MD of Novidea on the future of the Lloyd’s broker
Ben Potts is the MD of Novidea. Here he speaks exclusively with FinTech about trends in the London Insurance Market, and what the future holds for brokers.
The Future of the Lloyd’s Broker
Brokers have a vast number of checks and measures to go through before being allowed to operate in the London Market. As such, the Lloyd’s broker is seen as the best source of trusted advice in insurance, especially as the Market continues to set the precedent for emerging products or bespoke risks. But the expense of doing business is starting to erode its unrivalled dominance.
The rise of insurtechs continues apace as they try and change how insurance is done. In a recent report, it was estimated that the number of insurtechs almost tripled between 2014 and 2016. They want to change the relationship between the broker and the insurer, or else make it easier for clients to cut out the middle man and go directly to the insurer themselves. To avoid the threat and secure their place in the value chain, brokers will need to be indispensable advisors. To do that, and maintain those crucial client relationships, brokers need to have the technology to deliver.
The current Lloyd’s model means brokers rush around the City with their briefcase bursting with paper documents as they meet each client. In today’s modern world, this is clearly unsustainable. To make it worse, the tech that is being used is completely different at each stage of the insurance journey; it’s no wonder it all feels so slow and complex.
To arrange a quote, brokers currently need to ask a client numerous questions in order to get all the information required, yet even with all this information they are still unable to turn the quote around quickly – a process which is further exacerbated by the complexity of the London Market.
With ‘instant gratification’ as the name of the game for most customer service models these days, the vast majority of people are conditioned to get instant responses to queries. According to Accenture, almost half of customers want more online interaction when it comes to their insurance. They’re no longer happy to put up with slow service, and brokers and insurers need to vastly improve the customer experience, including making hassle-free adjustments to a policy or quotation at any part of their journey. This is where tech can help.
All about tech
The adoption of tech on some level is necessary for brokers to tackle this reality. Paper trails and legacy systems no longer fit the bill; ultimately, it’s technology that will enable brokers to stay on the front foot.
Brokers already have so much data on their customers, but they’re not leveraging it effectively. With the tools to in place to use quality data properly, brokers can get a 360-degree view of the customer and can identify cross and upsell opportunities. Not only is this good for business, it also goes a long way to cementing the relationship with the customer, which is a win-win for everyone involved.
The use of one single tech platform also means that all data can be accessed from any device, at any time. This gives brokers the ability to answer queries or update clients almost instantly wherever they are, which is a huge advantage when they’re under pressure to deliver.
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A changing role
As long as brokers are providing value for money, the customer will remain happy and loyal. The quantity of customer data within a business is only going to increase, so brokers need technology to distil it down and derive some actionable insights from it. This knowledge, in conjunction with their market experience, allows brokers to provide the highest value possible to the customer, over and above the competition.
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.