QBE’s Terry Whittaker says brokers should check the suitability of insurer partners.
In these uncertain times, the security and reliability of insurer partners rises right to the top of the corporate agenda. But sorting the good risks from the bad is far from simple.
Increasing emphasis has been placed in recent years on ratings. However, as the ratings agencies have always stressed, these should be treated as only one tool in the process of assessing the potential strength or otherwise of insurers. So what other factors should brokers consider when making a judgment on which insurers to recommend?
Transparency of security and a track record of controlled diversification into business areas that are properly understood are important factors, but so are other issues.
Number one on the list is how well an insurer listens and responds in terms of understanding what a client really needs. There will always be clients that have simple needs in terms of protecting their employees with standard, fairly priced products. But there will be just as many customers that need insurers to create a tailored product. This is still a real differentiator in the market.
Number two is whether the insurer is asking a credible price for the risk. The old saying, “there is no such thing as a free lunch”, applies just as much to insurance, but the difference is that, more often than not, you only find out the cost of a meal long after it has been finished.
If the price being quoted for a risk is significantly lower than that being offered generally, the obvious question is, why? Any professional underwriting entity should be able to justify its pricing decision. Equally important is the question of whether that pricing is sustainable.
Number three is whether an insurer’s appetite for the business is seemly. Although a relatively subjective measure, it is an important one as it goes to the heart of a company’s ethos and culture.
Last, but definitely not least, is an insurer’s reputation in terms of claims payment. All too often when times get tough financially, claims can become a issue of contention. The ability to build and sustain a position as a fair and prompt payer is critical.
Making the right call in respect of the right insurance partner for a particular client is what the broker exists to do. What is key, however, especially when dealing with difficult markets, is being able to demonstrate that an informed decision was made for good reasons.
Terry Whittaker is managing director, UK national, at QBE European Operations.