Slipping standards?

The debate over the service standards brokers receive from their insurers has been raging for many years. There have been signs of improvement recently but there have also been developments in the industry that have put further pressure on the issue. The question is, have pressures such as an increasingly competitive market and moves by some insurers to offshore certain services had a negative impact on standards?

A survey carried out last year for the British Insurance Brokers' Association revealed higher levels of satisfaction among brokers where insurer service standards are concerned. It also identified areas for improvement, with issues such as speed of policy documentation and accuracy of paperwork continuing to cause problems.

Shaun Astley, operations director for Fortis Insurance, is optimistic that there have been improvements across the board and observes that developments such as contract certainty and tighter Financial Services Authority regulation have acted as catalysts for change.

However, the fact is that brokers continue to be concerned about fundamental issues - with access to underwriters as well as speed and accuracy of documentation high on the agenda. Astley emphasises that "there are no excuses now for getting these wrong." He believes that those insurers that are succeeding in improving service standards are the ones that are managing to eliminate inefficiencies. "If you can eliminate inefficiencies in the system then you can develop your resources to add value to the customer process."

Richard Bucknall, Willis' vice chairman and co-chief operating officer, agrees there have been improvements but the work must continue. He comments: "While there has been improvement, particuarally in the area of contract certainty, there remains a lot of work to be done. Carriers and the brokers need to work together to ensure that this gap is closed."

Bucknall echoes the view of many brokers with the observation that, "The same issues prevail." He explains: "While there has been progress with policy documentation, this has not been uniform across the market and much remains to be done. In addition, responsiveness to claims and communications relating to claims, are areas that need further improvement."

A level of automation

Lack of access to underwriters has long been a common complaint among brokers. However, with much of personal lines in particular becoming increasingly commoditised, is this an area where brokers should accept a level of automation? Cathie Bruce, distribution and customer services director at Groupama Insurances, comments: "While the great majority of this sort of business benefits from straight through processing, it is the less straightforward stuff where brokers still need help and decisions so that they can support the client. This is one of the broker's unique selling points and insurers need to recognise the need to offer service that helps intermediaries deliver."

Furthermore, some parts of the personal lines sector continue to demand particular attention. As Julia Sansom, client services director at the Jelf Group, observes, "In many areas of personal lines, such as high net worth, the customer is more sophisticated and buys on more than just price."

Commoditisation is no longer just an issue for the personal lines sector and, as it continues to creep into the commercial arena, what impact should brokers expect on the standards of service they receive? Andy Hawkes, managing director at THB Risk Solutions, provides a note of optimism: "A number of insurers and underwriting agencies have developed very good solutions for general small business."

Hawkes asserts that the key for brokers is to pick their markets carefully and utilise technology to reduce costs. "Brokers need to consider whether single market solutions can deliver a sufficient proposition to satisfy clients. Increasingly insurers, from composites to Lloyd's syndicates, are developing small business solutions. Brokers must analyse books of business and understand their clients needs. Just because you have broked a risk across 20 markets for the past 20 years does not mean this is the correct thing to do in the future," he comments.

Lyndon Wood, chief executive officer at the Moorhouse Group, also believes there is some good news on the issue of increasing commoditisation. "Insurers do seem to be getting their act together a little bit here, although it is at a very slow pace. The types of product that lend themselves to this are essentially simple and easy to understand packaged policies. The expertise required does not have to be as sophisticated as a larger commercial or industrial risk. In terms of expertise for these type of products, there does seem to be more assistance from the insurer and speed of documentation is far greater, due to the availability of technology to drive performance."

Dave Smith, Zurich's market management director, expresses the view that access to underwriters is an area where insurers can differentiate their own offering, particularly in the small to medium-sized enterprise arena. Smith explains that brokers do have a choice in the SME market: "There is access to underwriters in the market if brokers want it. If brokers want to differentiate themselves through advice, they need to forge relationships with the insurer that allows them to do that effectively." Smith goes on to warn: "The industry tendency at the moment is towards commodity. The danger is that if brokers choose to go down the route of commodity players, which is low on advice and price driven, then they become highly vulnerable to the direct writers."

Face-to-face contact

In this increasingly commoditised and automated environment, one question which arises is how far brokers still value face-to-face contact, and how far insurers can provide it. Many agree that there is still a place for this level of contact. As Bucknall observes: "Face-to-face contact is important not only in relation to dispute resolution but finalising complex and specialist transactions."

