Technological change and the role of independent brokers

Since the COVID-19 pandemic forced wholesale changes to the once traditional way of working in the re/insurance industry, the discussion over the role that technology will play in the future of the business has grown even more prominent.

With the onset of global lockdowns and compulsory remote working orders, the use of technology in Bermuda and elsewhere, alongside the rise of insurtechs, has exploded. Will these developments ever fully replace the importance of face-to-face negotiations and relationships on which the market has been built?

Ed Broking Bermuda chief executive officer Chris Bonard spoke to Bermuda:Re+ILS to discuss the role of technology, the broker of the future, the evolution of the Island’s ecosystem and how the pandemic prompted a rethink within the re/insurance industry.

How the industry will operate once the impact of the pandemic fully subsides and travel resumes—if it ever does—to pre-COVID-19 levels remains one of the lingering questions from the past 18 months.

The re/insurance industry managed the transition to remote working with relative ease overall, with service largely uninterrupted, claims continuing to be serviced and employees converting to working from home with few major issues.

Bonard believes that the technological changes and innovation leading to new methods of doing business will make for a sharper marketplace overall.

“The process itself could be fully digitised in terms of buy and sell. In theory, it could be fully electronic, and for certain commoditised classes you could be in a situation where you’d never need a broker to touch it,” he said.

But that doesn’t mean that the role of brokers as partners working with clients to help them assess and source the right cover for them will come to an end.

Bonard suggests that brokers are likely to adopt the hybrid route in years to come, with a more prominent role for digital platforms, while retaining their focus on building key strategic partnerships between carriers, clients and capital.

“Our hybrid role means we still need people who understand the relationships. This central role of broker as a trusted advisor for customers isn’t going away.

“We are in essence going through an industrial revolution,” Bonard continued. “We’re considering how we create efficiencies in our business. Can we do more with the same people, or people with different skillsets?

“We’re seeing a focus on improvement through technology across insurance. Whether it’s through insurtech firms, or insurers and brokers improving their in-house abilities such as our TradEd platform, there is definitely a change coming in.”

Alternative service

As one of the larger independent brokers operating in Bermuda, Ed plays a vital role in offering clients an alternative to the big three players.

The Island is known for writing the biggest of big-ticket catastrophe business or complex risks—often handled by a handful of larger companies—but Bonard says that as more independents begin to make a home in Bermuda, they should look to establish a substantive presence rather than simply domiciling the business.

“It’s positive that more independent brokers are coming here, and I hope they put boots on the ground, rather than just a brass plate with one person,” he said.

“That makes a difference in being able to provide the knowledge and access that clients are demanding of us. If you look at the major wholesalers in the US, they didn’t know how to get to Bermuda, so they tended to come in via an additional wholesale route, either into London coming back round again, or via their competitors.

“Now they appreciate the fact that there is access to this marketplace through those who know it well.”

Bonard argues that technology can play a key role in introducing more independent players to the market, by helping to control costs and ensuring that the market becomes more diverse and sustainable even in times of stress.

“The central point for the Bermuda marketplace is to make sure it isn’t merely a hard market safe harbour for a large part of the insurance world. It needs to remain a sustainable, long-term option.

“Due to the cost of doing business here, a lot of insurance underwriters focus on the Fortune 500/1000 big ticket risks—they’ve moved away from the upper middle market and certainly don’t do small and medium-sized enterprises here at all,” he explained.

“We think that’s a short-sighted approach. This is where technology comes in, because there is no denying that sensible use of tech can reduce costs. This offers a strong incentive not to move risks when the market softens.”

Startup heaven

Over the last 18 months, Bermuda has attracted a new batch of technology startups which have chosen to make the Island their base, drawn in by the strength of the existing ecosystem as well as the supportive nature of the local regulators and government towards innovation.

Bonard says this approach has helped establish Bermuda as a leading force in the insurtech world, and points to the adoption of the Regulatory Sandbox, which offers an interim step where innovation can take place, as one of the most important factors helping to develop the market.

“Good, strong regulation is hugely important. But the insightful approach here is led by an understanding of what Bermuda needs to be. The creation of these sandboxes was a very smart step.

“You’re saying to people: we want to work with you, we want to build this and we want to create longevity in Bermuda for all the players involved. That’s a hugely attractive, positive message and one that certainly resonates with us,” he concluded.

Chris Bonard is the chief executive officer of Ed Broking Bermuda. He can be contacted at: chris.bonard@edbroking.com