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Racing ahead: top brokers embrace technology

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Higher-performing insurance brokers are ahead of the curve in improving their efficiency through innovation and technology, a new Macquarie Bank survey says.

The online survey of 194 brokers across Australia has found the difference between the high performers and others is marked by six core drivers across technology, operations and client experience.

“Although still feeling their way with technology, higher performers are ahead of the curve in harnessing innovation to increase productivity,” Macquarie Business Banking National Head of Insurance Eoghan Trehy says in the survey report.

Various strategies include partnering with tech-based businesses and launching pilot projects to automate and streamline operations.

“Our research suggests that these efforts to leverage technology are yielding tangible results, driving higher margins and revenue growth,” Mr Trehy says.

“Yet it also shows that the end-client and their experience needs to be front of mind as brokers look to refine sustainable growth strategies.”

Market research firm Fiftyfive5 surveyed the brokers last year for the 2019 Macquarie Insurance Industry Pulse Check, titled Thriving Through Change.

The survey finds that 50% of higher-performing insurance brokers are investing in technology and 41% in broking systems, compared to 44% and 24% respectively for others in the sector.

Despite uncertainty about the best way forward, higher performing businesses actively search for new solutions, particularly adopting technologies in areas designed to increase back-office efficiency or enhance the client experience.

Respondents generally were conscious of the need to take action, with 84% saying that keeping abreast of tech change is a key emerging challenge. And 79% say the issue was knowing what to invest in, while 77% were concerned about how much to invest.

The technology focus comes as Macquarie’s research confirms that the vast majority of broking businesses are prospering amid recent premium hardening.

Average revenues rose to $2.51 million last financial year, a 5.4% increase compared to two years earlier. Average profit margins edged up to 23.8% from 23.2%, while 30% of respondents had margins over 30%.

Looking ahead, brokers also see challenges emerging from regulatory intervention, increased price-sensitivity among clients and heightened competition.

“The level of concern is remarkable for an industry with healthy margins and a history of strong revenues across economic cycles,” Macquarie says. “Clearly many insurance brokers believe that change could be just over the horizon.”

More than 80% of respondents nominated increased regulation and compliance as key issues to be dealt with.

“These are ‘hygiene’ factors in professional services; a cost of being in business and, while important, difficult to influence,” Macquarie says.