By segmenting retail brokers into tiers using premium volume, profitability and strategic alignment as factors to define top tiers, carriers can start to win more business, according to a new consulting firm report.
The report, How Insurers Can Win More Business from Retail Brokers, published in late June by Boston Consulting Group, also recommends that insurers partner with brokers to co-develop modular, adaptable products for customers.
The report is focused on the personal lines and small and midsize enterprise coverage segments, and offers the recommendations in response to several factors the authors say are reshaping the retail brokerage landscape: broker consolidation, digitization and rising customer expectations. Tiering brokers based on their value and potential responds to the consolidation trend, while collaborations on product development respond to changing customer needs and rising expectations.
Discussing broker consolidation, the report suggests that the leading brokerages “wield greater negotiating power, have higher expectations for service quality, and seek highly customized solutions,” while a diverse collection of smaller brokers “continues to serve specialized markets, each confronting unique challenges and resource limitations.” A one-size-fits-all, uniform approach applied by carriers to these two groups results in “operational inefficiencies, underperformance with strategically important brokers, and missed opportunities for growth,” the report suggests.
As part of a tiering process, the BCG authors state that “top-tier brokers should receive dedicated account managers and prioritized service” in order to make sure that the highest-value relationships get needed resources.
Referencing the top-tier broker again in the discussion of product collaboration, the report notes that insurers can support the high-value brokers “by offering distinctive coverage enhancements or specialized products” to them, allowing those brokers to stand out in competitive markets. Additionally, insurers can provide specialized support, such as cyber coverage expertise, to help brokers capture emerging customer segments and stay ahead of industry trends.
Beyond the consolidation and customer trends, the report lists five other challenges that weaken carrier in an evolving broker landscape, including slow legacy systems, inconsistent service quality, little marketing support for brokers, and incentive structures that don’t address long-term growth.
“Today’s brokers expect fast, streamlined interactions,” the report says, highlighting the critical technology infrastructure modernization issues. “Implementing real-time quoting capabilities, integrating IT systems using application programming interfaces (APIs), and automating underwriting processes can improve responsiveness,” the report says, also suggesting that insurers “develop intuitive broker portals with robust self-service capabilities” for issuing policies, tracking claims and managing service requests.
Other recommendations for carriers include training and development of special broker relationship managers, appointments of dedicated claims managers to high-value brokers, the adoption of performance-based compensation tying “incentives to the growth of relationships, profitability, and retention.”
The report also discusses the need to regularly assess the maturity of broker segmentation, customer solutions, systems, servicing, marketing support, broker-facing teams and incentives to identify gaps in distribution relationships.
A final section of the report warns against adopting extreme models of broker engagement—one that’s completely tailored to individual broker requests, and another that’s wholly trained on standardization and operational efficiency.
While brokers value customized solutions, the overly tailored approaches are too complex. They overwhelm insurers’ operational processes and systems—and particularly impact service to carrier networks of smaller brokers.
The authors state that a better approach is to develop a set of modular product offerings.
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