The broker of the future Australia. EY survey highlights the impact of digital and the need for insurers and brokers to work together

The broker of the future Australia EY survey highlights the impact of digital and the need for insurers and brokers to work together

Contents 1 Foreword 2 Executive summary 4 Key theme 1 Disruption is the new black 8 Key theme 2 Distribution models are under strain 10 Key theme 3 Optimize the value chain and improve collaborative service model 12 Key theme 4 Increase automation and improve digital tools 16 Key theme 5 Codevelop new products and services 18 The broker of the future 19 Survey methodology 20 EY contacts Note: Figures throughout this report have been rounded to the closest 100%. ii The broker of the future

Foreword The changing role of the broker in an increasingly multichannel distribution environment is one of the industry s key challenges and one that impacts all stakeholders (for brokers, how to adapt and prosper in the future; for insurers, how to integrate brokers into their wider distribution strategy; and for consumers, how to get the most value from their brokers). Insurers who develop the optimal broker model for the future have much to gain. At EY, our global team of professionals is helping both insurers and brokers adapt to the changing shape of distribution and seize the strategic opportunities it represents. To support this ongoing work, EY surveyed insurance brokers in Australia to understand their perspectives on the challenges of digital disruption and changing consumer preferences and to paint a picture of the potential future of distribution. We asked brokers about: Their experience with, and expectations of, insurers The impact of direct channels and prospects for growth The dynamics of the broker-insurer relationship The future of insurance products and value propositions Their responses have helped us to answer some key strategic questions: What will the broker of the future look like? How and where will brokers collaborate with insurers? What will be the future relationship between insurers and brokers? At EY, we believe the better the question, the better the answer, the better the world works. We hope this report helps to raise better questions in the debate around how the industry will develop in Australia, starting with the question: How can insurers and brokers be stronger together? Grant Peters EY Oceania Insurance Sector Leader Imran Ahmed EY Oceania Insurance Customer & Growth Solution Leader The broker of the future 1

Executive summary Digital disruption is reshaping the entire insurance industry and intermediated distribution channels are no exception. Online price comparisons, new entrants and InsurTech start-ups, and online directto-consumer propositions continue to shake up personal lines, and technology is likewise enabling the commercial value chain. EY conducted a survey of Australian brokers in 2016 as part of a multi-country study into intermediated distribution of insurance products. The findings reveal that these fundamental shifts pose key strategic questions about the future role of brokers for both insurance providers and intermediaries: Which client segments will continue to rely on brokers? How will client expectations of brokers change, and how will brokers meet this need? How best may insurers and brokers collaborate to create optimal outcomes for their clients? How will the existing insurance value chain transform and who among insurers and brokers will capture the most value? The answers revolve around data, analytics and digital tools that are at the core of improved customer engagement, product innovation and underwriting excellence. These capabilities will help insurers and brokers clearly define the value they provide more than just a solution to underwrite risk and enable better risk identification and relationship, and customer and claims management with an outcome that benefits all. While insurers have the financial strength and scale to invest in sophisticated digital and analytics capabilities, they have not traditionally had depth in customer data to leverage this. Many have minimal or fragmented customer data. Conversely, brokers long-standing, integral role in managing customer relationships and building trust can generate quality customer data and insights; however, brokers do not always have the tools to mine this. Given these dynamics, we believe that insurers and brokers will have to collaborate in different and new ways in the future, in order to optimize the value chain and leverage their respective assets for mutual benefit. It is only by working together that insurers and brokers can best serve their customers, giving both parties renewed relevance in a market that is increasingly exposed to disruption. In this report, we identify five key current and future state themes that emerge from our survey: 1 2 3 4 5 Disruption is the new black Distribution models are under strain Optimize the value chain and improve collaborative service model Increase automation and improve digital tools Codevelop new products and services 2 The broker of the future

Data, analytics and digital tools are capabilities that will help insurers and brokers define the value they provide. More than 40% of brokers see direct-to-consumer channels as a significant or major threat to their business. 43% are unhappy with the consistency of interactions with insurers. More than 80% would significantly value technology that automatically identifies potential opportunities within their existing book. 81% 75% of brokers expect support from insurers around product customization. think innovation around product bundling could help grow their business. The broker of the future 3

