The Big Question: What are the biggest challenges set to hit brokers in H2 2024?

Mike Bottle, SVP for strategy and distribution, Arch UK Regional Division

Brokers are facing challenges on multiple fronts, placing a greater onus on insurers to collaborate more closely with their broking partners.

Firstly, there continues to be rate volatility across the UK insurance sector. Such fluctuations prove particularly challenging for brokers to understand future pricing developments, particularly when this market dislocation results in shifts in insurer appetite.

It is vital that insurers are clear on their appetite and keep brokers informed on their long-term market goals.

The requirements of Consumer Duty will also be a key area of focus for brokers as the market looks to raise and clarify standards of consumer protection across the sector.

Once again, broker and insurer collaboration will be key to ensuring best customer outcomes, enhancing service and supporting improved risk management.

Finally, there exists the perennial challenge of achieving sustainable organic growth and winning new business.

This requires a greater focus by insurers on creating an innovation pipeline and bolstering value-add capabilities, such as risk services, pre-cover surveys, property valuations, managing underinsurance and addressing evolving liability risks.

Graeme Trudgill, chief executive, Biba

There are several challenges that brokers may have to face later this year – some that are ongoing and some new.

We expect a continued focus from the FCA on complying with the Consumer Duty and demonstrating fair value and it is likely to look at how fair value is delivered both at point of sale and point of claim.

Using tools, such as Biba’s fair value assessment framework, will certainly help members demonstrate this.

Regulatory focus is also likely to turn to the use of premium finance, where value assessments will similarly come into play.

The treatment of those facing vulnerabilities will be under the lens of the regulator in an expected multi-firm review, so brokers would be wise to be prepared to evidence their established practices around identifying and serving vulnerable customers. 

As well as understanding how wider political changes that are likely to occur here and globally – and how these could affect their businesses – brokers are likely to continue to find reduced capacity challenging in certain markets, including in personal lines.

Building good relationships and arranging to access schemes, such as those provided to Biba members, will help them find suitable covers for customers.

Aaron Woodhams, chief underwriting officer, Iprism

In recent years, the soft market trend – such as in mid and high net worth (HNW) home – has driven premiums downward, meaning a significant number of policyholders’ premiums are underfunded.

Consequently, some insurers and capacity providers are finding it challenging to achieve a satisfactory return on capital.

As a result, some are exiting specific arrangements or implementing substantial across the board increases, irrespective of any material changes in risk. The situation has been further complicated by Brexit and the ongoing impact of Covid-19.

Labor shortages, rising material costs and increased prices for luxury goods and services have exacerbated the issue.

Our advice to brokers and their clients is always to look beyond price alone. When considering insurance products, avoid making decisions solely based on price alone, because whilst the cheapest policy may seem attractive, it often lacks longevity. 

Brokers should look to build partnerships with underwriters that demonstrate sustainable, considered pricing.

We have a disciplined underwriting strategy that allows for nominal increases for our brokers, whilst maintaining the same capacity and terms.

Ian Hughes, chief executive, Consumer Intelligence

Brokers are already facing a number of complex challenges, particularly with the implementation of the Consumer Duty regulations impacting key revenue streams, such as fees and charges.

This period is challenging brokers to profoundly reassess their value propositions and operational models. Over the last year, premium levels have escalated and underwriter capacity has tightened.

Brokers operating in niche markets have found it increasingly difficult to secure cover. This is exacerbated by a noticeable contraction in the number of available underwriters.

In addition, the resurgence of major players in the direct insurance market, such as Allianz and Direct Line Group, is poised to intensify competition significantly.

These companies are revitalising their strategies — shifting focus from protection to expansion, leveraging hefty digital investments to enhance direct customer interactions and undercut broker mediated channels.

The recently confirmed merger of Atlanta and Markerstudy in March 2024 is a prime example of market consolidation that could potentially monopolise capacity, further squeezing smaller brokers and reshaping competitive dynamics.

To face these challenges head-on, brokers must double down on their client servicing capabilities and deepen relationships with underwriters.

This involves not only managing existing capacities more effectively, but also innovating customer engagement without the large-scale digital transformations that larger firms can afford.

Strategic agility, enhanced digital capabilities and a focus on transparent, value driven client relationships will be paramount for brokers aiming to maintain a competitive edge in a rapidly evolving landscape.

