Brokers, the costs that eat into your margins

Margins : Insurance’s Achilles’ heel? 

According to estimates, the insurance sector will be worth 7.5 trillion dollars by 2025 (source: Accenture). A colossal amount. And yet! We all know that the insurance industry operates on extremely low margins - if not negative... like the motor vertical and its overall combined ratio of 100.4% in 2022. (Source: France Assureurs) 

Add to this a rising churn rate stemming from measures such as the Hamon Law and "Resiliation-en-3-clics", and here is your actuarial headache. Without the possibility of stabilising the program over time, achieving technical equilibrium becomes more difficult every year. 

Today, let's look at the levers at your disposal to recover those margin points and ensure the long-term future of your business. 
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Cutting costs: where do you start? 

Whether you're a general broker, a specialist or a wholesaler, let's look at the 3 main areas of expenditure:

• Human resources 
• Technology costs
• Compliance costs
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Human costs

According to INSEE, 65% of a company's expenditure is allocated to salaries in France. And the brokerage sector is no exception. Note however that the matter here isn’t so much about reducing costs, but rather optimising your employees’ time and talent. 

Why? Because empathy and the human touch are the pillars to your business’ future profitability. In insurance, aiming for the lowest possible price is not sustainable in the long term. This is particularly true in the field of health insurance. Without sufficient written premiums to balance their portfolios, risk carriers are withdrawing or naturally increasing their rates. This is already a reality. 

From now on, the only way to make these rates acceptable to customers is to offer an exceptional experience and quality of service. In other words, the insurance of the future will either be premium or it won't be. And by "premium" we mean: "technically balanced and with a service quality that justifies the premiums".

So how do you get ahead of the game? By planning your operations today so that its human quality can express itself to the full tomorrow:

• How much of your staff's time is spent with your customers? Can this be maximised?

• What proportion of the work carried out is manual? Is a specific task holding up your projects? What are the bottlenecks?

• How satisfied are your employees? Are there any trends emerging by department? What solutions could you use to address these gaps?
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Did you know? Any 5-minute action repeated 60 times a day is equivalent to 1 month's full-time work at the end of the year.

Integrating slips, managing AML alerts, sending quotes, modifying and cancelling policies, generating and sending schedules and receipts, etc. Automating but one of these tasks amounts to freeing 1 month of your team’s time for your customers!

Invest in differentiating services. These will be your margins of tomorrow. 
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Technological costs 

Over time, the insurance industry has found itself limited by its technology. The numerous mergers and acquisitions in the sector have made the adjustment of information systems costly and complex. Today, it is estimated that 80% of IT expenditure in the banking and insurance sectors is poured into maintenance alone. (Source: Worldline) 

While every euro invested in technology should enable us to protect more people, better. 
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How can we optimise our technological performance? Here are a few questions to get you thinking ... : 

• Is your technology scalable? Will it automatically update itself without major medium-term investment? Or are you getting into a spiral of endless costs?

• In addition to deployment costs, are you planning for maintenance costs? All your attention and resources should be focused on creation.

• Does your technology suite allow integration with the majority of solutions on the market? 
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In today's hyper-specialised economy, being able to provide your customers with the best solutions on the market is no longer a luxury. It's an obligation. E-signatures with DocuSign, automated payments with Stripe, continuous monitoring of your technical performance with Seyna, etc. 

By focusing all their resources and expertise on one part of your value chain, these companies are able to provide more effective solutions at lower cost. Capitalise on their expertise and make sure you can integrate them easily.
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Compliance costs

The cost of compliance is estimated at €150 billion at European level. This is hardly surprising when you consider that regulatory bills change on average every 3 months and that an insurance audit requires the review of at least 256 documents. 

The good news is that when it comes to compliance, 12/20 does the trick! As recently demonstrated by Sophie Le Goff, Insurance and Compliance Partner at Sia Partners.

Here you can read her (practical) tips on reaching compliance efficiently to focus on your customers. 
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The Cost Matrix

To sum up, there are a range of levers at your disposal. Not all of them will necessarily be relevant to your business. But creating value is sometimes a matter of a few seconds, a few words that bring a great idea to life...

The Cost Matrix won't turn the French brokerage market upside down - that's not its aim...

... but perhaps it will be that step aside that will help shed a new light on your operations.

And who knows... spark the project that will transform your profitability?

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👉 Access the Cost Matrix