1 Disruption is the new black Industry disruption is here. Online comparisons have improved pricing transparency in the market, new entrants are threatening disintermediation and many insurers have significantly grown their digital, direct-to-consumer channels a move perceived as a threat by the vast majority of brokers. Investment in InsurTech is booming, more than tripling in 2015 to approximately US$2.6 billion with the strong potential to threaten traditional insurers and brokers alike. Innovation has greatly disrupted the personal insurance market with the prospect of value comparison websites, roboadvisors, social brokers and peer-to-peer insurance on the horizon, as investment in InsurTech ramps up. Now, the less complex end of the commercial market is likely to go the same way. Industry innovators: InsurTech start-ups Embroker Cloud-based platform that provides commercial clients with a dashboard, identifying potential risks and means of securing coverage, coverage gap analysis, risk advice and claims support. FinanceFox Mobile or tablet app that provides a single view of insurance policies that may be purchased or cancelled through the platform; offers chat-based service (including claims reporting) and option to use your preferred broker. Coverwallet Mobile app that provides commercial insurance advice and a single view of existing commercial policies; facilitates free quotes through a range of major insurance carriers. Knip Mobile solution that aggregates existing insurance policies, compares and identifies gaps or duplicate cover, and provides access to brokers to assist in maintaining comprehensive coverage. 4 The broker of the future

1 Fear of the unknown: direct threat fades when brokers understand their role Intermediaries expect the disruption already occurring in personal insurance to make its way into commercial lines, starting with the small and medium-sized enterprise (SME) market, and specifically micro businesses. More than two-thirds of commercial brokers (69% vs. 42% of life brokers) see the market shift toward online and direct as a major constraint to their growth. Across all types of brokers, nearly half of intermediaries consider the direct-tocustomer channel as a significant or major threat to their business (see Figure 1). Notably, however, those brokers with a strong understanding of where their business fits into the insurers distribution strategy are less concerned about the move to online: Only 39% of those who understand their place in the strategy view direct-toconsumer as a significant or major threat to their business vs. 46% who claim to not understand how their business fits in. Intermediaries who are clear about their position within the insurers channel strategy feel insurers improvements to digital direct channels are notably more important than those with less clarity around their position (42% vs. 13%, respectively). Figure 1 The extent to which the insurer directto-customer channel poses a threat to business 22% 21% 31% Significant threat Major threat Some threat Unsurprisingly, many question the quality of the client experience in the channel, seeing it as slower, less responsive and less tailored to customer needs. In fact, moves toward multichannel create new opportunities for insurer and broker collaboration, including new market revenue and sharing business plans and investments. The future broker who collaborates and codevelops with insurers will be better placed to capitalize on this shift. 17% 10% Slight threat No threat 69% of commercial brokers see the market shift toward online and direct as a major constraint to their growth. The broker of the future 5

1 Industry disruption: participate or lose What does the future hold for brokers? Beyond expanding their core businesses via organic growth and new customer acquisitions, 58% of intermediaries (including 74% of medium-to-large brokers) plan to drive growth through new insurance products over the next five years. Almost half expect to enter into new insurer agreements to help grow their businesses as 45% pursue acquisitions. In this environment, doing nothing is not an option. Intermediaries relying on business as usual will find it hard to sustain market share and margins. Brokers need to consider how to participate in the disruption facing the industry. For example, first movers potentially could create and control Australia s first online broker-based site. Another breakthrough will be the first to offer robo-advice to the lower end of the market. Robo-advisors will not replace human advisors, but will augment them. Supported by robos, a single broker can service many more (low-complexity) customers fundamentally changing the cost structure of the broking process for this market. Those adopting this technology will significantly improve their advice quality, conduct risk and broker productivity. Currently, 60% of brokers believe the effort spent on administrative tasks is a major growth constraint (see Figure 2). Investing in automation will free up human resources to focus on growth, and lower organizational costs. This is a critical area where insurers and brokers must collaborate and work together to ensure their systems communicate seamlessly. Figure 2 Major constraints on the growth of brokers businesses Market shift toward online and direct 63% Effort spent on administrative tasks 60% Reducing premiums 51% Regulations 43% Recruiting and development of sales talent 43% Accesss to quality prospect and customer data 36% Size of investment required for analytics or automation 23% Inadequate or stagnant products 23% 6 The broker of the future

