Focus on quality not price

I have been in insurance for more than 25 years and I am dismayed to say that today's commercial market is as daft as I can remember. I look at our competitors and, with only the odd exception, they are all focused solely on price; insurance is a commodity like never before.

Soft markets do not have soft landings. The inevitable losses become intolerable. Corporate casualties can ensue. Companies try to put things right by increasing terms or refusing to accept risks that, only months before, they were slashing prices to win.

Behaviour as the market corrects can be as irrational as when it is falling. That deals a blow to the whole sector, doing nothing for our reputation as professionals.

The main casualties will be brokers. Direct sellers love commodity pricing because it shifts the focus from value. It means they can compete and win because they have no need to bring experience and expertise to bear.

Why are brokers trying to out-commoditise the commodity specialists? Their reluctance to sell value betrays a lack of confidence in their offer and a depressing short-termism that will trigger further consolidation.

I know the intermediary market is tough, with buyers expecting reductions in insurance costs. However, if we do not reverse the trend we will not have a market to moan about.

Brokers have to stop hawking insurance. Selling the transfer of risk on commission leaves them at the mercy of cut-throat competition with zero control over their income. If brokers add value and service in the form of risk management and business protection advice, however, they take their offer to a new level.

Any fool can buy cheap insurance. It needs a professional to advise on integrating the right risk transfer programme into an overall business protection and risk management strategy.

As a consultant, a broker can charge for its time and skill. As a valued partner, it can expect loyalty from clients that rises above the penny-pinching associated with today's renewals.

If prices continue to decline, direct sellers will win because they can squeeze out more cost. However, brokers will retain their pre-eminence if they focus on advice and service, charging a fair price to provide it.

If provincial brokers do not change their business model they will not survive. They have to start being consultants and not just buyers' agents.

Remember: win on price, lose on price. Win on quality, retain on quality.