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Small and micro brokers in the insurance industry are coming under increasing pressure. The administrative burden is growing, income remains the same and the time available for customer advice is shrinking. The cause lies less in the supervision of FINMA itself than in the complexity of regulation, a lack of standards and a lack of practical experience that overwhelms many companies. And: the client does not benefit in any way.
What was once handled by the insurers’ internal departments is now the responsibility of the broker: Quotations, policies, contract amendments. Despite this shift, remuneration has not changed. The result is end-to-end processing on the broker side with stagnating or even falling brokerage fees.
Fragmented systems
The incompatible IT systems of insurers are a major annoyance. Each company operates its own portals, formats and processes. There is a lack of standardized, machine-readable exports, such as a common XML or JSON standard. Brokers therefore have to enter data manually, which prevents automation, for example in the case of mass premium adjustments, and increases the susceptibility to errors.
Reporting obligations with little insightful value
The reports required by FINMA in accordance with the revised ISA/ARO are considered overloaded. Key figures are required that many insurers are unable to provide in a standardized form. Brokers are tinkering with Excel lists and auxiliary constructions, the benefits of which remain unclear for the supervisory authority and the market. FINMA explains on request. “The aim of the new regulation is to protect customers. This is not about small or large, but about ensuring that insured persons in the Swiss financial market receive correct advice and are protected from abuse”.
Prior to the revision, the registration of intermediaries was the main focus of supervisory activities. FINMA’s supervisory mandate has now been expanded to include ongoing supervision of intermediary activities, which requires the implementation of supervisory instruments such as reporting. This may well result in a higher administrative burden for all parties involved. However, FINMA has already publicly announced that reporting will be simplified for the 2025 financial year.
FINMA’s initial supervisory activities in the area of insurance mediation have revealed numerous irregularities among both registered and unregistered insurance intermediaries. FINMA will also continue to use supervisory tools such as reporting in order to carry out its supervisory duties efficiently and effectively.
Simplification of data and process standards by insurers, FINMA and SIBA
According to FINMA, delegating this supervisory task to industry associations is not provided for in the current regulation. Furthermore, the Swiss Insurance Brokers Association (SIBA) does not represent all brokers and insurance intermediary companies. Individual registered insurance brokers are not subject to reporting requirements, only legal entities and partnerships. The legislator has already taken care and consideration to ensure that natural persons do not have to incur any additional administrative expenses in the area of reporting.
How does SIBA justify the membership fee for small brokers?
“The effort for small brokers is proportionately much greater than for large brokerage houses, some of which have their own legal departments,” explains Markus Lehman, SIBA President. SIBA is currently working on a training platform that will benefit small brokers in particular. In addition, a three-stage training program is being developed for the 2nd pillar business. Every SIBA broker is automatically affiliated to the ombudsman’s office free of charge and, as a SIBA member, receives regular newsletters on the industry as well as various types of benefits.
Reasons for increased supervisory fees too “meagre”
“FINMA’s expanded tasks and the mandate for ongoing supervision to protect policyholders from abuse will lead to higher costs and therefore a higher registration fee and supervisory levy for independent insurance intermediaries, as the supervisory levies must be self-supporting,” says FINMA.
Although the number of supervised institutions is very high, the supervisory team is kept lean. In this way, FINMA prevents supervisory fees from being much higher. To keep fees as low as possible, it is constantly optimizing processes and making use of digitalization.
Compared to the old law, which was valid until 31.12.23, FINMA’s tasks in the area of intermediary supervision have been massively expanded by the legislator. FINMA is now responsible not only for registration, but also for ongoing monitoring of whether or not intermediaries are fulfilling their new obligations. To this end, FINMA carries out clarifications, investigations and proceedings. In addition, FINMA is investigating numerous reports and complaints from third parties regarding insurance brokerage.
