NEW OPPORTUNITIES FOR BROKERS TO DO GREAT BUSINESS
01 August 2008
In a world of confusing Internet and mobile phone based products and services - where all products seem to claim the same benefits and returns - a broker able to offer clients top quality, face-to-face service, informed by years of experience and backed by speedy service... well, how many consumers in today's age are craving exactly that, as a direct antidote to an environment where getting a real live human on the phone can often seem impossible?
The death of the archetypal insurance broker has been forecast for many years now. Indeed, one of the central themes of the 1990s dot.com boom was the imminent demise of humans as intermediaries between service providers and clients. And yet, the broker isn't dead – and isn't likely to die any time soon. The inefficient and poorly equipped broker might be in terminal danger – yes – but experience shows that there is plenty room left for in the market for skilled individuals able to guide customers through a veritable blizzard of options.
This is according to Pule Mokoena, Group Executive at Innovation Group, a leading business process consulting and administration company and the South African subsidiary of London-listed Innovation Group plc.
Citing research from PriceWaterHouse Cooper, Mokoena said: “At first glance, PriceWaterHouse Coopers' Emerging Trends and Strategic Issues in South African Insurance 2008 seems to confirm the limited life span of the insurance broker. In the executive summary of the PWC survey, three key themes are immediately obvious, and collectively could be interpreted as a stake through the broker's heart.
‘Firstly, there's the ongoing upswing in Consumerism, which was ranked by the survey's participants as the most important driver of change within the industry. Simply put, today's consumers are very savvy and have a range of alternative options at their fingertips they will not hesitate to use at the first sign of bad service. Then there's technology. “
“Technology is contributing to a comprehensive review of promotion, product design, distribution and pricing,” the survey said. “Significant new applications are forecast over the next three years, including the roll-out of mobile distribution, improved data mining and modelling, straight-through processing and processes that improve the allocation of risk capital and reserves.
And lastly, there's the old bogey of regulation. “Participants think the new commission regulations will lead to better advice and will have a negative impact on intermediaries,” writes Dr Brian Metcalfe, the survey's author. As always, more regulations seriously imperil a broker's ability to perform his or her core function: working with the client, face-to-face.
A well acknowledged trend within the industry towards more direct marketing of short-term and long-term products via new technologies, underpinned by the weight of regulations and demanding consumers is telling indeed, and there is no doubt that companies whose revenue is largely driven by intermediary contribution need to question their traditional methods.
It is a major mis-conception, however, added Mokoena, to disregard the power of the broker altogether in light of these factors. For while demanding consumers will click away from your brand in the blink of an eye, the reverse scenario also holds true.
“In a world of confusing Internet and mobile phone based products and services - where all products seem to claim the same benefits and returns - a broker able to offer clients top quality, face-to-face service, informed by years of experience and backed by speedy service... well, how many consumers in today's age are craving exactly that, as a direct antidote to an environment where getting a real live human on the phone can often seem impossible? A great many, I'd bet... in fact, one could even say that developing a top quality pool of brokers could be a serious point of competitive advantage for certain brands as the market moves decisively towards automated sales, service and distribution channels.
“The key to taking advantage of this opportunity is efficiency. My feeling, in fact, is that over the medium term an efficient team of brokers (a team whose back-end processes are in order, and whose time is dedicated to advising clients) will be a highly valuable asset for any insurance brand.
“It's also important to note that, even within the context of spiralling regulatory requirements and new technologies, this efficiency is far from a pipe dream. In fact, solutions are already in existence in the market that give the broker exactly the sort of support that enables true efficiency. Via these systems the broker can plug into world class technologies that allow her to service her clients in real time, and keep up with all regulatory requirements. It is simply not a given that today's broker must suffer from a lethal administrative burden.
“For me, the issue at the heart of the future of the broker might well be commitment. Companies seriously committed to broker development will actually be able to re-develop the intermediary niche for their brand. This commitment needs to manifest in certain key areas. It requires the provision of relevant technologies and back-end systems, the sort of systems that truly empower the broker to service the end customer. The provision of such solutions also removes the barriers to entry for a broker, allowing him to focus on his core function of advice. Add to this a training and skills development programme that seeks to develop the broker's ability to use these tools effectively and you have a winning recipe – one that is particularly relevant within the context of the sector's transformation drive.
“In a 2006 speech, Artwell Hlengwa, Deputy President of the Black Brokers Forum (BBF) and CEO of the Black Brokers Service Network (BBSN), estimated the number of qualified financial black South African advisors to be approximately 600 - compared to 14 000 white financial advisors. This is a figure no South African industry would be proud of. Nevertheless, I believe that despite (or possibly because of) the issues raised by PWC 's recent survey, local insurers are actually well placed to significantly boost the number of black advisors working in the South African markets, and to exploit a key area of opportunity at the same time.
“So,” stressed Mokoena, “don't write off the broker just yet – the future could well hold plenty of interesting surprises for those players with the necessary mix of vision and commitment to the future of what was once considered a rare breed.”