Insurers should think twice about headline-grabbing offers
Soft markets mean hard times for brokers and insurers. Premium income and earnings are under pressure, and intense competition means nothing can be taken for granted in terms of renewals and new business.
In times like these, hard-pressed SME businesses looking to control and reduce overheads will naturally pursue the cheapest price. And with online insurers and intermediaries expanding into the commercial lines space, the traditional broker market faces many challenges if it is to maintain its pre-eminence.
The broking sector must continue to counter low-cost internet-only propositions by reminding clients that cheap prices may only come at the expense of the loss of expert advice and guidance. And they can strengthen their argument by demonstrating how they can tailor protection to the needs of the policyholder, retaining the benefits and scope of the cover at a fair and competitive price.
For example, a broker will ensure the excess is correct – big enough to trim back the premium, but not so large as to deliver a mighty financial whack on the policyholder if a claim is made. Likewise with the sum insured; accuracy is essential, and brokers will check this.
Does the firm have part-time employees? If so, is it paying for liability cover on a per capita policy at standard rates when some insurers can offer special rates for part-timers? Does it own property that is unoccupied and risking inadequate cover? Does it run a fleet? If so, can the insurance spend be reduced through investment in a safe driving course? Are there other risk management initiatives that can enhance the insurance arrangement, while also improving the ability of the business to avoid incidents in the first place?
Can an online provider offer such a searching and bespoke service?
Brokers should also not hesitate to make the most of the fact that they can talk to a range of underwriters to secure the best policy. Again, this renders the take-it-or-leave-it internet option a rather poor alternative, notwithstanding the seductive headline prices.
It is also important for brokers to identify and support insurance providers that are willing and able to provide business support, variable payment methods and an overall approach that is flexible and proactive. The relationship between broker and insurer remains a key factor in ensuring that the commercial market as a whole continues to thrive.
With this in mind, it is important to consider the long-term impact of moves by some insurers to capture market share with headline-grabbing deals. Those involving high commissions, dual pricing or offers to “beat any price” spring to mind.
If the insurance profession is to make the sums add up, both now and in the future, it cannot afford to let net rates be diluted in this way. Underwriting principles have already been sacrificed to some degree on the altar of competition – it is time to draw a line in the sand.
If insurance is effectively sold below cost, the fundamentals of the market are corroded to the benefit of no one. We need to stick to our guns and continue to provide effective, well-priced products supported by top class, personal service. IT
Allison Andrews is head of commercial distribution at Groupama.