AI's Impact on Insurance Brokerage Growth and Workforce Dynamics
Insurance brokers are optimistic about the potential of artificial intelligence (AI) to enhance productivity and support growth, despite investor concerns about its impact on the industry's traditional business model. Recently, AI-related apprehensions have affected brokerage share prices, although brokers continue to demonstrate robust organic growth and profitability. Most industry leaders and analysts believe AI will bolster brokers rather than replace them.
AI's influence on employment is becoming apparent. Acrisure has announced plans to reduce its workforce by about 2,250 positions—approximately 11%—by next year, citing AI's ability to decrease manual labor needs. Previously, the company mentioned a smaller AI-driven reduction involving 400 employees. CEO Greg Williams highlighted that tasks previously requiring days or weeks can now be completed in minutes due to AI advancements.
Acrisure's decision is one of the first major workforce reductions in the brokerage sector explicitly linked to AI. In the last two years, several brokers have implemented broader cost-cutting strategies inclusive of increased technology use.
Leveraging AI for Efficiency and Growth
Brokers are increasingly focusing on technology to boost efficiency and facilitate growth amid easing rates in some areas. Both brokers and analysts generally perceive AI as a means to enhance efficiency and improve analytical capabilities. Many firms are employing AI to automate administrative duties, analyze vast datasets, and support claims and risk management processes.
Large brokers, in particular, are predicted to leverage AI-driven efficiencies to allocate more resources to sales, consulting, and risk management services, according to John Wepler, chairman and CEO of MarshBerry. Larger brokers might gain a competitive edge as they have access to proprietary data and resources to invest in technology. Smaller brokers could face challenges in keeping pace.
The industry's emphasis on enhancing productivity coincides with a softening in insurance pricing. Property insurance rates have notably decreased after several years of escalation, while casualty lines remain firm due to substantial liability claims, according to analysts and executives.
Market Dynamics and Growth Strategies
The softer pricing landscape has heightened the focus on acquiring new business and expanding exposures. Although organic growth has slowed from the strong levels seen in the hard market, brokers generally report healthy growth. “Exposure growth is by far the most important factor,” highlighted C. Gregory Peters of Raymond James & Associates.
Brokerage executives remain positive about their clients' futures. “They’re adding trucks, buildings, and new operations,” stated J. Patrick Gallagher Jr., CEO of Arthur J. Gallagher & Co.
Consolidation continues to drive growth for many brokerages, with notable deals closed last year, such as Arthur J. Gallagher & Co.’s $13.45 billion acquisition of AssuredPartners and Brown & Brown’s $9.83 billion purchase of Accession Risk Management Group. Acquisition activity has slowed due to higher borrowing costs, but consolidation is expected to persist given the fragmentation in the brokerage sector and numerous acquisition opportunities.
While rates soften and acquisition activity slows, technology and talent remain critical for brokers. Despite AI concerns, many believe brokers are well-positioned due to the intricate nature of commercial risks and the continued need for trusted advice. “The obituary for this sector has been written too early on multiple occasions,” observed Tim Zawacki, insurance sector strategist at S&P Global Market Intelligence.