The Land Before Price Comparison
In the good old days when people worked one job for their whole life and changed address about once every three decades, a different breed of insurance aggregator walked the streets. The broker.
When you came of age and finally needed insurance of your own, you would be introduced to one of these dapper folks, and they would sit down and have a conversation with you about what you needed in terms of insurance, and what you wanted out of the experience. They built a personal relationship with you, so that they could recommend a product that suit your actual needs instead of being a vague approximation.
The broker received a small cut of every insurance policy that they sold, but they also fulfilled a vital function that the modern industry has almost entirely lost. They built personal relationships with both the customers and the insurance companies, fulfilling not only the absolutely vital role of customer service, but also bringing personal judgement into the equation, preventing either customers or insurance companies from being tricked or confused by their counterpart on the other side of the desk. They also introduced an element of flexibility to the cover on offer, contacting underwriters directly and negotiating rates based on the specific insurance that was required instead of having to make every round peg fit a square hole.
Today, there is a lot of confusion surrounding insurance. Some of this is because information is poorly communicated to the end user, treated as common knowledge to the point that almost nobody knows the full extent of the cover that they have, but part of it is also due to intentionally misleading communication on the part of an industry that does not want to pay out on its policies, and that can avoid paying out by providing less cover than might have been expected.
In the absence of brokers, we now have aggregator sites. These sites take control away from the insurance companies, destroy any attempt that they might be making to create a customer experience, and provide only zero-loyalty custom in return for their significant cut. More importantly, they force insurers to compete with one another on an even playing field of price matching, completely discounting the different levels of service that the different providers actually offer.
Commoditization has been the bane of the industry. Price wars and aggregator sites have made cost the only talking point, resulting in a lack of transparency about what is actually on offer for the money paid, a lack of trust due to the bartering mentality and a lack of value adding services for customers like variable subscription models, loyalty rewards and bonuses for favourable behavior.
These aggregators also introduce their own set of pain points, forcing users to fill in their details over and over, providing vastly different information to the aggregator from what they eventually have to provide to their insurer and resulting in ceaseless confusion. To add to this, individual retailers are now trying to fill the role of brokers themselves, attaching insurance for specific products and services as an upsell option, resulting in overlapping insurance policies abounding. Banks are also getting in on the act, adding specific insurances on as loyalty bonuses for certain accounts. The end result is many people paying for cover that they do not need, but a system so convoluted and disconnected from them that they have no way of opting out.
The last thing that the insurance industry needs is more middle-men muddying the waters further, but there are certainly parts of the broker experience that insurers could learn from if they wish to stay alive in a market being disrupted by new and more agile competitors. Customization, personal relationships, better vetting, more transparency, communication that provides the user with what they need to know and not just a massive impassable block of text. There are so many lessons that can be learned from the way that brokers used to do business that are supremely applicable to the marketplace of the future – the only challenge will be introducing these old ideas back into a technologically saturated market that has been taught all the wrong lessons about insurance.