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The potential of technology to alter long-standing business models is becoming apparent as large insurance brokers leverage data they handle in the placement process and, as a result, redefine the nature of their relationships with clients and insurers.
As the intermediary between clients and insurers, brokers historically have had substantially more data than even the largest insurers, said Claude Yoder, Hartford, Conn.-based head of global analytics for Marsh Inc.
What has changed in recent years is the ability and willingness of brokers to avail themselves of better data aggregation and analytic tools. Unlike primary insurers, which may have legacy technology systems that complicate their efforts to employ emerging analytic technologies, the smaller technology footprint of insurance intermediaries means that they may be able to leverage data sooner rather than later, Mr. Yoder said.
“People now realize better decisions are possible if people can harvest the data and then harness the power of it through analytics,” he said.
Alastair Swift, London-based CEO for global placement at Willis Group Holdings P.L.C., said its WillPlace online placement tool captures data in the placement workflow before feeding it into algorithms that help match client risks and insurers.
“As far as we are concerned, data and analytics are the cornerstone of our client proposition,” Mr. Swift said.
Much of the impetus for creating a datacentric placement mechanism was at the behest of clients, Mr. Swift said, noting that analytics provide an audit trail that clients can show their boards and financial departments when explaining why they chose to place business with one insurer over another.
“Previously, you had to trust that the broker made the right choice,” Mr. Swift said.
Julie Zimmer, Chicago-based vice president of sales and middle-market practice leader at Hub International Ltd., said the increased use of data and analytics by intermediaries in many ways reflects insurers' evolution from broadly defined underwriting tiers to more granular, customized policies.
“Because insurance companies are getting so much more forensic with their data, brokers now have to be more proactive about targeting risks that they want to write,” she said. “Before, it was more relationship driven, and it always will be to a certain extent, but now we are getting more strategic about distribution,” she said.
Stephen Cross, Dublin-based CEO of Aon Global Risk Consulting, also sees the influx of data fundamentally altering the nature of how brokers conduct business, shifting the role from a transactional one to one predicated on offering strategic advice.
“The data is helping us evolve,” Mr. Cross said. “The old way was based on gut feel and intuition. The new way is to complement our market knowledge and experience with real-time facts.”
H. David Wood, Phoenix-based executive vice president and head of insurance operations at Wells Fargo Insurance Services USA Inc., said synthesizing data science with the traditional skill set of brokers is becoming imperative.
“What we now need to do is to take the strong part of that business and marry it with technology. It will be magic if we get it right,” Mr. Wood said.
Mr. Cross said he foresees the historic, linear relationship of brokers as intermediaries between clients and insurers giving way to a tripartite relationship, where there is more direct connectivity between clients and the market.
“There's a new breed of broker,” he said. “The carriers are becoming far more scientific, and so are we.”
Likewise, Mr. Swift predicts a greater need for brokers-as analysts rather than straight transactional brokers as intermediaries shift toward a more consultative model.
“The very nature of broking will start to change for certain sizes of business,” he said. “You are going to have to have people that understand data and how it drives cycles.”
Given the wider use of analytics inside and outside the insurance industry, those that downplay the speed and nature of this change do so at their own peril, Mr. Cross said.
“It's a profound shift, but we have a view that this is something that our clients desire,” he said.
Ms. Zimmer agreed that the biggest risk surrounding the use of data by brokers is ignoring it.
“This is one of those things where you don't need to be an early adopter, but you can't have blinders on about the world changing,” she said.
To get a sense of the future of insurance underwriting, a look at its current state is instructive.