As the soft market continues, how can the industry encourage clients to buy the right cover at a fair premium?
I’ve given up trying to predict when the UK market will harden. It will, at some stage between tomorrow and 2015, but in the meantime it is worth reflecting on some current behaviour.
People point out that new capacity continues to emerge, but there is little doubt that the main sign the market is firming up will be when we see enough insurers take decisive action on rates.
It is not simply capacity causing market conditions. As an industry, we are obsessed with price, whether that is the insurance risk price or broker’s fee. This is inexplicable when you consider how much investment is made in building innovative and different propositions for customers.
It is astonishing that a decision for a client spending upwards of £100,000 on business insurance is so often made on price. In many cases, this is due to a client’s attitude. Why else would we see so many ‘cost consultants’ bashing brokers over the head? It is also fair to say that many businesses need to make savings to see them through tough times, and this tests broker loyalty to the limit.
Perhaps, though, it is the insurance industry itself driving clients to buy in this way. If we promote the x% premium saving, we probably can’t blame the client for taking the money. Sadly for the client, such savings are too often made at the expense of effective service.
It is still surprising how often business is won by an insurer for a marginal price difference against other insurers who may offer more security, superior cover and a better claims service. Fortunately, there are still many customers and prospective customers who, even in this market, are willing to put more emphasis on the overall proposition.
Large corporate customers can often make a more informed decision when the broker supports a tripartite approach and involves the insurer in meetings.
The insurer can then put the right people in front of the client, normally an underwriter, but perhaps a claims manager or a surveyor, too. Clients may see insurers as mythical beings, not knowing how they work or why their prices vary so much. Meeting somebody with a pragmatic approach can often dispel myths.
Such meetings can also help the underwriter. Seeing a client can give a unique insight into how a business is run, the risks affecting it and the approach to risk management.
It is also useful to understand concerns with previous insurers, for example if third-party claims haven’t been defended robustly enough.
An ex-Prime Minister once said that if he could speak to every voter personally, then they would vote for him. To a point, the same may be said here – but only if the insurer and the broker work together to create a solution, putting emphasis on what matters most to the client. This may focus on the role of a bespoke rehabilitation and absence management offering in reducing employer’s liability claims costs, or perhaps dedicated risk management.
There is no doubt that it is extremely difficult to compete aggressively on price alone in a soft market – somebody will always be cheaper. It is also impossible to provide a bespoke approach to every client. A good result becomes more likely, however, when the insurer and broker have a strong relationship; where the broker understands what the insurer is good at and, in turn, knows which prospective or existing clients to introduce to them.
Price is always important, but it’s not the be all and end all. IT
Simon Cooter is director, market management regional operations, at Brit UK.