Our sister website SchemeServe has written about how direct insurers could pose a threat to brokers. They do, after all, have the muscle and the budget to market to customers directly and persuade them off broker’s books. Often, through advertising, they’ll try to persuade customers that they’re in fact saving vast amounts of money if they cut out the ‘middleman’, when in fact they could be doing them a disservice as they’d just be signing them up without the level of care and attention they were used to getting from a broker.
But direct insurers are no longer the only threat for brokers. A report produced by GlobalData warns that four ‘alternative providers’: Google, Apple, Facebook and Amazon (GAFA) could woo over 30% of consumers to purchase some form of insurance from them. “This suggests an opening potential of around £9bn in UK gross written premium,” says GlobalData.
This is no longer hearsay though as the alternative providers have already indicated their interest in the insurance sector. Earlier this year Amazon, Berkshire Hathaway and JPMorgan chase said they would partner on ‘ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs’. Then, Alphabet’s health-care unit Verily is reportedly set to enter the health insurance sector too. Verily was formerly known as Google Life Sciences and was owned by Google Inc. until 2015.
While there are some insurance companies and brokers that have made great strides in the insuretech space it may not be enough. Daniel Pearce, financial analyst at GlobalData, explains: “The technological capabilities of these alternative providers far exceed those of current market incumbents and with consumers open to purchased insurance product from them, the demand is also there. Should the likes of Amazon and Google enter the insurance industry, disruption will be widespread, particularly within the home, motor and travel markets where consumers are most open to purchasing some form of insurance product.”
GlobalData also warns that reinsurers could pose a threat particularly because they have been investing heavily in a number of customer-facing insuretechs which could provide a direct offering to customers.
So how could brokers and insurers deal with these potential threats? For insurers, GlobalData suggests being open to collaboration and leveraging of these companies’ knowledge of the latest technologies.
For brokers the answer could potentially lie in being open to offering their products and being ready with systems that are able to incorporate new products swiftly. Competition will be a good thing for consumers and they may jump ship to save money or may even be swayed by Google or Amazon’s tech offerings which may make things more transparent and accessible.
There’s no point in pretending that these alternative providers won’t make further moves by venturing out of the healthcare sector and offering motor, home, or even life insurance. They have the tools, the innovation, the ability to hire the right people and definitely the finances to back it all up. While this can’t be matched by most brokers, it’s important to be ready and adapt even if it means collaboration with these disruptors. As the saying goes: ‘If you can’t beat them, join them’.