Broker consolidation is inadvertently creating the biggest barrier to entry for new insurtech: diminishing available market. 

It’s a vicious, but subtle, loop. Here’s the math. 

Increasing consolidation = shrinking market. 

Shrinking market = less sales opportunity.  

Less sales opportunity = Increased risk. 

Increased risk = Less willingness to innovate.

There’s a caveat, of course: the correlation between increasing consolidation and decreasing broker insurtech innovation is strongest when talking about core system development.

Here’s how I’ve seen this play out in Canada over the last two decades. The market has shifted from a pyramid-like distribution, with a few large, national and international players at the top, multi-office large and mid-sized brokerages in the middle, and at the base thousands of independently owned single location brokerages in each province.

Today, the shape of the market resembles more of a rectangle when looking at contracted offices. If we use licensed brokers (staff) as a market size indicator, I suggest we’ve already flipped and are moving into an inverted pyramid where consolidators’ seat counts at the top are accounting for more and more true market share.

By most indicators this isn’t slowing down.

Which leaves the market, the broker distribution channel, in a unique place, one where it has really never been when it comes to innovation. Because over the last twenty years, the same vendors have been competing with the same core systems for market share. 

But the market has changed.

Little Core System Progress

What we’ve seen over the last two decades is practically zero new competition in the core system space. The only vendor to bring a competitive BMS product to market over this time is Acturis, who entered the market through the acquisition of PowerBroker. Otherwise, no new systems have entered the broker ecosystem. 

Why have we not seen any core system innovation? The economics just don’t make sense. Why spend wads of money on research and development on a product when the total available market is shrinking, fast? Most sane people wouldn’t.

That’s not to say someone shouldn’t, or won’t. It’s just that a number of reasons make it challenging. 

First, larger operations are not going to risk operational chaos on a “new” system. Like Adam Mitchell’s sentiment in his May 2025 CU article titled, “Is the latest tech always the right choice?”, larger brokerages, like the consolidators, will want to see any system prove itself with other brokerages first. Those holding the reigns at the industry’s largest operations are not behaving with an innovator mindset. So relying on them to adopt new tech is unwise.

Second, onboarding an acquired broker is a whole lot easier when you are working with the same core systems. Data and workflow transfers are just simpler. And when you’re integrating offices and people and culture, you want to remove headaches wherever you can.

Third, if you’re a brokerage thinking about being acquired, you want to make yourself as attractive as possible to maximize your buyout. Revenue and GWP certainly tops this list. Tech is not far behind. Being on the industry incumbent checks a box that makes things easier.

Fourth, as the serviceable obtainable market shrinks, so too does a group of principals who would have been willing to take a chance on a new system. I suspect a higher percentage of these than normal have already sold to consolidators. And if you believe in the Adoption of Innovation curve, then you’ll know that the less innovators and early adopters you have singing your praises, the harder it becomes to gain a market share foothold.

And yet, what you hear from whispers at conventions and tradeshows from the remaining group of principals is just that, “We want core system tech to challenge the incumbents. We’re frustrated. We’re overcharged.” And yet… 

Development of Ancillary Tech

Instead, what we’ve seen is a different strategy emerge from those building and funding insurtech. One focused on ancillary tech. Supportive or complementary of the core BMS system. And over the same period of time, the ‘tech stack’ has emerged: commercial lines quoting, email marketing and communications, RPA bots, AI telephony, form field capture.

It’s expected. It’s what most of us would do. Go where the competition isn’t (or at least isn’t that strong). Because the simple truth is this: displacing an incumbent is much harder than selling an add-on. You can rely on buyers to fall into the Adoption of Innovation curve, allowing you to plan your go-to-market strategy accordingly. You can plan according to a scaled-up adoption as word of mouth travels. Your serviceable market is pretty close to the total available market.

The tradeoff of course is revenue potential. Core systems are the highest price-point for a piece of brokerage tech because they handle the operations of a brokerage. Of course it makes sense that revenue is commensurate with task importance and scope and scale. 

But the effort required to displace a core system?  Huge.  

Let’s not kid ourselves. It was a challenge to displace an incumbent system back in the early to mid-2000’s. Moving from one system to another required a number of considerations: workflow, data, accounting, team morale, not to mention the right set of features.

In today’s consolidated landscape, I’d argue it’s never been a more challenging time to launch a competitive BMS product and displace an incumbent. Does this mean it’s impossible? Not at all. 

But it requires a different approach. From the frameworks used to plan go-to-market, like the Adoption of Innovation curve, to the underlying value proposition that’s inherently baked into BMSs. Everything has to be reconsidered. Everything, especially the implict rules-of-the-fame, has to be challenged.

Oh, You’re Not Building a BMS?

It doesn’t matter what insurtech you’re building, there’s still a key takeaway and it’s this: understand where the market (buyers, competition, regulations) is today and where it’s headed. Because at any point in time, you’re selling into today and building for tomorrow. It’s almost an impossible balance.

Your strategy, and company’s success, is tied to the market. Of course, whatever direction you choose - battle incumbents head-on or tackle ancillary problems - your product will have to be good. 

But once you have your product nailed down, success ultimately comes down to knowing, “the game you’re playing and how you’ll win”.