(Re)insurance in 2020: Our focus should be on Re-intermediation and NOT De-intermediation
Entering 2020, I think it is fair to say that we are now officially in a hardening market. With capacity and/or pricing significantly tightening, pressure on reducing acquisition costs will continue to rise. As we slim down, the market will likely go from a state of ‘globalization’ to a state of ‘global rationalization’ scaling down and in some instances closing overseas offices in order to reduce operating costs.
Five years ago it was almost fashionable to have offices around the globe nurturing a global image, and attempting to be ‘globally local’. I hope what many have learned is the increased capacity, and competition in regional and local markets only contributed to the extended soft market we found ourselves in. In the process we also competed against ourselves, drove rates down, and transferred knowledge and intellectual property overseas unnecessarily.
We attempted to disrupt a perfectly efficient market where our trusted broker partners went out in the world, and brought the business to our doorsteps. By attempting to get closer to our client’s clients, we started an arms race in the underwriting market which in turn resulted in the mushrooming of local colony markets homegrown trying to feed off our very presence and at times creating multiple middlemen into the chain.
With the market now forcing itself to correct years of inadequate technical pricing, once again the realignment of the relationship between the insured, reinsured, our brokers, and the market will take place. The burden of explaining to clients why we the market are increasing our prices or tightening conditions left on the shoulders of our only true trading partners, the broking fraternity.
If we are to reinvent ourselves as a market, and lay the foundation in a digital era for the market of tomorrow, we need to invest in our distribution relationships by providing tools and data, and working with our partners to take control of the wordings and pricing conversation.
Let 2020 be a year of true change for the market, and let’s get behind and support our only tried and tested distribution partners, the London and professional international (re)insurance broking community.
Let the next ten years be a decade of re-intermediation instead of de-intermediation!