Hardly a day goes by without another independent broker being snapped up by one of the traditional consolidators or new breed of hungry investors. And this present spate of mergers and acquisitions looks set to continue apace for at least another few years, with private equity investors in particular having ready access to cheap capital and a strong desire to benefit from the steady eddy-returns the world of insurance broking can provide.
For a broker with half an eye on their future, perhaps thinking of attracting new investors to help grow their business, the decision of whether to invest in digital begs the question of whether it will make the business more attractive to future investors – increasing the choice of potential buyers or partners – or if it could make it less attractive. Anecdotally for example, I have heard some brokers query whether having a different broker management system (only one in five, or 19% don’t have one already) to a potential consolidator could be seen as a negative, as a potential un- or re-wiring pain in the proverbial to any new owner.
An interesting question, but the facts speak for themselves. The main benefits of investing in digital, according to brokers, as highlighted in the Insurance Times Digital Innovation report, are improved efficiency (cited as the key benefit by 74% of brokers), streamlined business processes (53%) and improved employee productivity (42%). It goes without saying that these business benefits are all issues that any potential investor would see as extremely positive.
The main benefits of investing in digital, according to brokers, are improved efficiency, streamlined business processes and improved employee productivity.
And for those brokers investing in open-architecture platforms, which, like our offerings, enable flexibility and the addition of third-party data sources through plug and play APIs, there is no risk of being fenced in by your technology – in fact, it enables the very opposite.
The reality is that a broker that has been through, is going through or is contemplating starting on their digital journey, is demonstrating a desire to embrace change and to improve their business and the experience of their customers. Sitting still is also not really an option, with almost half (47%) of brokers surveyed believing that it is only a matter of time before they are disrupted by other providers using digital technology, with a further 28% convinced the disruption is well underway.
And in terms of the main risks’ brokers believe they face, outside of the obvious economic uncertainty caused by the pandemic, customer retention (40%) and remaining competitive (33%), were cited as the main risks. Compare this to the fact that 61% of brokers cite customer retention as the main benefit of digital investment, and 53% believe that it will mean they remain competitive, and it is clear there is a strong argument for taking the digital leap.
61% of brokers cite customer retention as the main benefit of digital investment.
But to return to my original question - is there a digital dividend? Absolutely, especially in terms of satisfied customers, business productivity and logically, attractiveness to investors. The resulting increase in sales and retention will translate into higher gross written premium and commission – which all means a higher price tag for the business. But don’t just take my word for it - see what brokers from across the UK said by checking out the free independent broker research results in Insurance Times’ Digital Transformation report.
Dave Chapman, Chief Revenue Officer, Applied Systems Europe, is responsible for leading Applied’s Sales & Marketing teams in Europe. Prior to Applied, Dave worked in the insurance technology industry for over 18 years at SSP where he was responsible for the Broker business, as well as all client relationships throughout Europe, the U.S. and the Caribbean. Prior to this role, Dave held a number of positions within Sales & Account Management, having joined the business as a Sales graduate in 2002.
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