Editor's Note: This article was created as part of my fractional/interim role leading Growth and Demand Gen at Quandri. You can read more about my time there here.
The ballad of consolidation, big tech, and brokerages
It seems we live in an age of consolidation. The internet was billed as a decentralizing force. In the past 25 years, I’d argue the opposite has transpired. Insurance has had the same fate. Every year, the currents of consolidation flow towards bigger and bigger water.
According to Optis Partners, the COVID pandemic accelerated this trend. Looking at North American agents and brokers:
In 2020, M&A transactions grew by 20% year over year (YoY).
In 2021, M&A transactions grew by 30% YoY.
And in 2022, M&A transactions grew by 16% YoY.
I’m not here to argue the merits of M&A. I am here to argue that staying independent in a world of consolidation is difficult. And getting more so every year. The rise of big tech companies, fintech and insurtech startups, and online services, has put brokers under pressure.
At Quandri, we work with many brokers who are fiercely independent and wish to remain so. The number of independent agencies in North America increased in 2022 by 11% (roughly 4,000). Swimming upstream against consolidation. A strident display of the entrepreneurial spirit within the industry.
If you fit the fiercely independent mold, what are you doing to maintain your independent status?
The rise of digital services and commerce has changed the game, no doubt. As technology becomes more available and widespread, consumers have gravitated to scale and centralized entities for an increasing amount of needs.
It has also pushed the competition for new customers into a decreasing amount of places, as evidenced by the plunge of marketing $s into paid search:
It might be tempting to not play the game at all. And I'm a strong advocate for playing your game, the way you can win - not another person's game. However, if you do that, you're fighting for roughly 40% of the pie, which shrinks every year. Plus, you're missing out on a lucrative short and long term customer base. Online insurance buyers are younger and have higher incomes:
*Target group is online insurance bookers, all respondents is everyone in the survey
*Target group is online insurance bookers, all respondents is everyone in the survey
"As the independent agency channel recovers from the coronavirus pandemic and weathers economic uncertainties, technology adoption continues to prove itself critical to continued success"
"Agencies are demonstrating flexibility and progress in digitalization as the insurance industry works together to incorporate tech solutions that support agents' roles as trusted advisors."
- Chris Boggs, Big "I" VP of Agent Development, education and research
To remain competitive, independent brokers need ways to level the playing field. Technology is one such force. Tools purpose built for brokers can improve operations, build customer loyalty, and help keep talent.
Throughout history, us humans tether ourselves to our tools. Tools available for brokers today are incredible compared to 10-20 years ago. Technology has become an integral part of any business, it is 2023 after all. For independent brokerages, it translates to adaptability, scalability, and efficiency.
Tools such as robotic process automation (RPA), customer relationship management systems (CRM), and digital analytics help brokers stay connected to customers, deliver tailored insurance products, and a seamless experience. Technology advancements in cloud computing, predictive analytics and machine learning, and cybersecurity, unlock improved efficiency and agility.
Technology has become an integral part of any business, it is 2023 after all. For independent brokerages, it translates to adaptability, scalability, and efficiency. Tech like cloud computing, robotic process automation, predictive analytics and machine learning, and cybersecurity tools, brokerages can (hopefully) improve efficiency and agility.
But let's not forget the humans, the most important part of the equation. Finding the right balance of technological and human solutions is crucial. Brokerages who do will reap the rewards of a business ready for the future, that delivers results today. Digital workers are a great way to leverage many of these technologies. They're built to take on mundane and repetitive tasks, allowing the human workers to do more human work.
Great companies probably have great employees. In fact, I'd argue that's always the case. So, in addition to tech, finding and retaining great talent is a necessary input. And that’s getting harder and harder, as any hiring manager can attest.
One thing that helps - ensuring employees are working on high impact activities. This is what my Econ professor would call a win-win scenario.
At Quandri, we firmly believe there's never been a better time to be a human than the modern day. Much of the insurance industry has yet to reap the benefits of recent technological improvements. But this is a matter of when, not if. We'd like to make the future brighter, for insurance brokers and their customers. That's why we're here, doing what we do.
Friday night reading, dive deeper:
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