.The recent year-end results announced by leading insurance broking groups throughout Australia and New Zealand highlight the difficulties that the Broking sector has faced over the last 12 months, and will continue to face in 2021-2022.
Sustained revenue pressure has forced Broking firms to focus on efficiency, reducing discretionary spending accumulated during the buoyant markets of previous years. While brokers have generally been successful in remaining profitable despite these difficult conditions, further efficiencies will become harder to find without genuinely transforming established Broking business models.
InsurTech start-ups and direct market insurance providers are also gaining traction and starting to win greater market share. This is having a direct impact on Broking revenues. Against this changing and increasingly competitive landscape, it is imperative that Brokers develop and implement effective new growth strategies.
Brokers are targeting three key growth strategies moving forward;
Mergers and Acquisitions
Historically, mergers and acquisition tend to be more prevalent during harder economic times. Smaller sized brokerages are typically absorbed by larger brokerages as the larger brokerages seek enhanced scale, product enhancement and or improved internal efficiencies. An impact of this increased merger and acquisition trend has been the consolidation of various insurance lines. Typical of merger and acquisition activity so far in 2021 was the recent acquisition of Canberra based Mutual Brokers Pty Ltd by AJ Gallagher. Likewise, Steadfast’s acquisition of Coverforce Pty Ltd.
According to Global Data’ 2021 Brokers Survey, 74.4% of Brokers intend to expand their geographical footprint over the next 12 months, once lockdown restrictions are lifted.
With the current tight market conditions we should expect to see further market consolidation in the months ahead.
New Business Development
As the insurance sector moves on from the COVID era, business development activities will be increased significantly. A key strategy in winning new business from competitors revolves around maximising value to clients and insurers, which requires a considered sales and marketing approach.
Traditionally broking houses have combined the roles of broker and business developer into one. This model has served the industry well for many years as brokers, as the subject matter experts and trusted advisors, have been able to effectively convey the market options to their clients.
An increasingly competitive market has forced some broking houses to rethink this approach and this has seen the emergence in a small but growing number of firms (particularly amongst the larger independent firms), of dedicated and professional sales positions working alongside brokers.
These Sales resources tend to have extensive B2B sales backgrounds, are trained in one or more of the recognised sales methodologies (Value Selling, Solution Selling etc.,) and have a strong understanding of insurance and broking.
Professional sales resources are able to open the client doors and bring in the subject matter experts (The Brokers) to work in tandem to effect the sale – A model that has been employed successfully in other industries such as Tech and Medical/Travel Assistance. This model also helps preserve the “trusted advisor” status of the broker. In building a successful sales team, it’s important to identify sales staff with the right sales experience, competencies and behaviours.
Other opportunities to differentiate their offering include;
-Improving the quality of the advisory services provided
-Tailored risk management solutions
-Increased insurer choice
In an article appearing in Insurance Business Australia (May 2021) Cara Morton, CEO of Insurer CoverMore says that the Insurance Industry as a whole is “lagging in terms of pivot to digital and innovation”. Digitisation is the use of Websites, Apps, Email, Social Media (LinkedIn), Live Chat, Text and other digital channels to reach out to customers and/or streamline company processes and the customer interface. While a full exploration of the impact and direction of digital technologies on the Broking industry is outside the scope of this article, there are significant opportunities for Brokers in this area to improve their customer/business development reach and to also drive operational efficiencies.
According to a 2013 Report (Social Media and Sales Quotas, UK) - 79% of salespeople who use social media to make sales outperform those who did not. This statistic also ties back to the point made above regarding the use and skills, competencies and behaviours of sales professionals.
An informative and engaging website should be a driver for lead generation and capture and should be considered as an essential and key digital sales platform. The website is often the first exposure that potential customers have of a business, It is therefore highly important to create a strong first impression and project a professional brand.
Traditionally brokers spend a lot of time talking with clients providing them with rich customer and industry data which is often under utilised. An online platform can provide the opportunity to demonstrate this knowledge and establish thought leadership capabilities across a range of risk management areas. Such platforms will allow brokers to build relationships with their clients over the longer term with engagement and high quality content.
While the greater impact of Digitisation on the Industry is still to play out across Large vs. SME, Commercial vs. Personal Lines, there are immediate opportunities for agile broking houses to take advantage of readily accessible digital platforms and skilled sales professionals to differentiate their offerings and drive their businesses forward.