The potential of technology to alter long-standing business models in the insurance industry is becoming apparent. Insurance brokers are leveraging data they handle in the placement process and, as a result, redefining 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, 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 they may be able to use data sooner rather than later, Mr. Yoder said.
“People now realize that better decisions are possible if people can harvest the data and then harness the power of it through analytics,” he said.
Alastair Swift, chief executive for global placement at Willis Group Holdings PLC, said its WillPlace online tool captures data in the placement work flow 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,” he said.
Much of the impetus for creating a data-centric placement mechanism came from clients, Mr. Swift said, noting that analytics provide an audit trail that clients can show their boards 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,” he said.
The increased use of data and analytics by intermediaries in many ways reflects insurers' evolution from underwriting broadly defined tiers of policies to more-granular, customized contracts, said Julie Zimmer, vice president of sales and middle-market practice leader at Hub International Ltd.
“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.
Stephen Cross, chief executive of Aon Global Risk Consulting, sees the use of data as fundamentally altering the nature of how brokers conduct business.
“The old way was based on gut feel and intuition,” he said. “The new way is to complement our market knowledge and experience with real-time facts.”
H. David Wood, 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,” he said. “It will be magic if we get it right.”
Mr. Cross said that 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.”
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.
Bill Kenealy is an associate editor for sister publication Business Insurance.