Market conditions, the Financial Systems Inquiry, big data and wearable technology – these are some of the topics occupying the minds of industry leaders.

by Cecilia Harris

Big Predictions

“The biggest upcoming challenges for insurance brokers will arise in relation to the Financial Systems Inquiry. The Government has accepted the majority of the Inquiry’s recommendations. 

While there were no broker-specific recommendations, there are some that are likely to affect insurance intermediaries.

As always, it will be NIBA’s job to properly represent the interests of insurance brokers to ensure that what is implemented is appropriate and reasonable.

Further to the FSI, insurance brokers will need to consider how best to take advantage of electronic disclosure and meet their relevant obligations. ASIC has recently released a regulatory guide explaining the new relief provided in relation to electronic disclosure under the Corporations Act.

Brokers will need to review their current practices to ensure they are compliant and, where appropriate, take advantage of the new relief. Special care needs to be taken in relation to electronic delivery of notices, as required under the Insurance Contracts Act, if the broker acts for the insurer.

We have all seen the results of the ASIC inquiry into life insurance personal advice and the proposed industry response from the FPA, AFA and FSC, proposing commission caps,
volume remuneration restrictions and a new Life Insurance Code of Practice.

While the same issues have not arisen for general insurance brokers, it is crucial that the existing high standards be maintained, to avoid any potential regulatory scrutiny.”

Big Predictions

“The consensus about the insurance market is that the commercial lines outlook is still challenging. While premium rates are expected to stabilise, we’ll see a slow transition from the current soft market with premium growth unlikely until FY17.

But this is a one-dimensional view, as it relates to the insurance cycle – by definition it’s a cycle and is always going to turn. It’s the rate of change that’s the variable.

It’s interesting to take a broader look at the factors that will influence our clients over the coming years, and therefore the insurance market. The often-cited trend of ‘emerging risks’ is no longer ‘emerging’, it’s here.

A good example of this is the increasing number of cyber-attacks in Australia. Up to now, Australia has been pretty nonchalant about cyber risk, and even seemed to be fatigued of hearing about it.

That time is clearly over. I would say we are going to experience an increasing number of cyber events.

The biggest opportunity in our view, and one that we’re arguably helping to lead, is to provide our partners and clients with a ‘whole-of-risk’ approach.

If we’re always keeping our clients at the centre of everything we do, giving due consideration to their full risk portfolio (people, physical and financial risks) and providing relevant solutions, the opportunity to help grow and protect their business will also help grow ours.”

Big Predictions

“I think the market will continue to be impacted by M&A activity, whether that’s major international insurers or local players. The market will continue to be very competitive.

While they are not all terrific, a number of the major global carriers have reported fantastic third-quarter results. It’s all happening because major catastrophe losses in the world have been low.

The privatisation of workers’ compensation in some of the states has the potential to impact insurers and brokers significantly.

If workers’ compensation hit the private market, it would be a great revenue opportunity for insurers and brokers alike, which would be a welcome opportunity for growth in difficult times.

Like all sectors of the economy, there is a big focus on expense control. All our major customers are focusing on it, and insurers are beginning to address that issue.

It will always be a challenge for brokers to differentiate themselves from their competition. It is more difficult for the bigger brokers in this environment to be able to get clients to see the value in the expanded range of services being offered to them.

That challenge of differentiation always exists, but it is exacerbated in an extremely soft market.

Effective data analysis and use is going to enable us to become more competitive. Investing in technology will improve our expense ratios and improve out ability to communicate with clients.

This will all lead to a lower cost of transaction and an improvement in efficiency in our businesses.”

“While the market environment remains competitive through significant capacity, it is creating an exciting time for the industry.

Growth opportunities will come through innovation, the use of data and analytics, and finding solutions for emerging risks.

This is good for the end customer but also for insurers and intermediaries, as our profession continues to improve through technology, investment in digital and improving the customer experience.

It is becoming increasingly important for our brokers to ensure their client relationships are as deep as possible. Understanding the real needs of the client and extending that beyond traditional insurance purchasing will be crucial to retain relevance in an ever-changing market.

Brokers who can fully understand the client’s needs, and offer solutions that are relevant and efficient, will prosper into the future.

Many people are talking about big data, the use of analytics, the use social media and the many emerging risks that will need insuring. Narrowing the focus to ensure that all of these areas are addressed to being truly beneficial for the end client is a challenge for the market as a whole.

Intermediaries and insurers need to work closely together to ensure we create a better experience and better solutions for our end customers.

This will include increasing not only the speed of new products to market but also ensuring we are agile enough to quickly change them as demand or need changes.”

“The wave of growth we have seen in the AR space over the past five years is showing no sign of slowing down.

I expect there will continue to be significant growth as more insurance professionals look to build equity in an asset that rewards them for their hard work.

A good AR network provides all of the back-room support that allows an AR to do what they does best – look after their clients and grow their business. For too long, ARs were considered a ‘poor cousin’ of the industry.

However, if we take an honest look at the industry now, some of our best brokers are ARs – and some of the best AR networks are run by career brokers who understand the value of providing more than just a computer system, cheaper PI insurance and a compliance manual to their ARs.

Our insurer friends have significantly changed their attitude toward the typical AR for the better.

I feel the primary challenge will be ARs’ access to bespoke products and expanded markets. The biggest requirement, which will be essential to the success of an AR in future, will be their ability to do good business.

While things like compliance and PI insurance might betaken care of by the licensee, the AR still has to make sound commercial decisions on a daily basis to ensure their business continues to grow and thrive.”

“We expect AR model movement to follow the trend set by ARs in the financial planning industry and obtain significant growth in the short-to-medium term.

We predict that this growth will be fuelled by a substantial increase in the cost of obtaining a license, as well as the increased awareness and understanding of the role of authorised brokers.

At the end ofthe day, the main difference between an authorised broker and an insurance broker is who holds the financial services license, they are otherwise both held accountable to the same education and compliance standards.

The main challenge confronting AR is integrity and compliance. AR networks need to ensure that the ARs operating under their license are compliant and adequately trained in all facets of running their business.”

“Technology is having a profound impact on the insurance industry. Some of the key trends over the next 12 to 18 months include robotic process automation, advances in the application of analytics and wearables.

Regarding robotic process automation, the current outlook suggests a softening of the market in certain lines and intensifying competition.

Automation of rules based processes is an opportunity for insurers to become more cost effective and consistent in their operations.

Continued advances in the application of analytics will aid decision making to improve personalisation, customer experience and operational effectiveness.

The increase in wearable technology in Australia will provide an interesting opportunity for insurers as they look to incorporate the data from activity trackers and other devices into their offerings.

Brokers will need to embrace the digital age and leverage technology to enhance their ability to provide customers with rich, tailored insights and advice. There is an opportunity to take the traditional broker value proposition, relationship model and customer experience to the next level.   

The biggest opportunity is to rethink the role of the insurance industry and how it operates.

This is an industry that has operated on the same principles for decades and one that has traditionally stayed within the boundaries of risk transfer.

However, there is a need to keep pace with the potential afforded by changes in consumer behaviour, the advances in technology and the proliferation of data.”