Brokers: stay relevant in an evolving industry
Tcollaborative risk mitigation as the cornerstone of sustainable and affordable insurance. It appears the shift is already happening. Close to half (45%) of the brokers surveyed for the report revealed that they are spending more time on providing expert risk and management advice and 80% said that they are conducting a risk assessment site visit.
Karen Rimmer, head of Distribution: Insure at PSG, says both insurance companies and their clients are under financial pressure. Reinsurers and
insurers have faced huge losses in the past five years as a result of the Covid-19 pandemic, riots, flooding and the energy crisis. Insurers have increased their premiums due to increased rates from re-insurers. Clients, on the other hand, are battling a cost of living crisis and high interest rates. To reduce their expenditure, many are considering cancelling their insurance products or making changes to reduce their premiums
This situation, she says, is impacting brokers. Brokers obviously want to retain their clients and keep the insurance cover in place. This means they need to spend more time on each client, ensuring they receive appropriate advice on the cover they can afford. They have also had to accept their bargaining power with insurers, particularly as far as price is concerned, is limited, based on the financial pressure insurance companies are facing.
Insurers are focused on stabilising their business and reassessing their structures and processes. While they do realise the challenges faced by their
brokers and value the relationships, this is not their primary priority at this stage. Interestingly, Santam s Insurance Barometer research revealed that price, while important, is not the biggest priority for brokers. The top three reasons why brokers select a particular insurer is based on the track record of claims settlements (52%), the support provided to brokers (32%) and ease of doing business (32%). Price featured 10th on the list of priorities. Brokers are also being challenged by rapid changes in the risk environment. Rimmer says insurers have reacted to these changes by making amendments to their policies for grid failure, power surges, certain vehicles and Sasria cover. They have also become much more cautious in terms of the type and amount of cover they are prepared to offer clients, even going so far as to walk away from certain geographical areas that pose a greater risk. This means brokers are not always in a position to get cover for their clients, or the
premiums are very high. Staying abreast of these changes and ensuring clients understand the risk, the cover provided and the terms and conditions of each policy, is a huge challenge for brokers, she explains. The increased complexity means there is a greater risk of errors being made which can, in turn, lead to claims from clients who have not received appropriate advice. This places a heavy burden on brokers to ensure their advice is documented and signed off by clients Ultimately, says Rimmer, it is not the broker model which has changed as much as the responsibilities and the way in which brokers interact with clients and product providers that has changed. There is a huge need for insurance advice, so the threat is not the role, but rather the competency of the individual fulfilling the role. The biggest threat therefore is becoming irrelevant. Brokers have to ensure they remain relevant and that requires they offer risk management as well as product advice.
Successful relationships are built on trust and solid advice
Not only is the risk universe constantly evolving, but it is getting more complex than ever
According to the latest Santam In surance Barometer Report 2022/2023, the top risks identified by personal lines insurance brokers including load-shedding (71%), economic challenges (62%), societal issues (43%), political risk (29%), accidental loss/damage to home,
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