London market brokers need to carve out “a more clearly defined role” in the value chain and make clear distinctions in the services offered, Lloyd’s chairman Bruce Carnegie-Brown has said.
Speaking at a London Market Group event this afternoon (5 June) Carnegie-Brown stressed the need for brokers to price their advisory services separately from the cost of placing risks.
He stressed that through amalgamating the two, brokers risked deterring clients from purchasing cover due to heightened costs.
“The challenge they [brokers] face is that all of that risk advice is being added to the cost of the risk transfer transaction, making the purchase of insurance look less and less attractive to their customers,” Carnegie-Brown said.
“Brokers need to find a way to price this advice separately because its value is independent of whether the customer chooses to buy insurance,” he added.
Drawing on his previous experience as a director of Moneysupermarket, Carnegie-Brown said that the advancements in technology that led to the development of price comparison engines had all but led to the disappearance of the shoeleather motor insurance broker.
Carnegie-Brown challenged the view that Lloyd’s could not face the same disruption arguing against the stance that the majority of its business is specialist risks that can’t be commoditised or automated in the way standard insurance risks can be.
Further, he warned that developments in robotics and artificial intelligence are making commoditisation of specialist risk more, not less, likely.
“The quality of modelled risk is improving all the time; the number of questions we need to ask to price risks in the commercial insurance sector is reducing; and the pressure from customers to increase response times is forcing insurers to reduce the human contribution to pricing decisions,” he said.
On top of this, he said the business coming into Lloyd’s is becoming more vanilla, with coverholder business on the up, accounting for one third of Lloyd’s premiums.
“In fact, coverholder business is growing faster at Lloyd’s than specialist business despite the fact that, in terms of administrative costs, it is the most expensive business we write,” Carnegie-Brown said.
The chairman said that in this changing risk landscape, the market at Lloyd’s need to embrace initiatives such as PPL and create products that better need the evolving needs of clients.