“The reports of my death have been greatly exaggerated.”
Throughout 2017, we were all barraged with countless articles about the future prospects of commercial insurance brokers. Much of it was negative, given all of the innovative disruption aimed at our industry. The focus was on disintermediation, direct to consumer business models and artificial intelligence.
2017 was an exciting year in the life of our company. We are now an integral part of Trisura Group, a new publicly traded company (symbol TSU on the Toronto Stock exchange). However, on a personal level for 2018, I am very much looking forward to getting back to focusing on our business and continuing our work of delivering on our goal as the Canadian specialty lines leader.
I was pleased to have an opportunity to speak at the recent Canadian Insurance Top Broker Summit, and used Twain’s words to sum up how I feel about the future of commercial insurance brokers in Canada. However, I also cautioned that I believe brokers must not be oblivious to all of the change swirling around our industry. Brokers, and their insurer partners, must collectively “up our game” if we are to succeed and thrive in the future.
As I wrote in our June newsletter, businesses built on a foundation of relationships are among the most expensive models. In highly commoditized products or segments, expensive business models are most susceptible to disruption and lower cost alternatives. Welcome to the reason why billions are now being invested globally in insuretech.
The traditional broker-insurer model is not immune to these forces. Indeed it is now a target, and I believe it is mission-critical that insurers and brokers partner together to address the issue. These partnerships must be focused on delivering more efficient solutions. The ultimate cost borne by the consumer must be driven down, thereby disarming the direct writers greatest weapon: lower cost.
Brokers demanding more commission from insurers is not only ignoring this fundamental issue, but is actually making it worse. In the immortal words from the John Hughes classic, Planes, Trains and Automobiles, “You’re going the wrong way”.
John’s Candy’s retort, “Oh, he’s drunk. How would he know where we’re going” is of little comfort. But I digress.
Imagining the Future of Commercial Insurance Brokers
The conventional broker-insurer model remains incredibly inefficient. Furthermore, our cost structure is too high in order to guarantee future success. There are a lot of folks looking at our traditional model and licking their chops. We need to find ways to reduce our costs and pass some of the savings on to the consumer. Why is this an imperative? Because if we don’t, others will eventually eat our lunch. Imagine, for example, a world where a business model yields an ultimate cost for commercial insurance to the consumer of less than half of what it is today. How do we compete?
There is good news. We have a little time before online direct to consumer adoption hits a tipping point and becomes irreversible. In the commercial space, particularly in specialty lines, most customers still value, need and appreciate expert advice and advocacy. Most commercial consumers are not quite ready to buy their P&C products online without the involvement of commercial insurance brokers. However, if the cost structure remains so high, the traditional broker – insurer model is at risk.
The Overall Goal
We have to get our collective acts together. Improvements have to be continuous, relentless and accretive to the overall goal of delivering a broker – insurer model that gives customers what they want and need, how they want and need it, and all at a lower cost structure than what exists today. While this won’t guarantee success, it will certainly give us a better chance. What I will guarantee is those brokers and insurers who fail to address these realities will face a difficult future.
Getting back to business for Trisura in 2018 will definitely include working hard on delivering more efficient solutions. Our efforts will go towards helping to reduce and eliminate costs in our structure.
I would again like to thank you very much for your unwavering support of Trisura Guarantee. I wish you and your families the very best of the holiday season and a happy, healthy and prosperous 2018.