Overview - Making changes in legislation work for you

As UK and European directives appear on a regular basis, it can be tempting to assume that all of the changes are bad for productivity and will lead only to increased paperwork and red tape. However, provided you are equipped with the latest knowledge on new legislation, this information, combined with effective risk management skills, could improve a broker's performance.

Identifying the emerging risks of the future by protecting your brand reputation, or preparing for the impact of the credit crunch, or learning how to cope with employees choosing to work from home are all must-dos in a fast-moving environment. By presenting a superior understanding of these areas brokers could capitalise, forming strong relationships to help secure mutually prosperous futures.

Building relationships is a common theme throughout this supplement. Whether it is the relationship between you and the insurers you work with, or the bond between the broker manager and their staff, effective communication and planning can lead to a better understanding of the changing insurance market and improved loyalty.

The importance of brokers providing a value-based relationship between itself and its clients is also highlighted, with emphasis being placed on communicating not just when the annual renewal looms, but providing ongoing contact throughout the tenure of the policy. In an age where insurance policies are becoming increasingly price-dominated it can be seen that loyalty is still available, though it needs to be won through hard work rather than relying simply on customer inertia.

Relationships are also important when it comes to analysing corporate risks on an international basis. The Environmental Liability Directive is a fine example of a piece of legislation that is active across the continent, planned for implementation in the UK but has not yet become mandatory. Building a connection with an experienced underwriting team and skilled legal advisers could make a real difference if and when the proposed amendments are brought in, as prior preparation will make the new methods of risk management implementation a smooth, transitional process.

The continuing EU debate over the law on non-contractual obligations, known as Rome II, could see the nature of liabilities in foreign countries change, so that instead of the locaton where the tort occurred dictating which country's laws apply, it will depend on where the damage occurs. This could also have significant impact on environmental damage insurance and cross-border claims on product liability and personal injury.

In addition, brokers should realise that legislation is not simply a matter of mandatory rule following, since it has now also become a measure of a company's success. As companies are now expected to be overtly environmentally and socially aware, so too are they expected to be compliant with all major changes to regulation on a near-immediate basis. It is seen as a mark of a firm's professionalism and can foster an image of a forward-thinking company that is ahead of the market and therefore desirable to work with.

This affects brokers in two ways. First, it has an impact on how it manages its own staff internally, and secondly, it changes how it can advise its clients on effective risk management, potentially lowering premiums. For example, a basic knowledge of how corporate governance can lead to successful internal control and improve risk containment strategies, such as advanced health and safety measures, could help a broker boost its relationship with its client and so help to possibly retain its business for years to come.

Finally, relations with the right trade bodies can also help insurance brokers overcome one of the main concerns within the industry - fraud. With fraud representing a £4m loss to UK insurers every day, according to estimates from the Association of British Insurers, this is certainly a problem at the forefront of managers' minds. By establishing a regular rapport with bodies such as the Association of British Insurers, the Insurance Fraud Bureau and the Insurance Fraud Investigations Group, broker managers can work towards developing risk management strategies that target fraudsters and help their staff to identify false claims more quickly.

Regular contact with industry organisations will also help to keep managers abreast of any regulatory changes that could affect future claims handling. This is especially true in the instance of the ongoing discussions of European Motor Insurance Directives, particularly the prospective 6th EMID that proposes no-fault liabilities for injuries to pedestrians and cyclists, something that is likely to be lobbied against again by insurers soon.

Readers of this supplement will realise that legislation changes are not to be feared by insurance brokers and that, given the correct preparation and understanding, it will provide brokers with extra value-added strings for their bows, since they could use their knowledge to win over clients and impart confidence that their insurance needs can be met by a forward-thinking and competent firm.

This article is from a Zurich supplement entitled ‘Corporate Risk’ which was distributed with the November edition of Professional Broking.