Adam Beckett, chief distribution officer, Ageas

Against a backdrop of inflation, rising premiums, market availability and ever-changing customer needs and expectations, we expect market conditions to remain challenging for brokers in H2 2024.

Brokers will also need to continually evolve their business models to incorporate the ever-changing regulatory landscape that’s evolving from Consumer Duty and the ethos of customer focused fair value.

But Ageas is not abandoning brokers to tackle these challenges on their own. We believe that brokers trading in personal lines insurance are uniquely positioned to capitalise on personalised insurance propositions that offer bespoke advice based on individual circumstances.

Success for insurers in this market can be achieved by supporting brokers to meet these challenges, focusing on broker success by offering a market to trade with stable pricing, technical expertise and facilitating brilliant service where it matters.

We have also found that through sophisticated rating and underwriting, it is possible to support regional brokers’ lifeblood – customer retention – enabling them to compete against direct players in real-time.

 

Chris Mallett, commercial strategy manager, Clear Group

More than ever before, brokers are facing a wider range of challenges. Uncertainty and instability in the UK and globally has resulted in a challenging economic environment for clients.

Understandably, brokers are being challenged to provide more innovative and cost effective ways of managing risk. Climate change and the cyber threat are also becoming real issues for clients and all of us.

Therefore, brokers have to work hard to help achieve the right outcomes for clients, while educating and advising them on these developing areas of risk.

Brokers themselves face challenges with addressing a substantial talent gap in the insurance broking sector, with many having to think about how they attract, train and retain high quality people.

As we’re doing at Clear, those brokers that invest heavily in training and development and combine this with a focus on emerging risks will be best placed to meet the challenges we face.

Capitalising on technological advances, particularly artificial intelligence (AI), is yet another challenge brokers will have to navigate in 2024 and beyond.

This is a challenge that has the potential to drive positive change in the broking sector if planned correctly.

Joe Conway, M&A director, Ardonagh Advisory

There are an aggregation of challenges for brokers that come down to delivering profitable returns, while staying on top of industry requirements and ever-evolving client needs.

While there’s likely to be no brand new risks that brokers will need to advise on in H2 2024, there will be an escalation of existing trends. These include more sophisticated criminal activity, growth in litigation from businesses and individuals and the uncertainty of a looming general election and geopolitical tensions that affect international trade.

Brokers themselves are recalibrating to the FCA’s new approach to regulation with increased reporting requirements.

The biggest risk amongst all of this for brokers is being left behind when competitors evolve. Joining a larger organisation or a network mitigates against having to navigate everything in isolation by tapping into central support, expertise and a trusted confidante. With the right team behind them, these challenges quickly become opportunities for brokers to thrive.

Tim Quayle, chief executive, OneAdvent

As we appear to be sliding into a soft market across a number of business lines, brokers that have got used to operating in a hard market are going to have to sharpen up their act.

In turn, this shift will increase the scrutiny on what value they are bringing to their clients.

Additionally, Lloyd’s and other London markets are still focusing their attention on reducing acquisition costs, so brokers will face pressure from both ends of the distribution chain.

This landscape will favour the innovative, value-add brokers. In an environment of surplus underwriting capacity, those brokers that exist to just ‘clip the ticket’ are going to struggle to justify their role.

Surely the days of charging a 5% brokerage fee just to get access to London will soon be behind us?

It all comes back to service and those brokers that have developed and evolved their service offering during the hard market. They will be well placed to succeed in a soft market.

Alan Houston, strategic sales and accounts directors, RSA 

One current challenge, is the ability to attract and retain talent, especially younger talent. With experienced individuals leaving the market, roles need to be filled. The industry needs to find ways to attract, retain and incentivise young, diverse talent. Insurance has many exciting career paths for people with all sorts of backgrounds, interests and skills and a better articulation of what the industry is all about would help draw in talent.

Apprenticeship schemes and links with schools and colleges should continue, but we should also look at other industries for people with the skills we need now and in the future.

Another challenge facing brokers and likely to continue in the second half of the year is understanding how clients are managing economic uncertainty, how this impacts their insurance buying capabilities and how they can help them manage this.

High interest rates and inflation are still present, and although we are seeing signs that the economy is improving, a UK general election means uncertainty looks set to remain.

Supporting clients with this isn’t solely the broker’s responsibility and insurers can play a role. Insurers should work with brokers to understand the challenges faced, offering insights and expertise that can help both brokers and their clients navigate the uncertainty.