Cutting commissions to brokers is not the answer, the leader of a Singapore-based brokerage has said.
With John Nelson, chairman of Lloyd’s of London, throwing a spotlight on broker commissions last week with calls for insurers to target broker fees as the industry looks to reduce costs, Danielle Warner, founder and CEO of Expat Insurance Brokers, said that “cutting commissions is not the answer.”
“Maybe the London market is looking for a quick fix for an already overstretched and saturated environment? We’re in insurance, there is no quick fix,” Warner told Insurance Business.
“Insurance is profitable when we care about the future and not just lining pockets with profits now.”
Warner said that while brokers are critical to the value chain of insurance, the value chain itself may need further examination.
“While Nelson was specifically targeting brokers who place reinsurance business for their clients or insurers directly, the entire value and supply chain needs to be looked at,” Warner continued.
“While I am sure Nelson and others in the industry are looking internally at their own operations to reduce costs, I believe those in the industry need to look and talk about this from every angle: internally, externally at competition and market conditions, look local and global.”
Warner stressed that it will be key in future for brokers to be able to explain their value proposition to both clients and insurers as a way to build on their existing place in the market.
With much being made of the impact insurtech and an increasing push towards digital channels could have on the intermediary section of the insurance market, Warner said that brokers are here to stay.
“I don’t see the role of the broker going away anytime soon,” Warner continued.
“If anything, brokers have an opportunity to prove their purpose and meaning to clients and insurers/re-insurers alike.
“What I’d encourage the industry to do is look inward and ask ourselves, our businesses, our teams, our clients the same question: how can we deliver more value?
“I’m speaking from every perspective, not just as a broker. Focusing on a sustainable and profitable future should be driving brokers and insurers/re-insurers to work together, instead of in silo, on a solution.”
Cut broker commissions – Lloyd’s chairman
Lloyd’s appoints Asia-Pac regional manager