The broker of 2035

An Insurance News roundtable tackles the key disruptive forces shaping the intermediated sector over the next decade

By John Deex

Tech will transform the industry, transparency and honesty are key, over-regulation is hurting and brokers need to speak up more on the direction and benefits of their sector. Plus, in 2035, brokers might no longer be called brokers.

These are just a few of the discussion points that emerged from an Insurance News roundtable the day after the National Insurance Brokers Association released its report: Ready or Reacting? Shaping the Future of the Insurance Broking Profession.

Participating in the roundtable, made possible by sponsor Vero, were NIBA president Nick Cook, Aon Queensland state director Lynette Walsh, Aviso Group CEO Jeff Moule, BAC Insurance Brokers COO Mitchell Lipscombe, CBN EGM of broking operations Wendy Foweraker, RSM Group general manager Danielle Doyle, and Vero head of distribution Anthony Pagano.

From brokers to advisers

NIBA’s report, produced in partnership with CoreData and CBN, says brokers are undergoing a “fundamental transformation” as they move towards a broader “trusted adviser” role.

About 77% of survey respondents say it is likely or very likely brokers will step into more strategic advisory roles by 2025 – but only 65% feel their business is prepared.

Our panel agrees a shift is under way but that it’s vital to ask the customer – particularly amid demographic change – what they want.

“We need to always assess, what problem are we solving?” BAC’s Mr Lipscombe said. “What does the customer need and want, and what do they desire to pay for?”

He added that resources and capabilities to enable the shift from broker to adviser are not yet in place, but Aon’s Mrs Walsh said brokers won’t need to do it all themselves.

“You can find strategic partners to give a holistic risk management, risk advisory service as well if it’s not something that you have the skill set for internally,” she said.

Mr Lipscombe agreed brokers need to become “orchestrators” as they facilitate partnerships to serve clients better, and CBN’s Ms Foweraker said brokers will need to become comfortable with passing their clients to trusted partners.

The panel felt there is merit in dropping the word “broker” as the sector evolves.

Ms Foweraker said people outside the industry usually think broker means stockbroker – “they never attach it to insurance”.

And Aviso’s Mr Moule thinks “adviser may be the way to go”.

“I think people are starting to progress that conversation,” he said. “A lot of people are shifting to the word adviser and that’s probably fair, particularly if we want to raise expectations and the way we think of ourselves.”

NIBA’s Mr Cook warned the federal government is considering ways to improve affordability in insurance markets, and Mr Lipscombe noted that in this context the term insurance broking “really pigeonholes us into insurance or risk transfer”.

“If we really want to be serious about our contribution to the ecosystem uplift, we do need to start thinking about the risk management solutions we’re orchestrating beyond the policy, because that government intervention example is where we actually lose addressable market”.

Remuneration

The panel was asked whether shifting from broker to trusted adviser will also require a reshaping of remuneration models. Commissions transparency is a hotly debated topic, but will the broker of the future move to a fee-based model?

RSM’s Ms Doyle believes it’s important to ask customers what they want, and she stressed that the answer may be different depending on the type and size of the client.

“As you speak to most of your customers, they know they’re going to be paying the brokers an amount. Do they want to see that as a large figure, say a $500 broker fee upfront just to talk to somebody? Or do they want it to be a smaller fee visible, with the commission already disclosed on that documentation anyway?”

Mrs Walsh thinks transparency is critical, and commissions are not necessarily a bad thing.

“You can still earn via commission and be transparent in that process,” she said. “If we compare ourselves to accountants or lawyers, they charge by the hour. But that’s not how we operate.

“We want to be that readily available conversation. We don’t want the clients to be sitting there thinking, ‘I don’t want to make that call, because I don’t want to be charged for that hour, for that 30 minutes.’ ”

Mr Cook said it is urgent brokers “form a view”, pointing out that member submissions to NIBA’s code review were few and far between.

“Consumer groups, governments – they are very aligned on transparency. Brokers responded in a variety of ways and given the diversity of business models and client types they serve, their feedback reflected the broad range of models.

“There’s a younger generation coming through that are saying, ‘I’m going to fees. I’ve got 30, 40 years ahead of me, I’m making the call now.’ And I think that is going to accelerate.”

The panel raised concerns that brokers who do not accurately set their fees could undermine others, and insurers could ultimately drive change, because if they are not getting value from their current distribution arrangements, they will look elsewhere.

But brokers also should not be afraid to charge for the value they provide.

Technology

NIBA’s report says the broking industry is undergoing a technology transformation, driven by rapid advancements in AI and data analytics that can automate many tasks.