1 Top five disruptive themes for the insurance industry Disruption whether digital, macroeconomic or geopolitical is fundamentally changing the world in ways that would have seemed unimaginable a few years ago. Artificial intelligence and robotics have the potential to reinvent the workforce. Drones are beginning to transform supply chains and logistics, and changing consumer preferences and expectations most notably in the millennial generation are altering purchasing behavior and demand for everything from cars to real estate. EY identifies these top five disruptive themes: 1 2 3 4 5 Disruptive theme Rapid adoption of technology Integrating technology within an evolving insurance marketplace creates opportunities for fundamentally different business models. The Internet of Things (IoT) Emerging technologies such as telematics, wearables, autonomous vehicles and connected homes. Advanced analytics Ability to analyze big data and social media to gauge immediate demands, risk preferences and impact of life changes for customers. Evolution of the insurance ecosystem Industry players need to develop strategies to collaborate with data providers, device manufacturers and other ecosystem participants. Increase in customer expectations Dramatic changes due to increasing transparency, mobility and the rise of millennials. Potential impact and implications for insurance Start-ups offering digital, all-in-one insurance solutions for commercial and specialty risks will enable greater self-service and price competition. Customers expect sophisticated data analytics and risk management services. Changing risk profile Opportunities for new forms of coverage and means of delivery. Real-time information on risks (assisting with risk mitigation and management) and claims. Customers expect personalized solutions that meet their specific needs, given the volume and real-time nature of available data. Customer expectations for more tailored product design, accurate pricing and better claims adjudication and management. For insurers, actionable insights into customers mindsets to help improve offerings, customer service, better riskpricing strategies and growth. For brokers, enhanced capability to justify value to clients and retain customers. New ecosystems will allow insurers to offer new services, reshape the customer experience and team with others to enter new markets. Successful players will need to critically assess existing and planned future capabilities to decide where and when they will seek to lead, follow or collaborate. New technologies enable service at the lowest possible cost with ease, convenience and low intrusion. Consumer potentially can control their own data. Critical assessment of customer needs (by insurers and brokers), consumer demand vs. capability to self-manage, and the ability to collaborate can empower customers and add value. The broker of the future 7

2 Distribution models are under strain Market disruption is pressuring existing distribution models. In their efforts to get closer to customers (and reduce costs), insurers strategies are evolving, leaving brokers uncertain about their role and some confusion and duplication of effort in the value chain. Strategy disconnect: smaller brokers left out in the cold Some intermediaries are seeing signs of changing times, with almost a quarter of brokers surveyed feeling that insurers are either neutral about the value intermediaries bring or believe they are unimportant. One in 10 report that they do not have a good understanding of where they fit in their insurers distribution strategies. Furthermore, there is a clear correlation between how valued brokers feel, with their understanding of their place in insurers broader channel strategy (82% vs. 52%, respectively Figure 3). Figure 3 Clearly, keeping brokers informed and reassured around insurers broader distribution strategies and future plans is important to maintaining strong healthy relationships and a precursor to successful collaboration. Intermediaries perception of feeling valued by insurers, by their understanding of how they fit into insurers distribution strategy Our survey shows that 56% of intermediaries who do understand their place in the insurer s strategy are more likely to be medium-tolarge organizations. Tellingly, it is the smaller brokers who are feeling disconnected from the process. Of concern, these are often the specialists whom insurers will need to play an important role in developing and selling customized insurance as the market fragments. 22% 26% 52% Don t understand their fit into insurer s strategy 6% 12% 82% Partly or fully understand their fit into insurer s strategy Intermediaries who do not feel valued (insurers value the intermediated channel as very unimportant or unimportant) Neutral Intermediaries who feel valued (insurers value the intermediated channel as very important or important) 8 The broker of the future

