Article Synopsis :
As risk aggregators disrupt the small-to- medium-sized enterprises (SME) insurance market, insurers face tough choices. Do they take on the aggregators at their own game with an efficient, platform-based offering? Or do they go for the premium customer, with sophisticated solutions based upon personal relationships, prevention and protection? This report, from KPMG’s Global Strategy Group, offers guidance to commercial insurance players seeking to turn disruption into competitive advantage.
The evolution of aggregators from simple comparison engines to sophisticated platforms is driving major disruption in the SME insurance market. With growing functionality, expanding product coverage, and a widening end-customer base, aggregators are 1) making traditional broking less relevant in the commercial SME market, and 2) forcing primary SME carriers to compete predominantly on price and bundled solution offerings.
In a market where risk aggregation is prevalent, price becomes the primary purchase criteria. This in turn forces carriers to compete on price or offer bundled solutions that meet the entire needs of the end customer. The report forecasts premium rates declining by up to 10%, meaning carriers will need to take market share to grow.
Aggregators have been around almost as long as the internet itself, and an aggregator-dominant market is not a new concept. But the authors believe a number of factors have broken down barriers leading us to a tipping point:
The emergence of InsurTech also suggests the time may be ripe for change, as InsurTech businesses cater to a wider, more complex customer base whilst also incorporating leading customer experience approaches.
Given the inevitability of aggregation, traditional brokers should be decisive in both strategy and execution, to successfully navigate and win in the SME market:
- Decide whether to play in the premium SME advice space, and invest in up-skilling staff as required.
- Create a digital direct proposition, by providing an online aggregated service that enables customers to compare bundled products, supported by a broader omni-channel experience.
- Consider build, buy, rent or collaborate options to access these opportunities and gain first mover advantage, without risking the primary brand.
- Consider incorporating auto-advice elements (similar to those seen in funds management, where robo-advice is emerging).
Carriers, on the other hand, could adopt a number of strategic responses:
- Build and enhance online direct SME propositions for direct marketing, whilst ensuring the capability to plug in to other online platforms.
- Improve auto-quote capabilities, to provide coverage across all industries and occupations minimizing manual referrals.
- Remain price-competitive on preferred risks in order to win business on major quote platforms, such as the online exchanges emerging from industry investment in technology partnerships.
- Optimize modular pricing options by offering additional relevant sections or ‘add-ons,’ to capture the greatest premium from the customer, in a pure online and omni-channel manner.
- Maximize positive user experience of aggregators, to increase renewal rates.
- Minimize costs associated with servicing SME business, to soften the impact of the ‘winner’s curse’ in a price-competitive market with thin margins.
- Establish robust fraud mitigation capabilities to ensure customer familiarity.
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Digital Insurer's CommentsAggregators raise a number of tactical challenges for commercial insurers and brokers, but we agree with the report’s authors that aggregators force questions that are more existential in nature, such as:
- What will we be famous for?
- What role do we want to play in our clients’ lives?
- Where will we play?
- How will we win?
Answers in hand, building a plan for executing against them should be a relatively straightforward exercise. Getting to the answers is the tricky part.
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