Risk ManagementShort-term

Business needs risk brokers

Closing the loop between risk management and commercial insurance

Following the global economic recession of 2008/2009 and the natural disasters and political unrest that have plagued Asian and African markets and Australia over the last year, there has seldom been a higher sense of risk awareness – in all markets across the globe.

That being said, this heightened awareness is largely being projected by businesses, where the management and monitoring of risk has become a necessity to effective and sustainable business management. Ensuring that the business is sufficiently insured for any variations of the “worst case scenario” is then no longer a contingency consideration, but rather strategic business procurement. Risk identification and analysis therefore plays a crucial role to the provision of commercial insurance.

Hands-on approach to upskilling brokers

As any broker is essentially a middle-man between the insurer and the insured, crucial to their role in the insurance channel is to facilitate deals. This means that they have to openly manage relationships with both the insurer and the insured, to guarantee that the respective parties’ expectations are managed and interests looked after.  The management of these relationships is therefore strongly dependent on the broker’s ability to find a balance between the relationship with the insurer and acting in the best interest of the insured. In the commercial insurance market, finding this balance takes a little more sophistication and it is crucial for brokers to have a core understanding of their client and the client’s needs. However, the buck doesn’t stop here. For a broker to be able provide a client with independent, sound and practical advice – to their fullest capacity – on the best available cover for their client’s business, a strong combination of good risk management with efficient insurance support is required, which means that brokers need to have high levels of skill, experience and training.

However, one of the greatest challenges that the commercial insurance market is currently faced with is attracting the right skills set and expertise. Consequently, the industry has constructed support structures to assist and ensure the good training of new entrants to various insurance entities to maintain the professionalism of the industry.

In addition to this, in the underwriting management agency (UMA) environment, it is very important that the brokers undertake training with the agencies to appreciate fully the niche product offerings and it is common for agencies to offer special training sessions to their brokers, either at the broker’s offices or in-house. This training should be aimed at assisting the broker with considering proper risk management coupled with the most appropriate insurance offering, when consulting clients accordingly. As niche products can potentially introduce different levels of complexity in each deal signed, it is in the interest of all parties to ensure that the broker gains sufficient understanding of the benefit of niche products and can align these to a clients insurances needs.

Facilitated, assisted training for brokers

The variety of products, wordings and technical complexities in the commercial insurance market has made the task of the broker more challenging. The Financial Advisory & Intermediary Services Act (FAIS) and other regulatory requirements, for example, regulatory examinations (RE), have added to the burden that brokers face today, and attaining the necessary minimum requirements has proven very challenging due to the ongoing changing legislative environment. These are, however, aimed at improving skills to the benefit of potential clients. As such, to combat this, the industry regularly hosts seminars, workshops and training sessions, which, coupled with official training, enhance the brokers’ skills set. For instance, the Insurance Institute offers official educational qualifications to the industry and other courses through institutions such as UNISA, and these can be used to improve the level of skills of individuals within the industry.

Small, but knowledgeable

The commercial insurance market is naturally a competitive one. Therefore, the better trained and skilled the broker – who is backed by an equally skilled underwriter with the right product offerings – the better chance a smaller, independent broker has in competing and succeeding in a market that has traditionally been dominated by large brokers.

Re-insuring underwriting skills

Re-insurers have traditionally always tried to gain a better understanding of the larger commercial risks that are underwritten, and one of the ways they are able to do so is when they look at risks either on a facultative or a special acceptance basis. As such, re-insurers would be able to look at the pricing of the risk, the main risk areas that they believe need to be addressed, and provide substantial feedback to the underwriters in this regard. Additionally, re-insurers who are part of an international group will have access to specialist expertise within the group outside of South Africa that they can call on to assist in the underwriting of unusual risks that the commercial underwriter may be faced with.

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