“One for all and all for one”, a motto that emphasises unity and collective responsibility, was famously used by Alexandre Dumas when he penned The Three Musketeers. By coming together to draw upon one another’s strengths and loyalty, they overcame myriad challenges.

Those same principles could equally apply today to Europe’s insurance brokerage industry, which remains highly fragmented. Small regional brokers face their own challenges, including compliance and regulation, competition to win new customers, and the cost burden of introducing new technology to try and improve the level of transparency on customer behaviours and needs.

Europe’s insurance sector is a patchwork of myriad brokers. Still largely reliant on basic technology systems, it is an industry that offers significant growth potential through digitisation. Growth projections reveal that market size, based on gross written premiums, is forecast to rise from €261 billion in 2024 to €370.9 billion by 2029(1). The U.S. insurance brokerage market, by comparison, has an estimated size of $216 billion(2).

Consolidation over the coming years means that those able to respond swiftly and accelerate their growth by harnessing the tailwinds of digitisation will be a stronger position to become local champions in their respective markets. There are an estimated 46,000 commercial brokers in Germany alone(3), while Spain has more than 3,500 brokers. In the UK, there are more than 1,600 insurance agents and brokers(4).

As technology starts to disrupt the insurance space, the risk for any founder-owned broker is being left behind. Given the rapid pace of innovation, the current climate represents an opportune time for brokers to consider how best to ride the wave and scale their businesses.

One strategic route is to become part of a wider, cohesive group as it offers the opportunity for each broker to benefit from the ‘halo effect’; that is to say, leveraging technology solutions that would otherwise by beyond their means. Moreover, in the spirit of ‘All for one and one for all’, it allows brokers to tap in to a wider brains trust within the group and share industry-specific knowledge with one another. This can help enhance the customer service experience.

Some brokers, such as Germany’s GGW and Belgium’s Induver, are discovering the synergistic benefits to building a bigger group and enjoy economies of scale, having acquired several owner-managed brokers in recent years.

From the point of view of insurance carriers, working with a bigger group not only makes relationship management easier in terms of time efficiency, it also improves the level of sophistication by virtue of liaising with a broader range of specialised advisors. Done well, it can lead to a highly virtuous circle for the carrier, the broker, and the end customer.

Brokers are now recognising the pivotal role that digitisation can play. After all, insurance is a data-rich industry where one could easily see LLMs being applied to proprietary data sets over the coming years, to drive value. One the one hand, a digital transformation strategy frees up more time for agents to sell products. On the other hand, it gives senior management a more comprehensive data-driven view of their organisations to better understand: How many policies do we sell per week? Who's been selling? What kind of policies are they? What margin are we making?

Greater data transparency is allowing firms like Howden UK, for example, to utilise predictive models to turn historical static data on its customers into dynamic data. In turn, equipping its insurance agents with the tools needed for more effective cross-selling of products. Knowing when certain types of customers are more likely to want certain products is opening up a deeper level of awareness among Howden’s agents.

A strong data foundation layer is vital for brokers to achieve this level of transparency. Depending on the size and the age of the company, this can potentially be a significant undertaking that involves a complete re-platforming to modernise its core software, before the formation of a data lake is even possible. Once in place, a data lake presents the opportunity to overlay more sophisticated AI tools, like predictive models, to build dynamic dashboards for different customer segments.

Data lakes can be applicable for both financial information, to gain a better understanding of the operational environment (costs, margin growth, branch-by-branch sales) – which should not be underestimated when building a platform – and also customer information, which brokers can interrogate in a more real-time environment and ask, ‘What is working for the client? What can we do better?’

This opens up the possibility for data-driven brokers to move away from a position of thinking about what customers have, to thinking about what customers should have.

Brokers like Induver are also starting to implement client-facing solutions for commercial clients to more easily access and manage their policy documents.

The emphasis on building broker cohesion by adopting a digitisation strategy can also lead to greater cost synergies and commission synergies within the group. One example of this is to use technology within HR teams to help with hiring and retention of talent, and measure performance. Benchmarking brokers across a jurisdiction is another important aspect of transparency, and rather than be seen as a negative, it presents a solution for sharing best practices, building further cohesion within the group.

Many brokers will likely be early on their digitisation journey – if at all – so thinking about AI co-pilots might feel a distant objective. Yet some have already taken steps. Howden UK, mentioned previously, recently embarked on such a programme to reduce the number of customer service agent manual tasks.

Having built a data lake, they had the right ecosystem in which to introduce an AI co-pilot. By listening in on calls, the AI is able to provide prompts to guide the conversation, bring up the right policy details, and allow agents to focus more attention on customers’ needs. This is already leading to fewer call backs and productivity gains of approximately 20%.

With further strategic M&A expected across Europe in the coming years, brokers who join forces to share the collective benefits of digital transformation will put themselves in a favourable position to drive growth.

Sources:

1: https://finance.yahoo.com/news/europe-insurance-brokerage-market-share-200800381.html

2: https://www.ibisworld.com/united-states/market-research-reports/insurance-brokers-agencies-industry/#IndustryStatisticsAndTrends

3: https://www.strategyand.pwc.com/de/en/industries/financial-services/germanys-commercial-insurance-brokerage-market.html

4: https://www.ibisworld.com/united-kingdom/number-of-businesses/insurance-agents-brokers/3790/