Discordant tones and fees
The increasing supervisory fees and further training requirements for all employees, even office staff, are criticized. The tone in official letters is described by those affected as threatening, in a style that undermines trust in the supervisory authority. Unfortunately, FINMA still lacks transparent information on its costs. Brokers are being asked for transparency, but the financial supervisory authority is not letting them look at their cards.
Between lobby and everyday life
Although SIBA is committed to the industry, small brokers hardly feel represented. Membership fees and priorities are geared towards larger firms. There is a lack of tangible, rapid simplification in day-to-day business for micro-brokers, such as standardized data, practical templates and digital standards.
Markus Lehmann disputes this: “We treat all members equally. Small brokers regularly contact us with questions and seek support for their problem areas. SIBA has also been looking after smaller brokers for two years. By changing the admission requirements, registered small brokers could also join SIBA and benefit from the quality seal. Small brokers can also join if they meet the conditions and are not active in the health insurance business.
What needs to change
A common data and process standard for all insurers, supported by the industry, supervisory authorities and SIBA, would be the greatest lever. Leaner reporting obligations that only access standardized data could significantly reduce bureaucracy. Equally necessary is the recognition of existing qualifications and bundled audit procedures.
Help can be provided by implementing optimal CRM and automation, says Markus Lehmann, “especially when it comes to FINMA’s unspeakable data collection”. FINMA could achieve the greatest relief by cutting back on meaningless data collection. “With financial supervision instead of abuse supervision, FINMA has taken on far too much that is of no use to anyone, and certainly not for the protection of clients,” says Lehmann.
What do the insurers say?
From Helvetia‘s perspective, the responsibility for developing corresponding standards clearly lies with IG B2B, which should define the relevant specifications in collaboration with Eco-Hub AG and ensure cross-industry acceptance. Pax also considers the standardization of data interfaces and processes to be fundamentally sensible, especially in order to keep the processes as simple as possible for smaller brokers. This is why the insurer supports all initiatives, including in the Eco-Hub shareholders’ meeting, to make the necessary data and interfaces available in a centralized and standardized manner. At the same time, Pax is consciously differentiating itself with services and solutions for brokers that go beyond the industry standard. Pax already offers individual connections for larger partners and is currently examining the provision of generic APIs for all its partners. Pax also anticipates the key figures required by FINMA and provides additional information on the annual financial statements as a further simplification for its sales partners.
If insurers outsource back-office work to brokers, this should be remunerated via higher brokerage fees or service fees. And communication between supervisors and brokers must become more of a partnership: binding, respectful, sensible and practical.
IG B2B has been setting standards (core processes) for the industry since 2003
Founded with the aim of optimizing communication between brokers and insurers, IG B2B promotes digitalization in the insurance industry. To this end, standards for digital data exchange were defined and Eco-Hub (formerly BrokerGate) was created as a joint digital ecosystem for the standardized and secure exchange of data.
The cooperation between the IG B2B association and Eco-Hub is central to this: While IG B2B is responsible for the technical recording and development of the standard as well as the support and maintenance of the needs of the insurance market, Eco-Hub is responsible for its technical implementation, the operation of the Eco-Hub platform and the further development of digital services.
IG B2B and EcoHub provide structured data that can be processed directly by software solutions for brokers. “This significantly reduces the administrative workload for brokers, a real added value in a dynamic market environment,” says Katia Jakob, Managing Director of IG B2B.
According to Markus Lehmann, standards for the industry have been the number one topic for many years, which is why IG B2B was founded from within the broker scene. In a second step, Ecohub AG was implemented. “But everything is going far too slowly. What’s more, insurers – out of caution, fear and data protection – are still standing too firmly on the brakes”.
Self-help through cooperation
In the short term, small brokers can ease the burden through cooperation and shared tools. An open exchange platform without association bureaucracy could become a laboratory for practical solutions. However, SIBA President Markus Lehmann takes a different view. He says: “This can only be achieved via IT companies such as WMC with suitable tools.”
Binci Heeb
