Cross-selling will only become more important for brokers in the future. And it’s the brokers who learn to cross-sell that will thrive
The world of insurance broking is constantly changing. Over the last 10 years, we have seen the emergence of new technologies which have reshaped the sector and kept brokers on their toes. It is important to stay abreast of technological advances because while the industry has indeed changed, insurance distribution is still ripe for disruption – and disruption is coming.
We’re currently seeing a number of different types of brokers in the market. These include businesses selling high-volume vanilla products, such as standard motor and home policies. Typically based in the north of England, where the costs of staff and office premises are lower, these brokers centre their business models around buying their products from aggregators and selling on to the consumer.
On the other end of the spectrum, we have the low-volume, low-loss ratio, highly specialist businesses offering products such as latent defect. These are built around another type of business model where risk management is as much a part of the equation as the risk coverage from insurance.
Of course, we cannot forget the traditional high street brokers, such as A-Plan and Coversure. Targeting tradesmen, small businesses and sole traders, these businesses provide commercial insurance with the hope of cross-selling personal lines products on the back of it.
The rise of the digital broker
Interestingly, we are now also seeing the rise of the digital broker, where the focus remains on providing service for clients: only digitally. These businesses typically offer a wide range of financial services alongside insurance.
And this is where I see the future of insurance distribution. At the moment, customers, particularly SMEs, are forced to go to different types of intermediaries to get all the financial services products they need – insurance, income protection, asset management and employee pensions, to name only a few. Dealing with all these different companies can prove costly and time-consuming for smaller businesses.
It can also prove costly for the brokers themselves. Historically, brokers have added policy fees or premium finance options to make more money from insurance transactions, but the Financial Conduct Authority does not like either of these solutions. What brokers should be doing to stay ahead of the curve and be more profitable is to diversify into selling more than one product.
How regulation has hindered innovation in the insurance industry
The Retail Distribution Review, which was launched in 2006, led to a change in legislation around how retail investment products are sold, and new rules were implemented in 2012. The review ripped apart the insurance broking industry by separating brokers into different siloes, stopping them from being able to take a customer-led view of their proposition. It has hindered brokers from tailoring their propositions around their customers, and what’s more, it is hindering development and innovation in the industry.
At Stubben Edge, we have created a technology platform that allows brokers to sell insurance policies, as well as other financial services products that their customers need. As a member of our community, brokers can upload their products for other members to sell while also gaining access to other members’ products. This means they can make more money by cross-selling different types of products that they otherwise would not have access to. It is also a win-win situation for SME clients who can get everything they need from one place instead of dealing with five or six different intermediaries.
Achieving growth through digital distribution and cross-selling
Cross-selling is only going to become more and more important for brokers in the future. Broking is a competitive sector, and the current economy is driving customers to focus even more on price. While the industry is currently benefitting from a hard market when it comes to rates, many brokers will find it challenging when the market softens. It is the brokers who learn to cross-sell to a wider client base that will thrive in this environment and have the opportunity to grow.
Our main aim at Stubben Edge is to help small brokers grow into medium-sized businesses. And the best way for them to do that is through digital distribution, cross-selling and building propositions around clients. We also want to partner with people who are currently employed by the larger brokers but are itching to go out on their own. It is tricky to know where to start to make that dream of owning your own broking business a reality, but we have all of the expertise and the tools needed to help brokers succeed.
Chris Kenning is CEO at Stubben Edge, where we’re on a mission to supercharge insurance distribution. Whether that’s helping more people start up on their own, or providing the technology to enable existing brokers to grow their businesses. If you’re interested in finding out more about what we can do, book a quick demo here.