The economic value of insurance broking
National Insurance Brokers Association
3.3 Supporting insurer innovation
3.3.2 Product innovation Brokers play an important role in developing their clients’ understanding of insurers’ different product offerings. This includes introducing new product lines and explaining their value to clients. On average, 13% of a broker’s policies sold in 2019 represented a new market opportunity for insurers. ‘Cyber risk’ was identified by 63% of brokers as an example of an emerging risk policy they sold in 2019.
Brokers support insurer innovation by providing advice to insurers about emerging demand, and introducing new products to an insurers’ client base. 3.3.1 Product refinement Insurers identify gaps in the insurance market by analysing data from client claims, as well as working with their distribution networks to understand clients’ changing needs. Brokers support insurers in understanding the market better, in terms of new risks, and in the types of coverage sought by clients, across industries. This includes providing insurers with feedback (including from clients) which can maintain or improve the insurer’s competitive position in specific markets. While the introduction of entirely new product lines is rare, ‘cyber risk’ coverage is a key example of a recently developed solution to an emerging risk. The demand for cyber risk insurance was brought to insurers by both brokers and reinsurers.77 Brokers assist insurers to identify market gaps, providing an opportunity for insurer product innovation. More often, the broker is involved in supporting the insurer to calibrate product details and specific wording. This might include the insurer working with a broker to develop product wording that can be used across a range of businesses (avoiding the cost to the insurer of developing multiple different, detailed product items). On the other hand, brokers might be engaged by an insurer to refine client specific manuscript wording on an ISR product, where the negotiation would begin with the intermediary communicating the client’s specific needs to the insurer.77
Brokers noted other emerging product opportunities that they had identified to insurers and/or sold to clients. These included: • Products to cover emerging risk areas, such as management liability coverage, professional indemnity coverage, and environmental liability coverage. • Products specific to some industries or business types, such as product recall coverage, trade credit insurance for bad debts, and pollution coverage for construction businesses. • Products to cover emerging industries, such as Airbnb and rideshare operators. Notably, not all emerging risks are resolved by a risk transfer to the insurer (Section 4.1). The broker acts as a risk adviser for their client more generally, and may play a significant role in supporting clients to mitigate and manage risks (Section 2.6).
Chart 3.7: Types of policies for emerging risks, surveyed brokerage businesses No new or emerging risk, 23%
Other, 6%
Cyber, 72% Source: Deloitte Access Economics, Brokerage Business Survey (2020). Note: n=71. Considers risks which brokers identified they had sold in 2019.
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