Brokers need to cut costs of services – Ed

High costs make insurance brokers look inefficient compared to the technology intermediaries increasingly used in the 21^st century, Ed’s group head of broking told Brokerslink 2017 attendees in Marrakech today.

Online intermediaries facilitate business and payments at a tiny fraction of the cost levied for broking services within the insurance market, said Jonathan Prinn, group head of broking at Ed.

“As a Lloyd’s broker, how much are we paid for access; how much are we paid for value?” asked Prinn.

“Some 42% of premium is taken up with costs, according to the London model, and 30% of that is us. A big issue for us is that we have to address that cost,” he added.

Listing intermediary costs across multiple industries, he listed the following costs levied: Mastercard credit card payments, 1.3%; hotel and travel intermediaries, 3%; estate agents, between 0.75-3% globally; Ebay, 9%; Amazon ‘Pro’ seller fees of between 12 and 15%; and ApplePay – free.

“That compares with re/insurance intermediaries average of around 30%,” Prinn continued.

Insurance technology (or insurtech, to use industry slang) is becoming a threat to time-worn business models, he told assembled brokers at the event in Morocco.

“Technology has had a massive impact. Insurtech is coming for this market,” said Prinn. “Artificial intelligence is coming. Maybe not in five years, but probably in 20 years.”

While Prinn suggested many of the intermediaries listed in other sectors “don’t seem like intermediaries”, the lessons drawn include that “geography and location are becoming irrelevant”.

He listed several technology or online-based firms that do not fit the form of insurance intermediaries, but have nevertheless edged in on the traditional broking industry, particularly in their distribution methods.

“People in the US will be very familiar with Zenefits, which was fastest growing dotcom company in 2015-2016,” said Prinn.

Zenefits sells HR software, but edged into the life insurance sector.

Metromile was also cited; the firm offers a plug-in product for vehicles, providing satellite navigation, parking locations and engine data in real-time.

“Because they then sell you car insurance,” said Prinn. “That’s not an insurance company itself putting a black box in your car.”

Metromile has partnered with taxi firm Uber, Prinn noted, potentially a gateway to huge motor premium placements.

Evosure was another firm cited. The company takes historical data on which carriers have written which risks to determine which carrier will write which cover in the future.

“That sounds like an insurance broker,” said Prinn.

Another example cited was Applied Epic, a cloud-based agency management system, which performs back-office systems work for big brokers.

He also listed Friendsurance, a new German intermediary, which operates a similar peer-to-peer model to US insurer Lemonade.

“It’s like the mutual business model. It’s not pitched as an insurance broker, but it’s an insurance broker with a mutual concept,” Prinn added.