Written by Dr George Shelton 

Broker consolidation is cantering-on, and this could have direct implications for how insurers innovate. Here, we dive-in to the tension between broker consolidation and innovation in the sector, and how both brokers and insurers might effectively evolve with this trend. 

"The agent and broker market, especially insurance brokerage, is seen as a stable, cash-generating business with recurring revenue streams, and that is exactly what private equity firms are attracted to." – Jay Slaughter

The tail-end of 2025 saw a flurry of M&A deals related to insurance brokers, with consolidation out of the US at the top of the market, and knock-on effects for medium to large regional brokers (due to a reduced number of in-market buyers). Strategic and financial buyers also appear to be taking a greater interest in personal lines, a challenging but digitally responsive segment. 

Diving into the topic of broker consolidation in the insurance industry can quickly catapult you into the philosophical realm of whether or not a few larger companies pursuing incremental innovation is more effective than a greater number of smaller companies chasing disruptive innovation. Predictably, in the complex world of insurance, the answer probably lies somewhere in the middle. 

Large Vs Small Players: The Innovation Dilemma

On the whole, small businesses (including start-ups and scale-ups) have characteristics that are utterly unlike larger household names. It makes sense, therefore, that they would have to approach innovation very differently. 

Whilst larger incumbents can use their stability and resources to scale innovation and drive incremental improvements, challenges around agility and risk-taking are often difficult to overcome, especially in the insurance sector. Processes and management structures exist that simply aren’t there in smaller organisations. To some extent, the price of stability is some level of bureaucracy. 

In contrast, whilst smaller businesses can leverage their relative size to pivot quickly and respond to market changes rapidly, often with disruptive offerings, a lack of resources and less long-term stability frequently stymies longer-term research and development efforts. 

Changing ‘how things are done’ in the insurance industry can be uniquely challenging. As an industry, it is historic, complex, highly regulated and (understandably) risk-averse, with brokers a key part of this complex ecosystem. There is a danger in oversimplifying innovation, in the context of large vs small organisations. 

The Role of Insurtech in a Consolidated Market

Over the past decade we’ve witnessed a mixture of highs and lows in Insurtech as a sector, reflecting both its transformative potential, and also the challenges of operating in a traditional and heavily regulated industry. The insurance industry (understandably) likes tech to be comprehensively de-risked before deployment. We’ve had Lemonade rocket to an IPO and a valuation of over $3bn in just 5 years by employing a customer-first approach, whilst at the same time Bright Health Group finding itself facing mounting losses as a result of overexpansion and inadequate understanding of insurance industry-specific operational challenges (despite ample financial backing). 

As opposed to revolutionising and transforming the industry, it might be said that insurtech is a slightly less disruptive ‘enabler of modernisation’ in insurance. As brokers consolidate and the typical size of brokers grows, working with agile and flexible insurtechs and importantly, cultivating a fertile and supportive ecosystem for fledgling innovation can make more sense than ever before. 

There are very good reasons why the critical broker link in the value chain has not been removed or replaced by technology, yet. For higher-value, more complex offerings, brokers are a critical interface and intermediary between customer and insurer. A ‘necessity’, however, for all offerings? One for challenge and debate. As brokers consolidate, increasing relative market share and negotiating power, there is no question that the broker-insurer relationship is likely to evolve. Whilst larger brokers might offer access to valuable data and broader customer bases, the increase in power and influence of a smaller number of brokers must be proactively considered by insurers who are keen to stay in front. This shift in power dynamics is already prompting insurers to collaborate in a different way with brokers in order to maintain access to their client bases, suggesting that sharing data more effectively and co-developing products might improve the state of existing partnerships. 

The value of brokers in a digital customer-first world

Booking isn’t dead. 

Berlin-based Wefox is a great example of why brokers should not be overlooked, and an example of a customer-centric innovator who is re-imagining the interface between customers and insurers through their digital platform. Their strategy was to empower brokers, rather than bypass them entirely, and focus on collaborating with them to serve customers (as opposed to disrupting the sector and circumventing them through disintermediation). By leveraging the existing broker network (as opposed to building a direct to consumer model from scratch), they were able to scale rapidly and quickly achieve profitability. Winning over brokers through smart incorporation into their platform has been a critical ingredient in their success. 

The sweet spot

On the one hand, fewer brokers means more leverage over insurers, and greater bargaining power for them. On the other hand, the rise of direct-to-consumer models and digital disruptors means that brokers still need to demonstrate their added value in a world where customers expect faster, more personalised, less cumbersome experiences, and organisations continue to streamline processes. There is a delicate tension. 

Ambidexterity theory highlights the need for organizations to balance exploitation (refining existing capabilities and optimizing current operations) with exploration (pursuing new opportunities and innovation). As brokers consolidate, insurers may face increased competition for access to distribution channels (through brokers), compelling them to innovate in areas such as digital platforms, direct-to-customer models, or advanced analytics to differentiate themselves. At the same time, they must maintain and improve their core underwriting and claims processes to remain competitive in the traditional market as it is, with brokers being a key feature. Successfully navigating this duality — exploring new models while optimizing existing structures — will determine insurers' ability to thrive in a more consolidated and dynamic insurance ecosystem.

The venture client model—where large organizations become early customers of startups to leverage their innovative solutions—aligns closely with this theory, enabling insurers to balance both exploration and exploitation. By acting as a venture client, an insurer can explore cutting-edge technologies from startups without committing significant resources to internal R&D. This allows insurers to rapidly test and integrate innovative solutions while still focusing on optimizing their core competencies. In the context of broker consolidation, the venture client model gives insurers a strategic edge by fostering partnerships with InsurTechs that can help them adapt to changes in the distribution landscape, enhancing both their operational efficiency and customer engagement capabilities.

What do you think comes next after broker consolidation? And how can insurers leverage this changing dynamic to their advantage?  

Whilst wider provocative questions like: ‘Are brokers a necessity in the insurance ecosystem of the future’ can be parked (to some extent), for now, continued consolidation is a current reality. 

If approached strategically, broker consolidation could become a catalyst for, rather than a barrier to, innovation. With broad collaboration, a commitment to customers, and the relevant focus on cultivating insurtech as an ecosystem, this shift could represent a brilliant opportunity for innovation. In practical terms, this means building collaborative partnerships, investing in insurtech and adapting to customer needs with streamlined, digital-first solutions.