2 Key theme 44% of brokers consider their relationship with insurers to be of a collaborative nature. Yet another 33% Mixed messages: intermediaries divided on who should serve clients Our survey highlights polarized views in the broker community. When it comes to providing customer services, 44% of brokers consider their relationship with insurers to be of a collaborative nature. By contrast, another third see sharply divided responsibilities, with insurers left to handle the service, claims or benefits behind the scenes, while leaving the customer relationship entirely in the hands of the broker. The remaining 14% prefer a hands off approach and are happy for the insurer to handle the interaction entirely, although the majority of these still want to remain informed. This difference of opinion over roles and responsibilities in the value chain suggests the industry is currently inefficient creating the potential for rationalization to substantially improve value chain efficiency and effectiveness. To achieve growth plans, and remain relevant to customers in the future, both insurers and intermediaries will need to work together to adapt successfully to industry disruption and address the key strategic questions posed earlier: How and where will brokers collaborate with insurers? What will be the future relationship between insurers and brokers? The survey identified these key themes as necessary for future success. want insurers hands off their customers. The broker of the future 9

3Optimize the value chain and improve collaborative service model Shifting roles and responsibilities Brokers have mixed views on whether (or how) their roles may change in the future. More than half (56%) responded positively to the idea of giving up some of their role in servicing to free-up time to focus on sales and growth and a quarter viewed this as preferable or essential (see Figure 4). Unsurprisingly, when it came to accepting reduced commissions or willingness to pay to offload some service burden, far fewer were keen to do so. Nevertheless, a significant segment of brokers would consider or prefer these options to be available (22% for reduced commission and 27% willing to pay). 56% would consider or prefer the idea of giving up some of their role in servicing to free up time to focus on sales and growth. Figure 4 Would you...? 12% 1% 13% 31% 43% Give up parts of your role in servicing to free up more time for sales and growth 2% 3% 1% 1% 2% 1% 19% 22% More sophisticated broker segmentation and treatment strategies 77% Accept a reduced commission in exchange for shifting some servicing burden to insurers Given the survey revealed mixed views on customer service roles, insurers and brokers need to work together to redefine the future value chain. The focus should be on the mutual aim of optimizing the customer experience, in light of a shifting ecosystem and new technologies. This has the potential both to take costs out and improve quality. 71% Be willing to pay to offload servicing for certain clients No Yes, would consider Yes, would prefer Yes, this must be available in the future Not sure/don't use Insurers will need to work harder to understand the views and behaviors of intermediaries and build this into their broker segmentation and account management structures. Just as the industry has moved to more sophisticated segmentation of end-customers, insurers must also apply behavioral and microsegmentation to brokers, rather than simply relying on traditional product or size factors. 10 The broker of the future

3 Improve communication and closer working relationships, enabled by technology Currently, many brokers are dissatisfied with the quality of their interactions with insurers. One in five rate insurers as very good or excellent in terms of meeting brokers needs; 43% are unhappy with the consistency of their interactions. Interestingly, those who prefer to deal with insurers online rate insurers marginally higher for consistency and meeting needs compared to those who prefer to interact via email or phone (consistency 22% vs. 15%, meeting needs 22% vs. 18%). Part of the solution will be enabling closer working relationships between intermediaries and underwriters. More than four in five respondents indicated that working more consistently with the same underwriters, providing more direct access to underwriters and making underwriters more relationship focused are keys to improving communication between underwriters and intermediaries (see Figure 5). Respondents also want process-driven changes to help improve communications, such as limits on turnaround times and an appeals process for decisions (see Figure 6). Figure 5 What could insurers do to enable more responsiveness to claims and benefit needs? More effective communication with agent/broker Simpler claims processes More effective communication with customer Better agent/broker online tools Better agent/broker call center Fewer forms/paperwork Faster turnaround and response time to claims Better customer online tools Better customer call center Simpler products Better staff training and education Better management of claims Give more authority to brokers on claims Hire dedicated and experienced staff for claims no call center Do not use offshore call centers for claims Do not actively try to decline claims Nothing 7% 7% 5% 5% 2% 2% 10% 13% 22% 21% 20% 18% 17% 17% 27% 25% 49% Figure 6 Facilitating better communication between brokers and underwriters Consistently work with the same underwriters Allow more direct access to underwriters Shift the underwriter s role away from transaction-focus and toward a relationship-focused engineer of solutions for customers Create service-level agreements (SLA) that limit turnaround time Formalize or improve the process for appealing/reviewing a decision 87% 81% 80% 80% 77% Reduce the number of products that must be underwritten 38% The broker of the future 11

