We are all part of a bigger industry

Jurie Erwee spoke to COVER, sharing his thoughts on intermediation and adding value in difficult times.

In challenging times client retention is as important as signing on new clients and growing market share. This is why in difficult times insurance brokers with strong client relationships come into their own. Simply put, in tough times clients need pro-active and professional advice on how to reduce the cost of their risk … and the intermediary is best positioned to give such independent advice.

As much as there is a place for direct insurers in the market, buying insurance directly is not always faster and more cost-effective. People need to ensure they compare like for like products, while understanding the small print and all the hidden costs that often only surface when a claim is submitted.

Direct insurers generally rely on aggressive and expensive advertising campaigns supported by call-centre technology to sell off-the-shelf products at the cheapest price. Buying through this channel assumes that the client will get little advice on restrictive clauses, terms and conditions and no one to represent their interests when they claim. This is where the value of an intermediary lies.

Providers focusing on the unique requirements of clients and adding individually tailored value generally do better in tough times. Those intermediaries who are serious about understanding their clients’ requirements, and who tailor offerings to suit client needs and support this with professional service, will remain in business. On the other hand, a model operating exclusively on price differentiation is unlikely to be sustainable over the long term.

There is an inherent danger in treating insurance as a commodity business. Even small commercial businesses often mirror large corporations in their complex risk exposures requiring sophisticated and professional risk advice. Without appropriate advice up-front, shortcomings are only likely to be revealed when a client comes to claim.

Being in the business of providing advice requires ongoing investment in human capital. The Financial Advisory and Intermediary Services Act (FAIS) in itself is not enough to ensure that appropriate advice is given since the range of risks that can arise from advice is very wide. As such, advice tends to be only as good as the advisor providing it; in other words, if the advisor is well trained, thorough and of sufficient probity, the client will be treated fairly – irrespective of FAIS requirements. Developing this kind of quality advisor requires a substantial investment in human capital.

Insurers should be more aggressive in positioning the value of the intermediary as the short-term industry conducts more than 60% of its business through brokers.

In tough times, clients will always try to save money. To survive in difficult times, however, brokers can prove their value by helping customers re-evaluate their risk retention capacity, remove non-essential covers and acknowledge improvement in their risk profile.

Brokers should also identify new opportunities that surface during difficult times. When everyone is cutting back, it is often the right time to focus on and improved service and product innovation. Ongoing investment in technology is essential if you are to remain relevant in the industry since speed and cost of delivery remain perennial differentiating factors.

Alexander Forbes Commercial Solutions’ recent launch of the first online business supportal is an exciting example of technological innovation. The supportal streamlines Commercial Solutions’ ability to service the growing number of clients that prefer doing business online and is proving very useful to the web-based generation.

All this, of course, depends on investment in training and development. The industry is not doing enough to position the industry to new recruits while training and development in the industry remains fragmented. The different industry bodies and players would be much more effective at branding the industry and attracting and developing people if they adopted a unified approach as an industry.

The risk industry relies on an extremely diverse skills set, ranging from chartered accountants, actuaries and engineers, to legal and technical people. Given the exciting career proposition offered by the industry, it should be attractive to new entrants. Unless, however, the entire industry works together to demonstrate the varied career opportunities available, it will not attract the talent that we need to achieve our collective objectives.

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