 80%
3) Prior to renewal: 78%
4) Occasional contact: 62%

Customers are sending a clear message that they want to work with their broker for proactive advice, choice and one-on-one professional service. However, as brokers struggle with their lack of tools, and tough competition from direct writers, there is now a need to do more.

Being Proactive is Key
What these surveys did uncover is that the industry, as a whole, is acknowledging that more needs to be done. Over the last two years brokers identified five key areas for development:

1) Train staff to be proactive (83% in 2008; 78% in 2009)
2) Create a sales culture (80% in 2008; 77% in 2009)
3) Embrace change (78% in 2008; 78% in 2009)
4) Invest in technology (75% in 2008; 64% in 2009)
5) Develop succession plans (63% in 2008; 64% in 2009)

As one broker put it: “The days of the ‘small mom & pop’ brokerage is coming to an end. It’s now becoming a very sophisticated business that needs an educated management team who can handle the complexity and rapid change.”

Brenda French is president of The French Group, a consulting firm that assists clients in developing competitive strategies to create profitable growth. This article is based on a presentation at the Keal Technology’s annual users’ group conference in October 2009.

METHODOLOGY

2008 Survey: The survey was sent out in late July to 2,220 industry professionals. We received 268 replies from every province across Canada–a 12% complete rate. We did a separate survey for Quebec as their business environment is unique.

About 50% of the respondents live in major cities with the rest living in smaller centres and rural environments. The mix of business was approximately 60% personal lines and 40% commercial lines.

Many of the questions were multiple-choice and there was an opportunity for respondents to provide expanded feedback. We received over 460 additional entries.

2009 Survey: The French Group partnered with Keal Technology to survey their clients (all brokers) and received a 6% response rate. The demographics of the respondents were similar to those in 2008.

© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the January 2010 edition of Canadian Insurance magazine.

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