4 Increase automation and improve digital tools Digitizing back office and service operations Across the board, brokers agree that insurers should be providing better online access and tools to support their clients and businesses. Improved platforms and access to thirdparty products are more important than providing competitive commissions, and improved digital tools (customer relationship management (CRM) and commission management) are highly valued (see Figure 7). RPA may be deployed across legacy systems to cost effectively create a virtual workforce of software robots that emulate human execution of existing tasks. For example, software bots are ideal for executing frequent insurance processes, such as claims verification and lodgement, and automatically issuing a letter to a third party. Because RPA Figure 7 How could insurers better support you and your business? can be deployed through existing interfaces, it avoids time and expense in legacy system and process changes. These findings suggest that, global brokers aside, most intermediaries are continuing to seek a symbiotic relationship, where brokers add value and insurers support them. In addition, more than two-thirds of brokers are also looking for increased support for sales operations and in servicing policyholders, indicating that the majority expect insurers to provide support across the value chain. Improve platforms/access to third-party products Competitive commissions Improve tools (CRM and commissions management) 78% 77% 73% All of these areas can be enabled digitally to increase efficiency and improve service levels. Previously, some insurers may have hesitated to digitize large parts of their back office or broker support operations to avoid significant investment in new IT infrastructure. But recent advances, such as robotic process automation (RPA), are now making the business case for digitizing back office and service operations far more compelling. Policyholder servicing support Sales operations support Improve proprietary products Succession planning support Recruiting support 26% 38% 71% 68% 67% 12 The broker of the future

4 Case study Digitizing highly manual and paper-based business processes for a global carrier The insurance carrier wanted to deliver a digital agent experience. The current endto-end process was monitored from the time an application was sent to the insurance company through issuance or decline of the policy. Multiple channels were evaluated: paper, mail, fax, email and e-submission. This evaluation resulted in a deeper understanding of the pain points that customers, brokers, insurance company data processors and underwriters experience throughout the process. These pain points drove specific, digitally focused solutions that insurers could implement in the short and long term. As a result of this process, a capability model was developed for document management that can be leveraged across other lines of business and use cases. This will speed the data entry process and create a new digital online application that eliminates the need for manual data entry. The quality of online broker tools is a game changer If customers are to have positive, brand affirming experiences at every touch point, sales and service channels need to be integrated. To take digital across their intermediated value chain, insurers need to help their distribution partners develop digital capability by sharing resources and expertise; for example, providing brokers with digital analytics and tools to improve customer segmentation, sales and promotional targeting. Providing brokers with digital tools to improve efficiency across all insurer and client interactions is a strategic imperative. Intermediaries clearly want this, with a significant 78% saying that the quality of online tools good or bad directly affects their choice of insurer. This finding was true, irrespective of size or type of business, or preference to interface with insurers primarily via phone, email or online. Figure 8 Rating insurers performance on online tools provided Online tools provided to you by your insurers Commissions and statements Billing and collections DigitaI policyholder and policy management tools Only 30% of intermediaries rate current performance with online tools as very good, and just 4% as excellent. More than 80% of brokers surveyed say that new business or underwriting, claims or benefits and servicing systems all require improvement to drive growth. 78% of brokers say the quality of online tools, good or bad, directly affects their choice of insurer. Intermediaries appear to be relatively satisfied with online marketing materials, training and digital policyholder tools with administrative processes such as commission statements and billings receiving the highest ratings. However, insurers need to improve their online account management, sales leads and application tools and digital onboarding and integrate them into a single portal login. Currently, almost two-thirds of brokers have to login to multiple systems to use online tools with the same insurer. Not surprisingly, those who only have to login via one system report higher levels of satisfaction with the tools provided. Training 6 8 10 20 29 17 10 2 Marketing materiais and knowledge management tools 2 7 16 26 26 18 5 Reporting DigitaI account management tools Homepage and dashboard view 4 6 15 41 30 4 3 3 6 21 32 26 8 4 6 10 18 2 7 14 22 26 24 3 10 16 21 28 19 3 2 8 16 21 31 20 2 5 4 13 25 32 19 3 30 26 6 5 7 Excellent 6 5 4 3 2 1 Poor Event management 12 7 18 22 25 14 3 Digital onboarding tools 4 7 19 22 35 12 2 Sales leads and application tools 20 16 19 18 17 8 2 The broker of the future 13

