Mind the Gaps

Broker Insights has talked about the knowledge gap between brokers and insurance markets. Where are those gaps?

Gaps exist between the appetites carriers have, the business that they want to underwrite, and the customer requirements and/or the sales objectives that the broker has to fulfill. Carrier appetites, as we all know, change based upon market conditions, carrier capacity, ability to execute, where they’re at in a market cycle, and their own product lines. Those appetites sometimes are not clearly communicated. So, the tension exists between the broker who has a relationship with the carrier and a carrier whose appetite for taking certain types of risk is subject to change.

It is said that better data leads to better decisions. What challenges do brokers face in harnessing and best using the data they already have?

At the core, if you think about it just from a conceptual level, brokers and agents are primarily sales companies. They’re not technology companies. Their core competency is building relationships in their communities and making sales, and servicing those clients, of course. One thing we found, though, and this goes from large organizations all the way down to small, is that the internal capacity to maintain a well-organized database of your existing book of business is oftentimes a challenge. This compounds when you’ve got highly acquisitive brokers; for instance, either PE (private equity) backed or doing the roll-up strategy, and they may buy agencies and ingest data from multiple agency management systems as a result.

So, you have data complexity, then you have data quality. Data complexity comes from multiple AMSs. It comes from multiple brokers that have been bought and ingested. It comes from organic or inorganic growth initiatives that result in all these different systems. Then you have data quality, which comes down to how efficient and effective is a brokerage in maintaining a robust repository of clean data.

Data quality is an issue. For example, around 50% of policies that we just got from a client who sent us their data to run through the [business optimization] simulations did not have NAICS [North American Industry Classification System] codes. And so, being able to classify, and therefore map business to carrier appetites, is very difficult because you’re not even looking from a complete set of information that helps you understand how to make an intelligent decision. Better data first starts with improving the quality of the data itself and removing the complexity of access.

What are the inefficiencies on both sides when it comes to placements?

At the carrier level, it can be hard to effectively communicate appetite to brokers. At the broker level, it’s about how do I better understand my own position in the market as I’ve grown over the years, or as I’ve served clients over the years, and what is actually available to me to optimize. Most brokers do the same thing they’ve always done, preserving the status quo. Or, if they’re buying cash flow, they’re buying cash flow and brokerages, and not really thinking about synergies and optimization. Yet they’re leaving a lot of money and a lot of growth opportunities on the table, which impacts not only their bottom line but also their EBITDA multiple if they’re looking to exit, or if they’re a private equity shop looking to continue the acquisition strategy.

How does Broker Insights address those knowledge gaps and challenges facing brokers?

What we’re able to bring to brokers is market-driven intelligence that is able to enhance what they currently understand. What we offer is an enhancement to their existing data with our own robust data science and database access. So, for instance, brokers can’t really do appetite matching or placement optimization by themselves. They can’t necessarily do commission forecasting based on book rolls. Some of the larger ones can, some of them have in-house analytics teams. But to do it at the speed and the scale with the degree of execution efficiency that we can do, I think is unique. We are more than just an analytics and insight firm that does data-driven decision intelligence. We also have the strategy development and execution capabilities inside the core platform that is basically tied to the brokers’ inbox.

You can set a strategy as a leadership team. You can say we want to move this business here and identify the growth partners and carriers that you want to be funneling new business to and so forth. Having set the strategy, it can be tied to a push notification technology system that promotes the strategy to the broker distribution force. Actions can then be monitored to show which brokers are on track and who may need more assistance.

It’s a complete circle of better data right at the start that creates the ability to simulate best case scenarios or outcomes, which leads to the development of a clear strategy, which then provides the capability to execute that strategy through effective communication and monitoring, all wrapped up into one platform.

How does this strengthen relationships between brokers and carriers and benefit clients?

If you’ve got a broker that better understands a carrier’s objectives, you’ve got a better distribution partner. If you’ve got a carrier who has an appetite for the business that you want to write as a broker, you’ve got a better relationship as a carrier partner. It almost becomes a bidirectional marketplace. Data transparency actually leads to better partnerships.

Certainly, markets change. Certain carriers don’t want to be exposed in certain markets, or they’re over-levered, and certain brokers are trying to move out of selling too much, say, fleet insurance. They want to sell more restaurant [insurance]. Markets change, but it’s the inefficiency of information that creates the misalignment of objectives. By bringing greater clarity to both sides, you create and forge better partnerships and mutual growth for all, but how does this serve the ultimate client?

The point is actually aligning customer requirements first. What is actually good for a client, first? How do I as a broker have the ability to ascertain that? I’m on the ground. I’m a pillar in my community. I’m building out relationships. I know my specialty lines, I know where my needs are from a customer standpoint, and typically I’ll have my hit list of top carriers that will write that kind of business. Well, what happens as those change?

By understanding customer requirements and then matching it to clear appetite from carriers, I can then actually move business that matches requirements, or I can identify new pockets of business that actually match to customers and carriers at the same time, as the true broker would do, with greater efficiency, speed, and profitability.

Tell us about the launch in the United States and where you go from here.

We did an official launch late last year in the U.S., so our founders have spent 50% of their time here in the U.S. We’ve reorganized and restructured the U.K. business operationally from a management team standpoint, to provide greater operational capacity to deliver. What have we done [in the U.S.] so far? We have a couple billion dollars in premium on our platform now. And we have a pipeline of probably about $50 billion in premium that’s due to come on to the platform in 2025.

Right now, in the U.S., we’re focused on the broker market. We do think that there’s an appetite at the carrier level for aggregated market insights to help them understand broker requirements better. But you need to have broker data first, and you need to be delivering a value proposition first to brokers. So probably for the next year, we are exclusively focused on the broker market and validating the value proposition for them. We do believe carriers will be interested in partnering with us, on the back of that, which should be a benefit to brokers, but the core product is designed for brokers— that’s in our name, it’s in our DNA, it’s in our brand. We’re not a data company that’s primarily catered towards carriers. It’s really about helping brokers. Our brokers are seeing the potential for between 10% and 20% uplift just on their top-line revenue from using our platform. So, you can imagine the impact that that has on a large broker. It’s not just the big tickets that are compelling. It’s the midsize, independent where this actually moves the needle in a material way.

The other thing worth noting is that we are involved with private equity firms and brokers on the M&A side. They use our technology to forecast valuations and revenue synergies during the diligence process. We are launching a new capability called Broker Insights Diligence, where we support due diligence through our data simulation and modeling, so we can look ahead and therefore accelerate revenue synergies post-acquisition.