By Chiamaka Ajeamo [email protected]
Since the outbreak of the COVID-19 pandemic and its attendant impacts on businesses across the globe, digitalisation of processes and procedures, technology and how it can be utilised to enhance productivity have been at the forefront of discussions in the different sectors of the economy.
The sole reason for this is that technology has become a game-changer in many businesses and now driving digital disruptions across all industries and the insurance sub-sector is not an exception.
According to insurance experts, InsurTech (Insurance Technology); a term used for technologies like Artificial Intelligence (AI), Internet of Things (IoT), digital marketing and machine learning, crafted to boost the operations of insurance companies and the industry in general, are becoming the future of the insurance industry.
Consequently, companies and practitioners that seek to survive and be relevant in the future must adopt insurtech to transform ways their businesses are done.
They added that the emergence of insurtech which has caused huge disruptions to insurance business models by replacing the old with innovative ones, will sooner or later displace the role being played by some practitioners such as the brokers/agents in the industry.
In fact, globally and locally; there have been several discussions around the threat InsurTech presents to brokers’ business models with the fear that many will be redundant since the technology is majorly controlled by data and analytics.
Reacting to this emerging concern, President, Nigerian Council of Registered Insurance Brokers (NCRIB), Mrs. Bola Onigbogi, said despite the disruption brought by the pandemic and other emerging trends in the industry including insurtech, brokers will remain relevant in the insurance industry.
She noted that there is no way digital marketing or technology can displace brokers because there is always a place for human interaction in every market.
“The strength of an insurance broker lies in the rendition of personalised services. Regardless of digital marketing, the broker will always remain relevant in the insurance business worldwide.
“There is no way digital or direct marketing will affect brokers. It is true that technology is evolving and impacting our business models and many underwriters are seeing digital marketing as the way to go. This fact is indeed a challenge to brokers which is also charging us to do more to change our strategies and be more creative in meeting clients expectations.
“There is always a place for human interaction in every business and I am certain that brokers will remain important in the insurance value chain. For instance, in commercial insurance, a broker will always have an edge because if a factory is being insured, he/she needs to visit the facility to do the necessary inspection and be in a position to advise the owner and the underwriter. It is not a policy you buy online through digital marketing only”, Onigbogi added.
For his part, insurance expert and consultant, Ekerete Ola Gam-Ikon, toldDaily Sun that brokers will remain relevant but in a different way from how they are currently operating.
Gam-Ikon said, “In a digital environment, their role and influence will likely reduce in terms of distribution, but will increase with regard to product innovation. We should expect to see more collaboration between brokers and insurers in the area of product development and underwriting as customers will prefer to purchase directly.
“Another area, where brokers will become more relevant, is in claims settlement. As insurers continue to delay the digitisation of this aspect of the insurance value chain, the role of brokers will be enhanced. Brokers that do not digitise their operations will become irrelevant even to the corporate clientele where they currently enjoy huge influence.”
An insurance broker is a professional who offers, negotiates and sells policies. He acts as an intermediary between insurers and customers.
According to NCRIB, as a client, it is so easy to get confused amongst hundreds of policies with different conditions, premiums and limitation. This is where a professional insurance broker becomes useful.
The Council stated that a good insurance broker is supposed to help you to understand and identify your needs, to look for the best insurance proposals meeting your personal requirements, to make the ‘jargon’ found in most insurance contracts comprehensible, to look after smooth adjustment of losses that might occur during the policy period.
It added that oftentimes, some insurance consumers misconstrue the role and responsibility of insurance brokers and that of agents. Although, their duties and responsibilities may look similar, but there are differences in their operations.
“In the eye of the law, the brokers and agents are all regarded as agents but the two categories have distinct status and responsibilities. In general term, an agent is a person employed for a purpose of placing the principal in a contractual relationship with a third party. In other words, an agent is someone who acts for another in all those circumstances under which an agency can be assumed. Brokers on the other hand are a “go-between’ between the providers of insurance services, that is insurance and reinsurance companies and the consumers of such insurance services who are the insuring public.
“Today, brokers are universally recognised as insurance intermediaries employed to use their skills and expertise in arranging insurance protection in the very best interest of their clients who are the proposer or consumers. A broker is presumed at law to have the necessary knowledge as well as the ability to handle all his clients’ insurance problems and to advise the clients correctly and appropriately. Unlike agent, who represents one insurance company, an insurance broker is independent and has access to many insurance companies, theoretically giving its clients the best coverage at the optimal price,” the Council explained.
It is worthy to note that insurance brokers and agents are frontline practitioners in the insurance business value chain, contributing about 80 per cent of the industry’s yearly gross premium income.
According to data obtained from the Nigeria Insurance Digest, published by the Nigerian Insurers Association (NIA) in 2019, it was revealed that brokers who are major players in the insurance distribution channel controlled 52 per cent of the insurance market.
The NIA disclosed that brokers generated N257.2 billion out of the N490. 8 billion gross premium income recorded by underwriters in 2019, while agents generated N166.2 billion which was 34 per cent of the cumulative gross premium recorded.
In 2018, brokers generated N220.8 billion out of the N413.8 billion gross premium income recorded by insurers. It represented 53.37 per cent of the gross premium income recorded by the insurance industry.
On the other hand, agents generated N107.8 billion, representing 26.05 per cent of the gross premium.