Some 83% of survey respondents believe tech and automation will impact the industry, with only 63% saying their business is prepared.

Mr Moule thinks the industry is still “a long way behind the eight ball”.

“The utilisation of technology, as an industry, has been pretty underwhelming,” he said. “We still have a lot of manual processes and touch points that could or should be automated.”

Vero’s Mr Pagano questioned how brokers will use the time that tech-related efficiencies bring them. “Is it to do things for other clients, or will you spend more time with your existing clients?”

He said technology can enhance the advice brokers can give clients, incorporating issues such as underinsurance, cost of materials or legislative changes.

“That’s what technology can be utilised for – to say to clients, ‘You need to think about things like this.’ ”

Mrs Walsh agreed time gained could be used to create webinars and articles to provide vital insights for clients, but the panel fears some brokers could shy away from such activities because they are not comfortable with them.

“We’re pushing towards customer conversations, risk conversations, but there’s that fear around behaviour change,” Ms Foweraker said.

“Some brokers go, ‘Oh, I’ve got all this time back, but I’m not skilled at writing webinars or doing my social media.’ Or, ‘Oh gosh, now I’ve got to go up-sell, cross-sell or get new business and I’ve forgotten how to do that.’

“So it’s almost that fear factor of, ‘I’m just going to keep doing what I know.’ ”

Mr Lipscombe said many brokers recognise that traditional service and pricing models are being reshaped by technology.

“As more solutions emerge that improve transparency and efficiency, we inevitably face new forms of margin pressure. For some long-standing principals, particularly those nearing succession, there’s a real question of timing – how to invest in transformation that may pay off in 10 years when the horizon for return might only be five.”

Mrs Walsh said industry professionals should look beyond mere efficiency savings to the breadth of “truly exciting” change that technology opens up, enabling more accurate assessments of clients’ risks and coverage needs.

Recruitment

NIBA’s report highlights the “growing imperative” to recruit talent from outside traditional channels, with 67% of survey respondents expecting workforce changes to affect the profession, and just 58% saying their business is prepared.

The panel agreed there isn’t enough new blood coming in to replace the retiring generation – and current initiatives aren’t working.

Ms Doyle said that while the benefits of working in insurance are often discussed by the industry, the message isn’t getting out to the broader community.

“We’re so focused on internal communication, there’s no external marketing. I mean, there is a limited amount, but we don’t talk about it enough.”

Mr Cook described industry initiatives as “well-intentioned but potentially not capturing all the available market”.

He applauded company graduate programs, but said the numbers are too small compared with what the industry is losing through retirements, and he believes efforts to engage with schools might be targeting the wrong demographic, with large consulting businesses easily outgunning insurance in the battle for high-achievers’ attention.

“We need to work out what we want. I suspect it’s in a business college somewhere in the suburbs, and it’s a kid somewhere in year 10, working out whether they’re going to become a plumber, hairdresser or go into insurance. That’s where we need to capture their minds.”

Mr Lipscombe said the industry needs to “capture hearts” as well, because younger people are “so much more purpose-aligned”, and Mr Moule advocated “selling the dream”. “I think we don’t sell the opportunities in our industry particularly well,” he said.

“The fact that insurance underpins the financial services industry, the good that we do in communities.”

Mr Pagano said a key selling point is that insurance is “one of the most recession-proof industries”, but Mrs Walsh fears the industry is suffering from a “branding issue”.

“For some reason, it’s more attractive to be an accountant than it is to be an insurance broker,” she said. “That’s what career guidance looks at, and it’s what the education system goes towards, and I think that’s a global issue.”

Ms Doyle thinks financial rewards are one aspect that could attract the brokers of tomorrow.

“Many year 10-12 students don’t know what they want to do after school – keep studying or start in their careers.

“In two to three years’ time, they could be making that $80,000 that the kids going through their university degrees won’t make until four or five years later. Drawing candidates in with what they could earn – they understand the dollar value.”

Mrs Walsh wants to encourage more referrals to the industry from members of the community who are helped by brokers, while Mr Moule noted the passion many industry professionals have for the sector is often passed to their offspring.

“All the people in insurance just need to have more kids,” he said.

Over-regulation

NIBA’s Ready or Reacting report flags regulatory demands as a critical concern. Some 86% of respondents think the issue will affect the industry in the next decade, with 62% saying they are prepared.

Mr Cook told the panel “we just can’t keep on layering regulation on top of regulation” and NIBA has offered to work with government to get it right.

“Adding further regulation like informed consent is not going to do it. That’s a 1985 answer to a problem that’s not even there.

“We’ve really got to unwind what it is we’re trying to achieve. If we had a blank sheet of paper, what would it look like?”