4 New business and sales functions ripe for innovation Intermediaries place significant value on innovation that facilitates new business and sales. More than 80% regard a system that identifies opportunities within an existing book as highly valuable. Insurers should seek to improve their sales leads and application tools, as well as digital onboarding tools, as a matter of priority, as these are areas of low satisfaction but high importance. The attributes of online tools are shown in Figure 9. Figure 9 Rating attributes of insurers online tools Attributes of online tools, importance vs. satisfaction (%) Importance Low satisfaction, high importance Sales leads and application tools Digital onboarding tools Homepage and dashboard view Event management Marketing materials and knowledge management tools Training Reporting Digital policyholder and policy management tools Digital account management tools Commissions and statements High satisfaction, high importance Billing and collections Low satisfaction, low importance High satisfaction, low importance Satisfaction 14 The broker of the future

4 29% of brokers prefer to interact with insurers using online industry platforms. Intermediaries need to get onboard with online tools Although the vast majority (97%) of intermediaries use online tools, more than half (54%) would prefer to communicate with insurers via phone or email. This could be a real challenge, given the potential for industry platforms to drive substantial efficiency gains by enabling insurers and intermediaries to automate many back-office processes, including policy approvals and renewals. In fact, 29% of brokers prefer to interact with insurers using online industry platforms, compared to small percentages that rely on text applications or messaging. By doing business on an industry platform, intermediaries and underwriters can significantly reduce transaction processing costs and improve responsiveness. Customer information is processed once and updated to both the insurer and intermediary s backoffice systems, eliminating multiple handling and reducing possible data entry errors. Thus, staff may be redeployed in more valueadding roles. To play their part in process automation, intermediaries need to work on staff appetite for and capability to use online tools and industry platforms. The broker of the future 15

5 Codevelop new products and services Intermediaries hold considerable amounts of customer information and insurers typically hold more investment capital to invest in tools and technology. All parties will benefit from closer collaboration. This will ensure the industry as a whole evolves and innovates, to develop new products and services to address the fast-changing needs of both endconsumers and commercial customers. Figure 10 New products or product changes required in the next five years Highly tailored underwriting and pricing Many available features to address a wide set of needs 79% 79% Growth opportunities: cyber, product customization and usage-based insurance (UBI) Limited set of easy to understand features Suite of complementary products 76% 73% Intermediaries are exploiting new growth opportunities presented by digital. Cyber risk has the greatest potential (86% of respondents), especially by brokers at medium or large firms who almost unanimously (99%) expect growth in these insurance products. Limited application questions Other 13% 60% Brokers also expect increasing demand for product customization (81% expect support from insurers in this area), leading to a diverging and polarizing market that will require differentiated solutions for diverse customer segments (see Figure 10). 16 The broker of the future

