Overcoming Broker Challenges
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Being an insurance broker can be both rewarding and challenging. Market changes, regulations, technology and client expectations create obstacles for brokers to overcome. However, brokerage services ensure people and companies find the right insurance. With how complex insurance terms and policies can be, these services are crucial.
For both new and experienced brokers, understanding the industry's challenges is paramount. Discover the latest obstacles you can expect and how to prepare your business to overcome them. You'll also discover how the insurance industry is doing and what to expect in 2025.
The State of the Insurance Broker Industry
Despite the challenges insurance brokers face, the industry has a positive outlook. In 2023, the global insurance brokerage market size was $287.4 billion. Experts predict it will grow by a compound annual growth rate of 9.2% between 2024 and 2030.
The industry's growth is the result of rising demand for insurance from businesses and individuals alike. As the population and economy grow, more people need insurance and can afford it. There's also increased awareness of the need for insurance, further driving demand. As an insurance broker, you have an opportunity to capture new customers and help them find insurance that fits their needs.
The future of insurance brokers looks bright with a positive job outlook. The U.S. Bureau of Labor Statistics reported 547,600 insurance sales agent jobs in 2023 and expects employment to grow by 6% annually until 2033. That's 47,100 average new job openings each year. This growth rate is faster than the average for all occupations, making insurance brokerage an appealing option for professionals.
Common Challenges of Being an Insurance Broker
Whether you're a seasoned insurance broke or just starting your career, here are some challenges you may run into:
1. Navigating Compliance
Regulatory requirements within the insurance industry frequently change, making compliance challenging. Keeping up with changes is often time- and resource-intensive. However, noncompliance can lead to legal consequences such as fines and license revocation. You may also lose credibility by failing to comply with new or updated regulations.
The risk of noncompliance increases as you expand your business, as regulations vary between states and countries. Understanding and complying with multiple regulatory requirements is difficult and costly. Regulatory shifts also impact your clients by affecting coverage requirements and pricing structures. You must remain compliant while helping clients navigate changes to their insurance policies and requirements.
2. Adapting to New Technology
New technology is constantly emerging, bringing significant changes to the insurance industry. Insurance brokers must stay ahead of technological advancements to stay competitive and meet customer expectations. New technology has helped brokers streamline processes, improve customer experiences and reduce costs.
However, implementing new technology can be a challenge for some businesses. New equipment and systems are costly and often require intensive training to use correctly. As you're trying to keep up with clients, administrative tasks and compliance, you'll have to find time to implement new technology and undergo training.
3. Staying Competitive
As the insurance industry and demand for insurance grow, the market becomes saturated and highly competitive. In this environment, insurance brokers must find a way to differentiate themselves. Differentiation is a challenge, as many insurance brokers offer similar services to clients. To stay competitive, they resort to competing on price. Over time, these practices erode their profit margins and affect business suitability.
Finding other ways to stay competitive and attract clients may be challenging.
4. Overcoming Market Fluctuations
The insurance industry experiences hard and soft market cycles every few years. A hard market describes times with high insurance premiums, reduced coverage, less competition and less capacity for new businesses. Conversely, soft insurance markets offer lower premiums, broader coverage, higher competition and increased capacity.
The market switches between hard and soft depending on various factors. The global insurance industry is currently facing a hard market, making it challenging to offer clients good coverage at the prices they're used to. The common causes of a hard market are increased claims, low interest rates and premium reductions.
Experts predict that the market will soften going into 2025. Insurance brokers may find it challenging to adapt to the changes this market shift will bring.
5. Balancing Client Expectations
Clients often have inflated expectations of cost, coverage and service when they lack industry knowledge. Insurance brokers have to balance these expectations with the insurer's service standards, which can be challenging. For example, a client may expect broader coverage than what their risk assessment and budget can allow. In these cases, it's difficult for brokers to provide an option the client is happy with.
In the insurance industry, clients also expect fast responses and turnaround times. It's usually difficult to meet these high service expectations because insurance carriers have their own service timelines. Changes in the insurance market that clients are unaware of can also affect insurance policies and make it harder for brokers to meet their expectations.
6. Ensuring Data Security
Cybersecurity has become increasingly important with the digitization of many aspects of business. Hackers are finding new ways to gain access to confidential data, and even large companies have fallen prey to cyberattacks.
2024 saw one of the biggest healthcare data breaches ever reported in the United States. The breach came from a healthcare software company called Change Healthcare, which was involved in a ransomware attack. By not enabling multifactor authentication on a remote access portal, hackers managed to steal the personal, health and financial records of more than 100 million individuals.
When implementing new technology, you must ensure your client's private data remains safe from cybercriminals. It can be challenging, but good cybersecurity can save your business from financial losses and severe reputational damage.
Strategies for Overcoming Insurance Broker Challenges
Insurance challenges present an opportunity for you to overhaul your business and provide customers with better services and experiences. If you're dealing with any of the challenges highlighted above or want to prepare in advance, try these strategies:
1. Conduct Internal Compliance Audits
Changing regulations makes compliance a challenge in the insurance industry. However, you can use various strategies to remain compliant, like conducting compliance audits. While regulatory bodies require insurance brokers to appoint an external auditor to conduct official audits, you can assign someone in your organization to do regular internal compliance audits.
