Experts see insurance brokers losing share on changing market dynamics

The way insurance is delivered and how consumers respond to services by operating companies going into the future would largely be influenced by a demography that uses social media and new technologies.

This is expected to change the insurance industry business dynamics which will favour direct marketing by insurance companies which invest in technology and also understand analytics.

Experts say insurance brokers and other intermediaries who have held on to old traditions in their approach to the business and  not investing in new technologies would be edged out of business.

They also fear that brokers will lose market share, placed currently at over 70 percent of the industry’s total premium, to underwriting companies that invest in technology, product innovation and emerging distribution channels.

Andrew Nevin, financial services advisory leader and chief economist at PwC Nigeria, said customer behaviour is evolving and customers will make informed choices that reflect lifestyle going forward.

Nevin, looking at financial services in the future, said customers have more devices than ever, and make demands when they want, and companies have developed the capabilities to personalise services in real time.

“Now, customers expect companies to serve them directly and to suit their own unique needs, and so interact with businesses over multiple channels and also expect the right experience to be delivered on their preferred channel”.

According to Nevin, a recent survey shows that 83 percent customers trust recommendations posted on social media; 71 percent customers purchase based on referrals on social media while another 71 percent customers conduct digital research before buying insurance products and services.

He however noted that it is easy for incumbent firms in financial services to underestimate the impact and progress of new ways of engaging the customer.

“Digital technology is on the rise since over 90 percent of internet users in Nigeria surf the web on their mobile phones.

“InsurTech and insurers are creating data-driven innovative products and services”

He further added that though insurance brokers dominate the Nigerian distribution channel at 70 percent, direct marketing is evolving and will dominate the future industry.

He stated quickly that though direct marketing, including e-commerce, mobile, telesales, infomercials, and direct mail contribute 10 percent of gross premium today, it will dominate the distribution channels of the future.

Obinna Chilekezi, an insurance consultant and visiting lecturer at the West African Insurance Institute(WAII) Banjul, the Gambia, said “that technology will change the way insurance services are delivered is not in doubt, and that brokers share of the market will reduce over time is also not in doubt”.

Chilekezi said this has happened in Germany and the UK, and will happen here in Nigeria, as technology takes deeper root in service delivery.

Today, I am not sure insurance brokers in Germany still control up to 10 percent of the market share. It is not about social media, it’s about new technology and demographic changes.

According to him, if insurance companies embrace full technology, build consumer trust by payment of claims promptly, most consumers, particularly the millennials, will buy directly from providers through different convenient technological platforms.

But then, brokers have opportunity, if only they can invest in technologies, get more education but definitely, the dynamics will change, Chilekezie noted.

Anselem Igbo, chief executive of Stanbic IBTC Insurance Brokers Ltd, said his company appreciates the influence of the social media and technology in the delivery of insurance, given the quality of service known with its group company Stanbic IBTC.

He said the company has identified some of the perceived gaps in the industry as including inadequate support to clients to help them effectively manage their risks and the claims management process.

“Through effective risk transfer mechanisms, seamless insurance cover payment and impeccable quality of service, the customer will have peace of mind and subsequently provide the testament required to convince the insuring public to embrace insurance and deepen participation.”

 

Modestus Anaesoronye