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around the cost of the product they’re buying I don’t know if you’re really doing them a whole lot of good.� He is concerned that the role of brokers and the quality and need for the advice they offer isn’t well understood – an issue that affects both attitudes to regulation and distribution. Regulation has “stolen a lot of expertise out of the [Australian personal lines] market – it’s almost become impossible for brokers to economically handle that business, so that will ultimately impact on the quality of advice available�. As for competition from other distribution channels, it’s the same story – the broking industry “isn’t very good at explaining what it does�. “Commoditised delivery will suit some people, and it may be that all it’s going to mean for brokers is that we need to explain in a little more detail what it is we offer.
“Many insurers are now offering up direct solutions to what might have otherwise traditionally been a broking market. Many brokers, for a portion of their client base, are looking to provide a managing agencytype arrangement for a portion of their clients. “That’s just a natural evolution of the business. So your clients can probably expect a whole lot more in terms of different delivery models. “But at the end of the day their desire hasn’t changed – they’re still just buying insurance and they want to buy a quality promise.� While he’s positive about the future of broking, Mr Lockwood delivers his vision of tomorrow with a hefty caveat. He nominates the lack of available talent around the world as a threat to brokers’ prime differentiator – high levels of professional service.
“It’s better to spend a lot of time explaining in detail what we do, when we do it and how we do it, and then offer the price. To offer price as the only solution really is lazy.�
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“If the other option is some internet commoditised solution then you have to differentiate to your consumer audience what service you’re offering for your price differential. “Of course, a consumer doesn’t really think about that until something like a Christchurch earthquake happens. And then who do you call? And are they there when you call them? And are they visiting the next day? And can you get hold of the same person next time? “In my experience, if you’ve got a good relationship with a client, and you build that relationship, then that is desirable to a consumer.� Mr Lockwood is strongly critical of brokers emphasising price rather than service – a practice that he says is caused by a belief that price provides business retention. “There’s been a bit of laziness around that. It’s better to spend a lot of time explaining in detail what we do, when we do it and how we do it, and then offer the price. To offer price as the only solution really is lazy.� For the future, Mr Lockwood sees the market continuing to change as business dynamics change, with new risk transfer solutions and new entrants. “I’ve been saying for about the last 10 or 15 years that insurers will begin to look more like brokers and brokers will begin to look more like insurers,� he says. insuranceNEWS
December 2011/January 2012
“You could find the level of service you offer threatened because you just can’t afford to have those expensive people delivering service to a smaller client,� Mr Lockwood says. “So we’ve got to be careful that we don’t price our people out of a job. It’s going to be a big issue.� Does that mean there will be even more commoditisation of insurance products because delivery by brokers could be unaffordable? Could a salaries gold rush push brokers out of the SME market? Beyond hinting that research exists to confirm such a scenario, Mr Lockwood is keeping his own counsel on that subject. “I’ve always had a view that you can probably do a different broking service delivery that doesn’t involve sticking people in expensive cars on expensive salaries and sending them out to see people,� he says. “You can probably do it with e-addresses. “I’ve always had a view that there needs to be more back-office efficiency between brokers and insurers and that we could be more creative about the way we deliver our services without compromising the advice and service we offer. I have some views on how this might happen and how in the process we can attract some young blood into the industry so that as an industry we create some succession. I am pretty keen to explore that.