Insurance broker commissions face digital pressure, Lochy says

Insurance broker commissions are likely to face greater pressure as digital comparison tools and artificial intelligence make standard policies easier to buy without intermediaries, according to Joris Lochy, product manager at Vyntra and co-founder of Capilever. In a Finextra opinion post, Lochy argued that the economic impact will fall most heavily on routine distribution, while complex claims support and specialist advice may become more valuable.

Lochy focused on the Belgian insurance market, where brokers have long held a central role by maintaining local customer relationships and often serving as the first point of contact after a loss. He wrote that customers have relied on brokers not because insurance products are attractive to compare, but because insurance is purchased for reassurance when an adverse event occurs.

The model, in Lochy’s view, contains a persistent conflict. Brokers describe themselves as independent customer advisers, yet they are usually paid by insurers through commissions. He identified this as a principal-agent problem: the customer depends on advice from a professional whose remuneration comes from another party to the transaction.

Why are insurance broker commissions under scrutiny?

Broker commissions are payments made by insurers to intermediaries that sell or service policies. Lochy argued that the structure can shape behaviour because brokers usually work with a limited panel of insurers, each with its own commercial incentives, even where brokers seek to give honest advice.

Lochy said the case for the traditional broker rested on four promises: service, broader coverage, pricing and help with claims. That case was stronger when consumers lacked access to policy information, he wrote. Digital comparison platforms now let buyers check premiums quickly, while AI tools can explain contract language, identify differences between policies and answer technical questions that previously required specialist knowledge.

He compared the shift to travel agencies, where online booking reduced the need for intermediaries in standard trips but left demand for specialists handling luxury travel, complex itineraries and tailored arrangements. Insurance, Lochy argued, is moving in a similar direction as car, home, travel and family liability cover become more transparent and standardised.

Embedded insurance is adding to the change, he wrote, with customers buying travel cover during airline bookings, phone insurance at online checkout or cyber cover bundled with software subscriptions. In these cases, Lochy said, the role of a broker in the purchase process becomes harder to justify.

Where could brokers still add value?

Lochy drew a distinction between buying insurance and using it. Purchasing a standard policy may become a digital transaction, he argued, while filing a disputed claim, interpreting exclusions or negotiating compensation can still require professional judgement over weeks or months.

That distinction points to a different role for intermediaries, according to Lochy: independent insurance advisers paid directly by customers rather than by insurers. He suggested possible models including hourly fees, fixed fees for portfolio design or success fees linked to additional compensation after a disputed claim.

Such a structure would make the payer clear and reduce the tension between customer advice and insurer-funded remuneration, Lochy argued. He said AI would reinforce the shift by automating routine work such as comparing wording, identifying coverage gaps and preparing claim documentation, while leaving more room for negotiation, judgement and risk advice.

Lochy also said advisers could move beyond placing policies into helping customers prevent losses, including guidance on cyber resilience, climate adaptation, liability prevention, home security and emerging digital risks. He expects specialists to develop in areas such as cyber insurance, healthcare, construction, international mobility, complex liability, SME risks and high-net-worth clients.

For insurers, Lochy framed the change as an evolution rather than a disappearance of intermediaries. Standard product distribution may move further online, while specialised advice and claims advocacy could become a separate professional service for customers willing to pay directly.

This story draws on original reporting from Finextra Research.