The landscape for insurance brokers, particularly small independent firms, is undergoing significant challenges as the cost of regulation reaches an all-time high. Due to this difficulty, FullCricl’s Ashleigh Gwilliam has outlined the smartest ways to tackle the cost of regulation and drive growth.
According to the British Insurance Brokers’ Association (BIBA), direct regulatory costs for brokers have surged by 40% since 2019. The overall direct and indirect costs now account for 8.1% of fees and commissions, a burden double that experienced by counterparts in other countries. This surge, coupled with factors like rising inflation, market challenges, and escalating operational costs, including HR, accounting, marketing, and IT, is prompting many brokers to exit the market, citing disproportionate regulation as a primary reason.
The potential exodus of brokers is concerning for the sector, primarily composed of smaller firms. Despite brokers arranging over £74bn of insurance annually, constituting 67% of general insurance business and 81% of all commercial insurance business in the UK, the number of independent brokers and agents in the UK has seen a decline of 0.4% per year on average over the last five years.
Regulation, while crucial for a healthy insurance ecosystem, needs to be proportionate.
BIBA has raised concerns about the exponential increase in red tape costs for brokers over the past three years. CEO Graeme Trudgill emphasized the overwhelming regulatory burden on smaller brokers and its prohibitive cost.
Staying on top of ever-changing compliance requirements is the first challenge for brokers. BIBA’s regulation updates page highlights the complexity, especially for smaller brokers.
The introduction of the Consumer Duty earlier this year, setting a higher standard of protection, adds to the challenge, requiring brokers to prioritize customers’ needs and undergo fair value assessments, incurring additional time and costs. With the Government’s Future Regulatory Framework taking shape, brokers anticipate new reforms in the coming months and years, requiring proactive understanding and adherence to regulatory updates.
To tackle these challenges, a data-driven approach becomes essential. Brokers can leverage real-time customer information and insights to gain a holistic view of each customer’s financial situation, group structure, and anticipate any risk profile changes that may impact compliance requirements.
Enter SmartBroker™, a revolutionary tool democratising customer intelligence for the independent broking sector. By providing data-driven insights, SmartBroker™ enables brokers to identify new opportunities, build long-term relationships, and drive growth and revenue.
Its benefits include prospecting with precision, preparing better underwriting submissions, tailoring outreach with data-driven insights, and increasing client retention by being alerted to changes in clients’ business and risk portfolios.
Throughout these testing times, SmartBroker™ offers insurance brokers a smarter approach to not only tackle the cost of regulation but also to drive growth and navigate the evolving landscape.
Read the full post from FullCircl here.
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