How can insurance brokers remain relevant in the face of growing online distribution channels?
Peter Harmer One of the greatest assets of an effective insurance broker is their ability to assist customers in not only understanding their risks but also providing the right risk management advice and product solutions to meet their individual needs. These insights are drawn from a deep understanding of the changing environment their clients operate in. For example, understanding how changes in technology will change a customer’s risk profile. Risk and business complexity are only increasing, and therefore so does the value of these insights.
This depth of personal advice and expertise is of real value and something that customers can’t get from direct providers – this will help keep the role of a broker relevant.
What political pressures are facing insurers, and what could the upcoming election mean for them?
PH CGU supports well-considered policies and effective regulations that bring benefits to both insurers and consumers. We’ve had a constructive and open dialogue with the current federal government over the past five years or so, during a particularly challenging time for the insurance sector. More recently, we’ve been engaging closely with the federal government on possible ways to make insurance as affordable and accessible as possible. This is, in turn, closely linked to how communities can better prepare for natural peril events. Our work will continue, regardless of the results of the next federal election. We look forward to working with the government of the day to address these important challenges.
What does CGU see as the biggest growth area for insurance?
PH At CGU, we are seeing a range of new social, technical, economic and environmental trends that will all have some impact on insurance in the medium to long term, and provide opportunities for growth. As the world around us changes, the risks our customers face will also evolve and change, as will the profile of our customers.
For example, the large ageing Baby Boomer demographic has created growth in health services and aged care facilities. This is resulting in opportunities across a range of insurance products including professional indemnity, liability and property. Other industries where we expect growth opportunities include professional services, communications and media, and infrastructure.
We are also seeing changes in environmental trends, with increasing exposure of natural perils, resulting in a rise of more sophisticated risk models and risk transfer options to address the increasing severity and frequency of catastrophic events.
While the ongoing evolution of technology will create new and emerging risks, such as identity theft, it could also lead to opportunities for product development in the insurance industry.
What can brokers do now to capitalise on areas of insurance that may be growing in popularity with consumers?
PH Building specialist knowledge and providing exceptional customer service are two key areas brokers can focus on to ensure they are ready for new opportunities.
Brokers recognise the need to invest in their own development so they can continue learning about emerging opportunities and build their knowledge about key industries. This means keeping informed of political, environmental, social and technological trends. CGU’s business development managers are a great resource for brokers looking to access customer insights and information in order to take advantage of growth areas.
With changing customer expectations, we are always looking for opportunities to work with our brokers to think about the ever-increasing customer requirements. The more brokers provide superior customer service, the stronger the relationship and the more information the customer will share. This information puts the broker in a better position to identify opportunities for their customers and ensure they provide the best advice.
With natural disasters becoming more prevalent leading to rising claims, what can insurers do to keep premiums affordable while still protecting their margins?
PH Addressing affordability requires a strategic approach by the insurance industry, government and the broader community. Insurers need to accurately price for the events we cover. But to do so, we need adequate risk mapping, planning regulations, building standards and mitigation works that reduce risk and develop a greater community awareness of the risks. We also need to work harder at ensuring the community understands the value of insurance.
As you are aware, CGU is into its second year of implementing a new operating model that will improve our customer service and build efficiencies – with obvious spin offs for cost management and our margin. We are seeking to minimise premium increases by implementing new, more efficient systems and processes to reduce the costs of managing policies and claims. We are also working with product suppliers to keep their costs to a minimum.
In what area are Australians/SMEs least adequately insured, and what can brokers do to communicate this risk to clients?
PH Australia is one of the most under-insured countries in the developed world. While affordability may be a factor, the root cause of the problem is deeper. Last year, CGU surveyed nearly 500 Australian small businesses and found that:
- One in seven SMEs think that they may be underinsured
- One in 10 SMEs claim they don’t have any business interruption insurance
- More than a quarter of SMEs surveyed believed their business would not survive if they had to close their doors for three months.
The research also showed that business owners didn’t understand that the recovery time after an insured event can be lengthy, and without the right cover businesses can incur significant losses and financial costs.
Helping a business owner understand the risks they face needs to remain a key priority for both brokers and insurers. We believe one of the key education messages for business owners is to explain the purpose of Business Interruption (BI) insurance. Many people don’t know that BI will help pay ongoing costs and protect profit margins until the business is up and running again following an insured event and, of course, that BI can also protect customers from loss of income for an insured incident that happens to another business or partner.
What technologies should brokers be embracing to ensure they’re effectively communicating to clients?
PH The challenge for all of us is that customers are utilising more than just one channel to research, communicate and complete a transaction. Increased access to technology means customers are doing more research online before they pick up the phone to talk to a broker; and they are often more informed at the point they talk to a broker.
Completing a sales transaction now involves communicating with customers online, by phone as well as through personal and professional networks. So, it’s important that brokers find ways to engage with customers through a range of different channels.
Brokers need to be aware of the complete customer experience they provide. This means they need to understand how the various technologies they use operate and work together. This will enable brokers to understand what information the customer requires, as well as when and how it should be delivered to the customer, so they know they are delivering the required customer experience.
It is also critical for brokers to understand the role and purpose of social and digital media such as Facebook, and the role that it plays in business. These communication tools develop and change quickly, and can do damage if they aren’t used in a way that supports business objectives.
IAG recently stated it is opposed to incorporating unfair contract terms into general insurance, whereas brokers are more positive. Where do you stand?
PH The Insurance Contracts Acthas been in effect for many years and has stood the test of time in protecting consumer interests. The Act also clearly outlines the duties and rights of both parties and arguably offers better consumer protections than any other industry. The insurance industry has also adopted further consumer protection measures such as the General Insurance Code of Practice which give consumers ready access to information and dispute resolution measures. CGU is a signatory to and a strong supporter of the Insurance Council of Australia’s industry codes.
The insurance contract itself is a relationship of utmost good faith which is a fiduciary duty that CGU takes very seriously. Insurance is based on a relationship of trust and confidence and CGU values that relationship very highly. We believe the current Acts and Codes provide everyone in the industry appropriate guidance and protection.
Some insurers are making job cuts, which has concerned brokers who fear they are going to lose their main point of contact. Does CGU have any plans to make cuts, or is it hiring?
PH Last year, we made changes to improve the way we serviced our brokers and agents, to streamline our processes, remove duplication and become more efficient. These changes, which had an impact on a number of roles, allowed us to free up the time of our business development managers (BDMs) so they could focus on building mutually beneficial partnerships with our brokers. Our BDMs are now sharing market knowledge and information with our brokers and helping them to identify local opportunities for growth.
Generally, brokers have welcomed the changes and have been supportive through the transition process. We are now receiving feedback that they are experiencing improved and more efficient service.
We are comfortable with our current business development model and are continuing to invest heavily in our people, both in leadership and technical skills so they can strengthen our partnerships.