The final Zurich Broker Business Club of 2012 drew together a panel of experts to discuss the challenges facing brokers in the SME market.
The discussion, conducted under Chatham House rules, began by asking whether there was any evidence of SME businesses wishing to shop online, along with expectations of the changes in purchasing habits in the years to come. The attendees covered how to retain the role of advice for clients whose needs are becoming more complex while the premiums remain small, along with how insurers could assist with specialised manual underwriting. The debate also looked at the potential for conflict in an environment where products are becoming commoditised – can a balance be struck to harness the efficiencies and power of technology while minimising the risk of opening a broker up to professional indemnity claims? And how far into the mid-market will the changes ultimately grow?
Does the commoditisation of micro SME mean there are areas of business that brokers need to walk away from in 2013?
The broker attendees were uniform in arguing that efficiency was crucial to make a mark, and more importantly, a profit in this part of the sector. One said that he was unsure if clients were prepared to pay a fee in this market but that with the cost of compliance and servicing business it was a growing issue. One pointed out: “As brokers [we] understand our businesses now more than we ever did, we’ve got to take a stance.”
Another delegate raised the issue of brokers’ professional indemnity exposure around quote and buy online facilities with a colleague highlighting the potential for delegated authority to take out the need for rekeying, a continual bane of brokers’ working lives. “[If you] enter [details] into two or three different systems then you are not going to make money because it will take you too long to do it,” commented one participant.
A Zurich representative moved the conversation on: “The trick for us is to make sure that it [technology] minimises the expense and strain between insurer and broker.” He added: “But we still need to maintain the differentiation [of] offering the advice… out to the customer.” Almost uniformly the panel agreed that there was no need to leave the micro end of the market, but that brokers did need to differentiate their offering. “Brokers increasingly need to focus on what their ideal client is and spend time up front working out which markets and sectors they can add value with expertise,” said a panellist. “In my experience lots of brokers will chase anything and everything and hope for the best, that is where it falls down.”
With increasing commoditisation is insurance losing its skills base?
The attendees began by noting that in the SME sector there was such a spread of clients and risk that the focus must always be on putting the client at the heart of the matter to make sure they are getting the right product. However, many noted that getting the correct blend of skills and culture was difficult, particularly with so many clients increasingly focused on price. “It is about sharing skills because the days where insurers used to train them [employees] up and brokers used to take them on have all gone,” reported one broker. “Insurers will benefit from us having better trained staff with better skills.”
One representative of Zurich agreed that it was also incumbent on insurers to make sure the skill sets were available to support their broker partners. “We have spent a lot of time over the last few years on our academy,” he continued. “We have found that among ground level entrants it is very hard to find people with a good couple of years’ insurance experience under the belt. We have started growing our own.”
The tone of the discussion was that greater skills led to fewer PI claims and clients with better managed and covered exposures. However, the challenge in the market was to balance understanding systems and processes with knowing how to underwrite and make decisions. “You still need the intervention over the top of vanilla business,” commented one Zurich attendee.
For brokers the main issue at both ends of the relationship was staff who have become too used to relying on question sets. As one attendee added: “[People] have got to be able to trade and that is a totally different skill set.”
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