Is technology about to render brokers obsolete?

Date: 2017.10.31

A recent press release from a B.C. brokerage was entitled, Automated online office insurance could make brokers redundant. The press release itself dealt with the introduction of an automated system that allows owners of small businesses to buy and download insurance policies online ‘without ever having to talk to a broker’. It’s not clear whether the brokerage authored the title of the press release or whether this was the work of the wire service. Nevertheless, the title does raise the question as to whether, in this digital age, there is a future for insurance intermediaries.

The press release states that automation is expected to shake up the market for office insurance and that this could lead to significant job losses within the brokerage community. Mark Wardell, President of Wardell International Inc., a business advisory firm based in Vancouver, is quoted as saying ‘Insurance salesmen, like milkmen, could rapidly see a reduction in their numbers.’

To be sure, technology can be disruptive. The advent of modern refrigeration didn’t just reduce the number of milkmen, it wiped them out.

I don’t think the future of insurance intermediates is quite that bleak. Still, if brokers are to compete effectively, there is a need for the brokerage community to respond to changes in the ways consumers wish to make purchases and the ways in which technology allows them to do so.

Rather than milkmen, I think a better analogy is the travel agent. At one time, it was normal to book flights, hotels and car rentals through a travel agent. Most of this routine type of travel is now booked online. What it has meant for travel agents is that they have specialised as consultants for cruises or for tour packages to exotic destinations. It is not unreasonable to think that we will see a similar trend in the insurance marketplace as consumers choose to circumvent insurance agents and brokers for routine transactions. This is particularly the case with younger consumers who have relatively modest insurance requirements.

For brokers, there is still the opportunity to offer a traditional service in which the broker conducts a needs-based assessment and then offers an insurance programme tailored to the consumer’s needs. There is a segment of the market that needs and wants this level of service. At the same time, brokers can market an online, do-it-yourself service that allows a consumer to purchase a pre-designed insurance programme. For consumers who choose to go the self-service route, there should be a savings in insurance cost. The press release mentioned above cites expected savings of around 20% for buyers of its automated online office insurance product.

Whether buying personal lines or commercial lines coverage, consumers will no doubt enjoy saving time and money by shopping online. However, I think it is important for the brokerage to ensure in each case that the consumer clearly understands the brokerage has acted merely as an order-taker; professional insurance advice has not been provided. The brokerage can accomplish this by including a bold statement to this effect on its automated online system. Although it should be obvious the consumer has not received professional advice if the entire transaction was completed without any broker interaction, still, it can’t hurt to state the fact if for no other reason than to bolster the brokerage’s defence in the event of a subsequent errors and omissions lawsuit. There is nothing wrong with buying a pre-packaged suite of coverages without talking to an agent or broker, provided the consumer is made to understand that the insurance programme he or she is buying may or may not be adequate.

If the consumer wishes to obtain the professional advice of an insurance agent or broker, that level of service will still be available. It will cost the consumer additional time and money. But, in exchange, the consumer will end up with an insurance programme designed to meet the consumer’s individual insurance needs.

There is no reason to imagine that insurance intermediaries will become redundant anytime soon. With that said, the insurance marketplace is changing. The brokerages that thrive will be the ones that successfully adapt to these changes. When it comes to buying insurance online without the advice of a professional insurance agent or broker, it is important to give consumers this choice. It is equally important for the consumer to understand the risk that is being taken by foregoing the advice of a professional insurance advisor.

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