Why the future for brokers is data-driven

The latest Insurance Age Pulse survey explores how brokers are using data insight to guide business strategy, and reveals why more now see data as an essential factor for growth. Rachel Gordon reports

There is growing realisation among brokers that using data effectively can have a transformational impact on business outcomes.

This is revealed in analysis showing brokers are planning investment in data insight tools – from customer profiling, credit decisioning and CRM, to risk assessment and fraud prevention – and are more knowledgeable about how these can help in areas like cross-selling and winning new business.

The latest Insurance Age Pulse survey, in association with Close Brothers Premium Finance, sought to find out to what extent brokers are using data insight to drive business strategy and improve decision making.

Around 200 brokers were surveyed – with more than 80% being predominantly commercial lines, while some 16% also provided some personal lines. Firms of all sizes were included, ranging from GWP of up to £1 million to in excess of £75 million.

 

Investment matters

Brokers were firstly asked to what extent they agreed or disagreed that investment in data-led customer insight is crucial to the future of their business.

Almost 70% either agreed – or strongly so – that it is crucial. This is a high number, although Allen Seldon, product director for Close Brothers Premium Finance, points out there is still a “broad spectrum of data maturity”.

He comments: “Brokers competing online, particularly where they distribute through price comparison websites, are well versed in the power of data. However, smaller brokers, distributing offline, may be less so.”

Broking is competitive, and Seldon says: “Margins are tight and data costs are a big investment. But the value of the right data is huge and not investing could introduce more cost, such as from cancellations and debt.”

Seldon says larger broking firms tend to have a statistical advantage, as they have larger data sets at their disposal, and can benefit from retrospective analysis. Smaller firms “don’t have the same quantity of data to model, and generally have less experience of data enrichment, so support and guidance is necessary to help identify the benefits and extract the value.”

The research also found 40% of brokers said they planned to invest in data tools in six months to a year’s time and just over 20% in more than a year’s time. Again, this suggests growing awareness, although some 38% said they had no plans to invest.

 

Making better decisions

Brokers are enthusiastic about the data tools they are currently using, with respondents frequently commenting on the time-saving benefits of automated tasks and the ease of use in making decisions.

One broker described usage of a leading risk assessment tool as “invaluable in helping to select risks”, while another commented on the same tool’s “huge range of data enrichment points to support underwriting”.

Another described their firm’s CRM system as “extremely powerful in automating client journeys and renewals”.

Many of those surveyed also admitted they were still in the early stages of exploring their data tools’ full potential.

Asked about the priority areas where brokers considered data could help them make better business decisions, respondents pinpointed the top five objectives as: retaining customers, cross-sale opportunities, market opportunities, risk evaluation and improving customer journeys.

Beyond these, brokers had other objectives for investment in data tools, including automation of SME risks, full cycle AI automation and systems integration.

Barriers to investment?

The research also explored the barriers for firms in increasing investment in this area, with brokers asked what limited them from making greater use of data tools to guide decision making.

There were four main reasons. First was cost, with 39% saying the price of data insight tools was too expensive. Lack of time came second at 35%, with insufficient knowledge coming third at 31%, and in fourth place came difficulty integrating with existing systems, at 28%.

Although cost will always be a factor, this may become less of a barrier if brokers had more bandwidth to explore the potential return on investment. There is an argument that failing to invest is a risky and short-sighted strategy.

As Seldon says: "If your competitors are using data, their pricing will be sharper and you may end up with the risks they don’t want. This potentially drives increased levels of fraud, cancellations and debt.”

Given the workloads many brokers are under, they may be pressed for time when it comes to investigating data insight options. However, they again risk losing out to competitors. Meanwhile, lack of knowledge can be countered if the provider offers training.

If your competitors are using data, their pricing will be sharper and you may end up with the risks they don’t want.

Allen Seldon, product director, Close Brothers Premium Finance

Seldon says any decision should be taken carefully, and helping an existing relationship with a provider makes sense. “Some brokers will be unclear as to what tools would be suitable. They may be inundated with salespeople and collateral, but unless they understand what their requirements are, they won’t know where to get the best return for their money.”

He advises brokers to consider what will work in their business. “Data can help spot problems as well as positive trends – this can be used in customer retention and cross-selling. Certain data sets are highly predictive of claims risk and cancellation.

“Using this data at point of quote can significantly improve pricing accuracy, enabling you to load those risks you don’t want, who are more prone to cancel, and discount those for safer risks you want to keep.

“A greater understanding of your target market and customer footprint can only improve your understanding of their needs and support the tailoring of your service proposition.”

 

Using data to future-proof business

Brokers are increasingly using some form of data analysis, and Peter Smits, managing director of Ashbourne Insurance, says using indicative quotes to cross-sell is useful.

“Our administration team run a series of reports to obtain indicative quotes where we believe there are gaps in cover. There is a cross-sell matrix which we review annually and typically this would include cyber and data liability, management liability or professional indemnity quotes where no cover exists within a traditional commercial combined policy.

“Another example for motor would be GAP insurance or breakdown for fleets or for property owners, it could be landlords’ legal expenses or rent guarantee.”

He adds: “Any cross-sell must add value to the client’s insurance solution and we only offer quotes where we contain enough data to ensure that any indication is pretty accurate. We also work on the basis that if we are not advising our clients on potential gaps in cover, then someone else will.”

Smits says a further use of data is in reviewing claims patterns. “Given the difficulties and stresses of the repair network currently it can help manage a client’s expectations pre-renewal or inception.”

Eddie Ferrão, director with broker Langton London, says his business is “increasingly leveraging data to drive new business and analyse claims more effectively.”

He explains as AI continues to evolve, his firm is developing an online platform called Parasol-insure. “It will amplify efforts, offering deeper insights and automating decision-making processes. However, careful management of data privacy and algorithmic bias will be crucial as these technologies expand. Embracing data and AI is essential for brokers to stay competitive and deliver personalised client services.”

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