The SSP director looks at what's wrong and right in the broker market
No matter how much the insurance market changes there are always some fundamentals that stay the same, although this seems to be an incredibly difficult lesson for some parties to learn.
Despite a changing market environment, pressure from regulation and consolidation and the ever-tighter squeeze on margins, brokers have retained the lions’ share of the commercial market, continued to be significant players in personal lines and have relationships with their clients that are the envy of many insurers.
Just as the broking channel remains a constant, so too is its desire for simple, straightforward good service, especially in commercial lines. Brokers want to deal with skilled underwriters that can assess the particular needs of their clients and price a risk quickly and effectively.
If an underwriter does not want a risk, then brokers want to know quickly so they can move on. Brokers want consistency from underwriters so they know where to go with risks and what sort of terms to expect. They also want to discuss risks with people with knowledge, experience and authority and if terms are agreed, receive documentation that is accurate and timely.
When it comes to claims they are looking for a fast reaction to first notification of loss, prompt payment of simple claims and good communication on complex ones, leading to fair settlement. Is this really too much to ask?
It does not seem like it, although from the industry surveys that we continually see it is invariably service over price that tops the brokers’ wish list. If an insurer is so difficult to deal with that it creates problems for brokers and their clients alike, then the saving made on the premium generally turns out to be a false economy.
Many insurers took a gamble that the changing market conditions would leave them dealing with a handful of mega brokers and because of this they shut down their regional networks, created call centres, off shored much of their administration, de-skilled customer facing roles and turned to computer rating and rules based underwriting.
Not all of these are bad things per se, but when added up and delivered in the way they were, they left the majority of brokers out in the cold and hankering after some old-fashioned flexibility and service. One broker said recently that if insurers got the policy documentation out right even most of the time that would be an improvement!
It is no surprise, therefore, that the more dynamic and customer centric insurers and broker only MGAs have scooped up business by providing exactly what these established brokers with their longstanding client relationships were looking for. In many cases they have been very successful. Quality of service will out and it is as simple as that.
Indeed, having seen that the smaller broker market has stood the test of time, some insurers are now looking to court it again with initiatives like Aviva’s Club 110 and with consolidators’ warchests almost empty, perhaps small is the new big!
However it is also interesting that there has been so much debate over the viability of these new MGAs and there is now a strong consensus that only those that add value, have financial strength and a long-term strategy will survive. There is little appetite for the short term, commission hungry, broker-turned-underwriter model.
When brokers are asking only that the simple things get done well, it is shocking that they are still waiting for the decent service that they and their clients crave. In this area at least, change would be very welcome indeed.
Jonathan Davey is a director at SSP.