Blog: Partnership builds the resilience brokers need to navigate a challenging world

Are ‘black swan’ events (unpredictable events with serious consequence) becoming more common? It certainly feels that way in the insurance industry, which has had to navigate its way through a significant number of both industry-specific and macro challenges during the last few years.

Of course, what is and what is not a black swan event is highly subjective. For example, many people argue that the Covid pandemic was a predictable event, and did not come from nowhere, but there is no doubt about its dreadful impact on millions of people and businesses, and we in the industry are still feeling its effects.

Responding to a recent Close Brothers Premium Finance survey, brokers identified a host of issues they are facing into this year that did not appear at all when the last survey was conducted in early 2020.

Not all of the issues are ‘black swans,’ but the sheer number of new and emerging challenges does give the impression that we are living through a period of continual unpredictability.

New entries

There were 13 major challenges identified in the research, and six of them: hardening market, cost of living increases, the impact of Covid, war in Ukraine, the reputation of the insurance industry and keeping up with technology change, were new entries in 2022, compared to the last time the survey was conducted, just before Covid struck the UK in March 2020.

The top new entry, with 53% of brokers citing it as a major challenge, was the harder market, while the increase in the cost of living was the second new entry, with 36% of brokers identifying it. The impact of Covid drew the attention of 27% of brokers, and 18% said the war in Ukraine is a major challenge for them.

That nearly half of all challenges identified didn’t exist 36 months previously underlines just how volatile the business environment is for the broking sector.

It is therefore remarkable that, far from being weighed down by negativity, the same survey found widespread optimism about the future from both personal and commercial lines brokers, with 90% predicting growth during the next twelve months.

Such optimism is partly down to the deep rooted resilience of the UKs Brokers. CBPF has been providing premium finance to its broker partners for 45 years, during which time the demise of broking has been announced on many occasions.

Resilience

Although there was a big drop in the number of brokerages in the UK between the early 1980s (10,000) and 2013 (3000), in the last decade the numbers have only dipped slightly, to 2,750 in 2022.

Many of these brokerages are local independents who have thrived from being at the heart of the communities they serve, helping their customers and clients protect themselves from the many problems that affect them. Their clients renew with them year after year because they know they get a great service, and they know that brokers will fight their corner when they need help to make a claim, require risk management advice to bring down the cost of their premium, or wish to use premium finance to pay their premium.

Speaking of which the purpose of premium finance, to help make insurance affordable by mitigating the cost over time, remains fundamental to our business, especially now, as people and businesses wrestle with the pace of change.

But premium finance needs to evolve too, as it is important to give customers a range of channels to use when managing their finance agreement, such as the ability for customers to catch up on their arrears online.

We introduced such an offering in March and are now seeing double the number of customers using the facility than we saw at launch. Evidence that by working together with partners, brokers can deal successfully with new challenges and maintain and grow their presence at the heart of the communities they serve.

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