A new report entitled ‘Broking 2020: Leading from the front in a new era of risk’ has highlighted how brokers need to take a wider risk advisor role n the market or face losing profitable business to special risk advisors.
The report, which draws on a survey of risk buyers from multinational organisations, reveals that organisations think that the evolving risk environment can no longer be managed solely through traditional approaches and are beginning to engage a wider set of advisors to get the specialty advice they need.
PwC’s research reveals that while risk managers continue to rely on brokers as their main information source when placing risk, they do not always view brokers as the ones to develop solutions for their risk concerns. Less than half of those surveyed identified brokers as a solutions provider. This is particularly true for emerging risk such as cyber security, data and supply chain risks, where risk managers said they would look primarily to industry groups and carriers to develop the solutions for these risks. This is a worrying trend for the broking industry as these are also the risks that organisations place highest on their risk agenda.
According to the research, nearly three quarters of risk managers said they want analytics to help inform their decision making due to concerns over new and emerging risks, but many brokers are falling short in this area. Less than a third of respondents said they were very satisfied with brokers’ analytical and modelling services.
Rich Mayock, global insurance brokerage leader at PwC, said:
“This is crunch time for some in the broking industry. Brokers’ clients’ expectations are changing faster than ever, with risk managers looking for consultative partners who have the skills to both identify and develop solutions for the changing risk landscape.
“Brokers may be first choice to take on this expanded risk facilitation role, but they are not the only choice in all cases. Given the rising demand for risk advice, other specialty advisors are vying to take on this risk partnership role. If some market players don’t adapt their businesses to provide the services and expertise their clients now want they could face increased competition for this valuable new business.
“For some brokers this will require a shift in mindset from hindsight to foresight as they evolve from being simply placers of coverage to preventative risk advisors and managers.”
PwC’s research shows that developing advanced risk and loss analytics and capitalising on big data analysis will be key to strengthening brokers’ position in the market. Risk analysis, developing shared technology between client, brokerage firm and carriers, and loss analytics were identified by survey participants as the top three things brokers can do to assist them on a more efficient basis. More than a third of risk buyers also identified big data analytics as important. This suggests that those brokers who can use analytics to identify new threats and then develop solutions for these will emerge in prime position.
Finding new sources of business is becoming more important than ever for brokers as organisations’ investments in people, advanced systems and data gathering means many are becoming better informed about their risk profiles and management options. This has led to a greater retention of risks and added pressure of prices for what is still insured. To achieve growth, brokers will need to look to the emerging risk area.
Rich Mayock, global insurance brokerage leader at PwC, said:
“Broking is at a once in a generation crossroads. Brokers have a choice – they can either compete for increasingly commoditised standard risks, or lead risk facilitation which will open up both commercial opportunities and a crucially important role with society and the global economy. This will provide a powerful boost for a sector facing disruptive competitive pressures and shifts in market expectations.”
PwC suggests that brokers should:
- Adapt their business models to simultaneously support cost-efficient standard risk management and be seen as knowledge-intensive risk consultants
- Expand their information gathering network to better anticipate and understand the new and emerging risks facing their clients
- Improve their ability to collect, integrate and analyse data to create new solutions – shifting to more of an analytical/consultative broker
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