October 2019 | General Insurance

Paul Thompson: Should brokers subscribe to the subscription model?

I’ll admit I was sceptical when the first subscription insurance product launched last year. If I’m honest I struggled to see how it genuinely offered something new.

I also had concerns around lack of provision for no claims discount, the fact that premiums could go up at any time, and most importantly that if a policyholder missed a payment they could potentially be left instantly uninsured.

However, in light of recent events such as a rise in the practice of fees being added to GI sales by brokers, and a worrying return to the bad old days of brokers seeing a reduction in trail commission, I am starting to think that the subscription model could offer a solution.

Firstly, it’s a very attractive proposition for brokers/advisors not to re-broker every year but run a subscription model and keep receiving trail commission payments (as you’ll have read previously I believe that intermediary service must be remunerated appropriately).

Secondly, as a subscription model prohibits brokers from adding fees, brokers are not being remunerated in ways that conflict with their customer’s best interests. Win, win.

However, Andy Thornley, BIBA’s head of corporate affairs raised an interesting point in August when he said that in order for brokers to successfully offer subscription policies software houses need to up their game.

He said the majority cannot currently offer the services brokers need to run subscription products. This highlights once again that the industry is not keeping up with demand.

Customers are demanding more flexible products, but brokers are unable to flex their offerings to keep pace with emerging InsurTech subscription insurance providers.

I think GI providers could offer intermediaries a solution.

Don’t wait for software houses to play catch up. If your GI provider has strong enough insurer relationships they should be able to flex for you, whether that be in terms of increasing/decreasing levels of cover or cover limits to find the right solution for your customers.

If they can find the right cover at the right price then premiums should not go up each year (except perhaps for inflation) inviting the same level of customer loyalty as a subscription approach.

Get this right then you no longer need to re-broker every year, but instead invite renewals and focus your time on selling, or perhaps even diversifying your offering to drive even greater customer retention. Talking of which…

Diversify or die

The rise of the subscription model highlights perfectly how the market is changing and how evolving customer demands require intermediaries to diversify in order to remain relevant.

Looking wider, whilst I hate to use the dreaded ‘B’ word, persistent political and economic uncertainty could potentially wreak havoc on the property market and the pockets of your customers in the coming months, and perhaps even years (depending on what happens on 31 October).

You must start thinking outside of the box. There are emerging markets out there – young first-time buyers looking for flexible home insurance options, landlords looking to move towards short-term (Airbnb type) lettings rather than traditional buy-to-let portfolios, older customers releasing equity in their properties to improve their homes, travel the world or perhaps help their younger family members get on the property ladder.

Adding in new products, services or technology driven solutions are among the actions you must take to remain competitive.

On the product/service front, let me give you a personal example. I was shocked earlier this year when Cavere launched an up to 75 year old annual travel insurance product with Age Partnership.

This story received no pick up in the press (other than in Mortgage Introducer), and when I questioned why, I was told that brokers and advisors aren’t interested in selling travel insurance. Why? Surely this is a perfect example of the need to diversify to meet changing customer needs.

Equity release is a fast growing market, of course you can help these customers remortgage, and perhaps even reinsure their homes, but shouldn’t you also question why customers are looking to release equity and help them with that too?

As for technology, I often see GI providers telling brokers and advisors that technology cannot replace sound advice. Whilst I agree trusted counsel is a fundamental USP, embracing technology offers the best way to future-proof your business and make your proposition more relevant.

The use of more sophisticated technology is resulting in more accurate assessments of risk and your ability to get the right product, at the right price, as well as streamline quotations and policy administration, and importantly improve experiences at every touch point throughout the customer journey.

A broker or adviser who can offer technological efficiency combined with knowledgeable advice will be the best placed to capitalise on changing market conditions and evolving customer needs.

Diversify (and evolve) or die.