5 Case study UBI: the new normal The concept of pay-as-you-drive insurance, whereby drivers are charged premiums based on their individual driving behavior, is now relatively well established in countries such as Canada, France, Norway, parts of Latin America and the US. The concept is now expanding into other segments, such as life and health insurance (pay-as-you-live). When a customer shows lifestyle characteristics that are linked to better health outcomes, such as regular exercise, a healthy number of daily footsteps and a healthy body mass index, their premiums, can be adjusted to reflect their reduced risk. This clearly benefits the customer through reduced premiums, but also benefits the insurer through better pricing, the broader community through reduced critical illness such as diabetes and the government through the reduced cost of health care. EY believes that this will be a major area of innovation for life and health insurers and has the potential to disrupt an industry that has so far remained fairly safe from the digital disruption that has been seen in lending, motor insurance and payments. UBI has the potential to innovate across the value chain and provide all parties with benefits reduce claims costs, reduce policy administration, reduce acquisition cost and enable more effective pricing. Brokers can play a critical role in this industry evolution, by working with insurers and technology providers to codevelop new concepts and products, leveraging their strong client base. Brokers see multi-feature products to address a wide set of needs and simple products with a limited set of easy-to-understand features. These simpler products will be bundled together to provide more basic customization and offered at a reduced premium (see Figure 11). One thing is certain customers do not care about the traditional silos of health, life and general insurance, which are now blurring. UBI (based on telematics, behavioral and social data) is seen as an important growth opportunity more than 60% responded positively to this playing a significant role in the future of insurance. These innovative solutions will help insurers to better identify risk exposures, design differentiated products and put pricing control in the hands of their customers. Figure 11 Types of product innovation that will support and grow your business ncrease marketability as a distributor of innovative products Bundling of products Products that are simple and need little explanation Reduced effort to underwrite 58% 58% 66% 65% 70% 75% 80% Products to service age demographics, i.e., baby boomers, millennials Reduced effort to sell Reduced effort to service Other 11% The broker of the future 17

The broker of the future To survive emerging waves of industry disruption, the broker of the future must adapt to the changing environment: Increased specialization Stronger relationships Digitally savvy Using advanced analytics to improve risk management Participate in more fragmented ecosystem Clear value demonstration As clients demand specialized products and services, the broker as generalist model is unlikely to be sustainable. We anticipate greater specialization as the insurance market becomes increasingly segmented. There will be a greater focus on risk advice, augmented by digital tools and analytics. We will see an increasingly close relationship between insurers and brokers one involving a clear delineation of roles and an understanding of the value that each brings. Brokers may align with fewer insurers, but partnerships will be characterized by a broader range of products and services. Intermediaries will use technology to engage with and advise customers. They will be comfortable using digital platforms and tools to interact with clients and share information with insurers. Brokers will build analytics and big data capabilities to help them price more accurately and understand and manage risks better or differently. They will increasingly look for opportunities to place risks where they previously may have lacked the necessary data. Brokers will be part of a wider ecosystem, working with insurers and other third parties to offer new services, reshape the customer experience and enter new markets in collaboration with others. They will want simpler, more innovative products and will be willing to collaborate to codevelop new propositions. Given fee transparency and a more savvy customer base with access to knowledgeresources, it will be more important for brokers to demonstrate the value of their advice to customers. 18 The broker of the future

Survey methodology EY conducted research among Australian insurance brokers as part of a multi-country study into intermediated distribution of insurance products in 2016. It consisted of 273 telephone interviews with individuals selling and servicing life or general insurance. Type of agency/brokerage Number of staff 13% 17% Brokerage Under 10 26% IFA/Life 60% IFA/Life MGA (managing general agent) 24% 59% 11 to 50 Over 50 Type of agency/brokerage Way of approaching insurers with new business 4% 4% 17% 13% 1% 9% 4% 12% 8% 26% Broker International broker National broker Multi-office broker Single office broker Independent financial agent Tiered agent MGA (managing general agent) Authorized representative Financial advisor IFA 40% 5% 3% 4% 45% I am a tiered agent I have one primary alliance carrier but can place business with other insurers I have 2-5 most favored insurers but can place business with others I have 1 or 2 insurers that I favor for each product I place business with many different insurers The broker of the future 19

EY contacts For more information or to schedule a briefing, please reach out to the EY Insurance Customer & Growth teams: Grant Peters Oceania Insurance Sector Leader +61 2 9248 4491 grant.peters@au.ey.com Imran Ahmed Oceania Insurance Customer & Growth Solution Leader +61 2 9248 5339 imran.ahmed@au.ey.com Shona Burns Author +61 4 2428 0242 shona.burns@au.ey.com 20 The broker of the future

EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2017 EYGM Limited. All Rights Reserved. EYG no. 04024-174Gbl 1612-2134350 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. ey.com