Wood points out that while brokers do value face-to-face contact with insurers, it is not required to transact business. Bruce observes that while it is still "The best way of doing business," it is also hugely expensive. "Time is money and I think intermediaries recognise that they need to expend effort where it offers the greatest return. For us, this has translated into a distribution strategy that recognises that different brokers want different things."

Smith agrees that this is something that brokers want and that it is "absolutely valid, particularly at the corporate end." He adds, "For SME, the key issue is not necessarily face-to-face but a relationship over the phone with somebody you know, who understands your business, the risks and the local area."

Despite increasing commoditisation, however, as Hawkes points out, this is a people business. "Commercial insurance is complex. Clients value face to face service from brokers so why do insurers think the computer can replace all the human underwriting process? Brokers want face-to-face contact when they need it and this is the challenge that faces the insurer," observes Hawkes.

Among the more recent development to put pressure on the service standards debate is the trend towards offshoring on the part of insurers. Astley points to research indicating a negative impact. "In the claims context specifically, research shows there is a very marked difference between levels of customer satisfaction depending on whether the claim is handled in the UK or abroad. If it is handled abroad, the proportion of very satisfied customers is considerably lower than those handled in the UK."

Sansom believes that offshoring as an end result is not the problem, explaining: "Whether it is India or the US, it is the quality of the service and lack of appreciation of the concerns of brokers and clients to get matters resolved where there is a problem." This is a sentiment echoed by Bucknall: "The brokers should be concerned with the overall service provided by the carriers rather than where this is being provided."

It could be said that one way for brokers to get what they need may be to do it themselves. In fact, there is a view that brokers are beginning to carry out roles that were traditionally the remit of the insurance companies. Smith believes there is a willingness on the part of some brokers to step in. "In certain cases, that is very relevant and a broker can do a better job than an insurer in terms of a delegated authority scheme, for example. This makes sense in niche areas where brokers build up expertise over a period of time. Where it makes less sense is where it is a vanilla product across the market, and where the insurer simply becomes a capacity provider across a range of the market."

Wood asserts that the concept of brokers taking over some of the administration is now a reality. He comments: "I highlighted three years ago that brokers will take over a lot of the administration of insurers in the future. This is now happening and becoming more apparent as insurers are pushing to drive costs down and realising that it is far more cost effective for them to pay an extra 2.5% brokerage and let brokers do the work for them." Wood is enthusiastic about this development: "Carrying out an insurer role without having to take the risk and getting paid for it I think is fantastic. It is the way forward to build your service levels and thus increasing business for your organisation."

Raising standards

For their part, insurers must continue to focus on raising standards of service across the board. Hawkes points out that improved service standards will benefit the insurers themselves, and not just the brokers. He comments: "Everyone understands the need to reduce transactional costs but in doing so we must also offer customer-focused solutions. Those insurers that find ways of delivering high value expertise and low cost administration solutions can and will make a margin."

Commenting on the Biba research last year, chief executive Eric Galbraith emphasised: "Improvements in the service brokers receive from their insurers is good news but, of course, neither brokers nor insurers should become complacent." The clear message from much of the industry appears to be that much progress has been made but it must not rest on its laurels and service standards must remain a priority.

BIBA RESEARCH SHOWS IMPROVEMENTS

Below are some highlights from the British Insurance Brokers Association's 2005 Intermediary Satisfaction Survey, which showed that while satisfaction with insurer service standards had increased, there was still room for improvement.

Biba's 10th annual survey, carried out by Harris Interactive among 440 personal lines brokers and 582 commercial lines brokers, showed insurers' overall performance has improved for both personal and commercial lines brokers since the last research project in 2002. However, there were still issues to be addressed, with flexibility of underwriting seen as the most important.

There were concerns expressed about the speed of issue of policy documents and the accuracy of paperwork amongst commercial lines brokers. When policies are inaccurate brokers prefer insurers to revise the policy rather than sending through amendments. The research also showed that improvements in speed of issue and accuracy of documents are seen as important for brokers in adapting to the Financial Service Authority's rules.

Both broker types rate price and good value as the major factors when placing business and brokers will also look at the quality of service and the strength of their relationship with insurers when making decisions.

Personal lines brokers rate product range, speed of settlement of claims and commitment to the broking market as important when assessing levels of satisfaction with insurers.