Is double entry costing brokers marketshare?

If brokers want to keep up with their direct-to-consumer competition — to whom they’ve lost 15% of personal insurance market share over the last 20 years — they need to reduce the time they spend entering clients’ data.  

That can be done through better broker-insurer connectivity and application programming interface (API) integration, said Tom Reid, broker connectivity lead for IBAC’s Data Exchange (DX) Project.

Between 2000 and 2022, personal lines broker market share has steadily declined from 65% to 50% — and the turnover has largely gone to direct writers and agents, Reid told attendees at the Insurance Brokers Association of Alberta Convention 2024 in Banff. 

Of the provinces, Quebec has seen the biggest decline in market share, “and there’s a tremendous number of direct writers in that province,” he said. 

Canadian Underwriter‘s 2024 National Broker Survey shows the apex of brokers’ concern about directs was in 2018, when 76% of brokers in the survey said it was the Number 1 challenge facing the broker distribution channel. The pandemic highlighted the broker value proposition of choice, advice and advocacy on behalf of clients, and thus concern about directs tapered off to as low as 51% in 2023. But this year, concerns about directs has crept back up to 54%.

Comparing the process 

According to Reid, direct writers’ advantage lies primarily in two places: the customer experience and the workflow process.

For example, whereas many direct writers have self-serve customer portals, brokerage firms often don’t. “Insurance is convenience buy; they want to buy it when it’s convenient to them,” Reid said of insurance customers. 

Traditionally, brokers have tended to operate from nine to five on weekdays. But a direct writer with a self-serve portal can close the same transaction at any time of night or day, at the consumer’s convenience. 

Brokers also face the reality of getting quotes from multiple markets. And so, they occasionally need to call underwriters to confirm rates, coverages or restrictions. Direct writers, with only their own products to sell, can close the sale internally. 

And then there’s the question of a difference in rates between broker systems and the carriers’ portals. “Our rates are not always accurate, when you look at some of the third-party [vendor systems] out there,” said Reid. “Do you trust your quote system?” he asked of a broker audience member, who responded, ‘No.’ 

In fact, an IBAC study shows 40% of broker management system quotes are more than 2% different from the insurer portal price. 

On that note, brokers also contend with multiple carrier portals, whereas direct writers may offer straight-through processing. In fact, brokers deal with an average of five to six portals each, Reid said. 

Although brokers offer clients personalized service, choice and advocacy, as distinguished from their direct writer peers, “when you look at how much work a broker [customer service representative] has do versus a direct writer CSR, brokers have to do a ton more work— they’re less efficient,” said Reid. 

Direct writers might also have bigger marketing budgets, or better search engine optimization. 

For example, “if you search, ‘Car insurance quote in Calgary,’ there will be 10 organic leads that come up,” Reid explained. But of that 10, excluding sponsored ads, “there are only three brokers on that first page,” he said. “Right off the hop, you only get a 30% chance of the broker getting somebody looking for them.” The rest of the results are aggregators, broker channel carriers, and direct writers. 

The double entry solution 

Part of the key to growing broker market share is removing double entry and then reinvesting the time and money saved to grow the brokerage business, said Reid.

“Portals, double entry, and the cost associated with it, are holding back the broker value proposition. They are holding back the broker channel’s ability to take back market share with direct writers,” said Reid. 

In fact, a 2023 IBAC study found that transaction costs could be reduced by 11% to 17% on new business and up to 50% on policy changes by shortening the quoting process. What’s more, the study found 35% of transactions could have been self-served.  

But to eliminate double entry, the onus is not solely on brokers, but carriers and BMS vendors as well. API connectivity allows brokers and insurers to transmit data between the BMS and the carrier’s back-end systems in real-time, thus eliminating the need for double-entry of the client’s data. 

“Allowing insurance brokers to make client changes in their own system without double entry saved as much as 40% of the work for the broker, and reduced client wait times by the same amount,” reads an IBAC release on the report. 

It’s a change that could save brokers 5% to 10% of revenue, according to Reid. “Let’s get rid of that five or 10% that was taken and reinvest it back into marketing.” 

Connectivity has been addled by the high cost to implement new technologies, as well as varied implementations between companies (though CSIO has published implementation guidelines). 

But one of the factors slowing API connectivity down is there’s not been enough impetus from brokers, said Reid. “Brokers have not been, until relatively recently, pushing hard on this.” 

It’s pertinent, he said, that brokers push their carriers and vendors and ask what they’re doing about connectivity, and continue to support those that are already investing in it. 

Feature image by iStock.com/nidwlw