An internal audit helps you stay compliant by evaluating your current compliance performance to uncover potential risks. It also enables you to address issues before they can damage your business. An internal audit is particularly useful following regulatory changes, as you may need to adjust your current compliance program to reduce your risk.
2. Attend Industry Events
It may not seem like it at first glance, but attending insurance industry events can help you overcome many brokerage challenges. Industry events usually host talks, workshops and seminars that teach new skills and update you on industry changes. Professional development is key to differentiating your business and providing customers with the best service.
You'll also meet other insurance brokers at these events and get a chance to network with them. Networking is essential for building trust and growing your industry connections. While networking, you may also learn about industry innovations that help you revolutionize your service offerings and stay ahead of the competition.
3. Leverage Innovative Solutions
Leveraging the latest technology allows your business to offer clients the best service in the industry. By allocating time and resources to exploring new solutions, you can prioritize innovation. With this approach, implementing new technology becomes a common occurrence with limited disruptions to business operations.
Examples of innovative technology solutions your brokerage business can benefit from include:
- Customer relationship management (CRM) software: CRM software captures customer information and interaction history in a single place, making customer service easier.
- Cloud computing: Cloud computing makes remote work possible by providing access to storage, servers, networks and more over the internet.
- Claims process automation: Claims process automation refers to using technology to automate claims, making the process less time-consuming and reducing customer wait times.
- Smart data analytics: Smart data analytics uses artificial intelligence (AI) and machine learning to filter and organize data. The result is a smaller dataset with meaningful and actionable information.
4. Provide Tailored Solutions
Today, customers expect more than one-size-fits-all insurance packages. They want insurance that suits their specific lifestyle, budget and requirements. Insurance brokers can meet this need and differentiate themselves by tailoring their services to each customer. You can achieve personalization by using technology to analyze customer data and learn more about them.
Knowing more about your customers allows you to customize their coverage, benefits and premiums according to their needs. Partnering with insurers who offer flexible insurance plans is pivotal for this strategy. You'll also find that having more data helps you deliver more personalized customer service, improving lead generation, satisfaction and retention.
5. Develop Flexible Business Strategies
Insurance market conditions can switch between hard and soft, and insurance brokers must adapt to stay successful. That's why your business should adopt a flexible business strategy. A flexible strategy realizes that conditions can change and accounts for each market type's known challenges and opportunities. This way, you can prepare for market changes in advance and quickly shift your approach when they arrive.
For example, your business may need to overcome more challenges in a hard market. Focus on what you can control — your hard market strategy can include focusing on a niche market segment, networking more and improving customer transparency. In a soft market, you may need to focus on differentiation — some ideas include boosting digital marketing efforts, speeding up business processes and highlighting your expertise.
A flexible strategy increases the chances of your business surviving the hard market and pivoting as it softens in the coming years.
6. Improve Customer Service
One strategy that can help you overcome many broker challenges is good customer service. Your customers are the lifeblood of your business, making their satisfaction essential for success. Effective customer service keeps customers satisfied, builds loyalty and improves retention. Plus, happy customers are more likely to spread positive reviews, helping you generate more leads.
How can you improve your customer service? Start by implementing an effective feedback process to understand what makes your customers stay or leave. Ask them directly how you can improve your services and close the loop by making changes and following up with results. CRM software can also improve customer service by making customer information accessible to all employees.
7. Invest in Cybersecurity
Cybersecurity isn't something you can choose to do — it's mandated by law. In the U.S., insurance and medical industries must follow the Health Insurance Portability and Accountability Act (HIPAA) standards. These standards protect the sensitive health information your customers trust you with.
While it may seem overwhelming at the start, there are some things you can quickly implement to improve your cybersecurity efforts. Start by investing in training to learn the skills and tools to protect sensitive information and respond in a crisis. You can also conduct a risk assessment to uncover any weak points and devise a plan to fix them. From there, you should know what must change to protect your business's data.
Overcome Broker Challenges With The Difference Card
At The Difference Card, we know how hard it can be to retain customers and remain competitive. That's why we partner with insurance brokers to help them offer innovative, cost-saving solutions to their customers. When you choose us, you'll see the following benefits:
- Differentiation: The Difference Card provides your employee group clients with health insurance plans unlike anything currently available. Offering a unique solution can help you stand out in a competitive marketplace.
- Retain your clients: We specialize in administering Medical Expense Reimbursement Plans (MERP) that allow employers to lower medical insurance costs without reducing employee benefits. Employer groups save an average of 18% on healthcare insurance costs in their first year of using The Difference Card. These cost savings keep employer groups coming back year after year, helping you improve your retention rates.
- Growth: Our solutions are the answer to rising healthcare costs, making them attractive to employers. With The Difference Card strategy, you can attract new clients and grow your business. In 2023, our Producer Partners won 117 new "broker of record" accounts and our Partner Agencies generated over $5.1 million in new revenue.
- Compliance: The Employee Retirement Income Security Act (ERISA) sets standards for voluntarily established retirement and health plans, such as a MERP. We provide comprehensive ERISA compliance services to help you and your clients avoid costly penalties. These include unlimited plan documents, amendments, restatements and nondiscrimination testing.
Become a Partner Today
If you're ready to see the difference, request a proposal today. Our team has over 20 years of experience helping producers grow their businesses, and we look forward to helping you do the same.
