Today’s insurance brokers face new challenges and market trends that their forerunners did not. To succeed in the 21st century, brokers must adapt to the changing landscape by leveraging best practices across all operational areas. One area of particular importance is their relationships with the carriers. Knowing how to apply best practices to address key industry trends and build strong carrier relationships is essential.
Key Industry Trends and Market Conditions
The insurance marketplace is in a transformative state. The landscape is now marked with new distribution models such as online aggregators and InsurTech firms. Willis Towers Watson-CB Insights’ research found that from 2012 -2017, $312 million was invested in life and health insurance global InsurTechs. There has also been entry into the insurance market by major retailers like Amazon, Walmart and various banks and credit unions, all of which may have more robust e-commerce platforms through which to reach customers. The presence of these new players, coupled with industry consolidation, has introduced new competitive pressures on brokers.
Besides the pain points coming from within the industry, there are higher expectations coming from customers. They expect brokers to have a broader portfolio of products to meet their specific financial wellness goals, have a deeper understanding of their needs, and have product information accessible on a 24/7 basis via their PCs, tablets and cell phones. There is also the ongoing expectation that the broker still will be accessible for in-person meetings. This was confirmed in the LIMRA Insurance Barometer Survey 2018 which found that 69 percent of all respondents and 72 percent of Millennials agree that meeting with an agent/advisor before buying life insurance is important to them. This same survey also noted that customers expect a more seamless, self-service experience when it comes to researching and learning about a broker’s product offerings. Customers expect to continue their relationship with their broker over the life cycle of their experience with any given carrier. In fact, based on a J.D. Power 2018 study, customers go first to their broker or agent for advice or support relating to an insurance matter rather than a carrier’s website or call center. This wasn’t always the case.
Given these factors alone, what worked in the past may not be as effective today. The current insurance distribution environment requires that brokers have a clear value proposition which not only addresses new market conditions, but also requires them to assess their performance and then develop best practices that accommodate their customers as well as the carriers.
What Carriers Want from Brokers
There have been many surveys covering what brokers want from the carriers. For example, a 2017 Cannel Harvest Research Report, focusing on personal lines insurance, found high percentages of brokers to place a high value on these aspects of a carrier’s operation:
- Competitive pricing (65 percent);
- Carrier technology (61 percent);
- Customer service (57 percent);
- Agency compensation (55 percent); and,
- Underwriting flexibility (51 percent).
What carriers want from their brokers has not been the subject of as many surveys. What we do know, however, is that carriers want clear and complete communications from brokers, greater access to customers in order to improve the customers’ experience, and less use of them (carriers) for testing quotes against other carriers and/or soliciting lower quotes and then not transferring the business to them.
Regarding communications, both carriers and brokers alike strive for more collaborative, open communications with the other. It’s one of the reasons why carriers are establishing broker advisory councils. These forums are proving very effective in facilitating productive exchanges between these two symbiotic entities. Also relating to communications, there is a heightened expectation by carriers that brokers will embrace more digital communications that help support their mutual customers’ service experience. Further, carriers want brokers to be that “in-the-field” presence in order to remain connected to their customer base. Even with all of the virtual communications through digital platforms, carriers recognize the importance of the human connection and believe brokers need to continue focusing on this.
Carriers also want their brokers to be strong generalists in terms of their product knowledge. If the carrier has a broad suite of solutions, they are more inclined to want to do business with brokers who can master more than just one or two of their products. This requires that brokers remain up-to-date on product developments and how they relate to the marketplace and especially the demographics of the region(s) they serve.
Technology is also a tool carriers hope the brokers will fully leverage. A small broker applying technology, for instance, to target Taft-Hartley multiemployer plan sponsors or middle market companies, can project an “easy-to-do-business with” identity that conveys a strong customer-service orientation more so than a larger, more established brokerage that is not deploying the latest digital technologies.
Along with accommodating the carriers on these factors, brokers can put themselves on a path to greater success by adhering to best practices that are in step with today’s insurance marketplace.
Best Practices Pave the Way to Success
Best practices aren’t confined to areas of carrier communication or customer service. They should envelope all aspects of a broker’s operation. They shouldn’t be static, but rather evolve to reflect changing market developments and customer expectations. Best practices should be a function of the broker’s business value proposition which answers such questions as:
- What differentiates the broker from others as it pertains to the carrier relationship and the customer relationship?
- What are the short- and long-term benefits derived by the carrier and the customer when working with this broker?
- What expectations can the carrier and the customer have of this broker?
In support of their value proposition, brokers should establish best practices that include:
- Consistent reporting on prospects indicating interest in the carrier’s products;
- Sharing with the carrier their short- and long-term business goals with respect to increasing their marketing/sales of the carrier’s products;
- A distribution strategy that embraces both digital technologies as well as the human touch, and keeping the carrier informed about this strategy designed to deliver optimum customer service, attract referrals, and facilitate new customer relationships;
- Highlighting the carrier’s products in its customer newsletters or on their social media pages;
- Regular product and industry training of their staff;
- Marketing and sales initiatives that effectively target industry niches and/or other market sectors on which their business is focused;
- Continuous benchmarking of sales performance and customer service metrics wherein performance data is regularly analyzed, demonstrating a strong commitment to a high quality operation;
- A robust cyber security program that encompasses systems vulnerability assessments, penetration testing, data breach prevention/cyber security policies and procedures, employee training and cyber security awareness, maintaining a strong firewall, the deployment of leading-edge technologies (i.e., anti-virus software, encryption software, and key logging software to impede the key logging effect of malware, etc.), and a formal digital governance policy; and,
- Policies and procedures that support the confidentiality of the carrier and its proprietary information.
The end game for brokers and carriers is the same. They both want to see their mutual customers gaining the financial protection insurance provides, and they each want to derive the financial rewards that come with doing business the best way they can. If that means changing with the times as needed, updating internal systems when required, investing in regular staff training, and remaining vigilant and ready to adapt to new market conditions, whether the influx of new players like the InsurTechs or the pervasive presence of cyber criminals, then that is what needs to be done. Above all, the best practices a brokerage can adopt to build stronger carrier relationships will also position it for long-term viability and success.