Brokers should consider the total cost of risk, beyond insurance coverage, to help clients understand the challenges facing their business and ward off direct competition, an expert has said.
Calling brokers the “front line ambassadors” for the industry,
Mervyn Rea, head of risk engineering at
Zurich Australia and New Zealand, told the 2017
NIBA Convention that brokers that this is an area in which they can get ahead of online offerings.
“In our industry we seem to get very focused and hung up on just talking about insurance but I think it is about time that we, or you as brokers, engage with customers, start talking about total risk management and total cost of risk,” Rea said. “That is the kind of information you can’t get when you go direct online.”
Search and compare insurance product listings for Brokers from specialty market providers here
Rea cited a study by the International Loss Control Institute that found that for every dollar of an insurance claim, there is between $8 and $53 of uninsurable losses and costs. Rea said even using a more conservative figure of a dollar of claim versus $3 of uninsurable losses gives clients an idea of the true cost of risk.
“You should also be pointing out that insurance is only a third of the answer; there are three times more compelling reasons to risk manage a business,” Rea said.
Using motor fleet claims as an example, Rea said that businesses face a host of challenges from any one claim. A vehicle can be taken off the road, drivers can be injured, products damaged, and productivity impacted which can see costs spiral. Brokers and their clients should look to analyse data on past claims in a bid to understand and implement changes that can reduce these impacts for the business in the event of a future loss.
In addition, Rea said that by engaging with clients on risk issues outside of the scope of insurance, brokers can provide a service that clients will rank alongside their accountants, lawyers and other business professionals.
“When we talk about known, quantifiable, insurable risks, they are just the tip of the iceberg,” Rea said. “But it wasn’t the tip of the iceberg that sank the Titanic, it was the bit underneath. It is unseen, hidden, unknown and it is actually getting bigger not smaller.”
Related stories:
How to best protect a client from a cyclone
Uncertainty ahead for financial lines market
