Are brokers doing enough to close the protection gap?

Are brokers doing enough to close the protection gap? | Insurance Business

Are brokers doing enough to close the protection gap?

The insurance protection gap is being pulled into the spotlight once again after the recent bushfires in New South Wales and Victoria highlighted the pervasiveness of the problem.

According to preliminary reports, around 10% of those impacted by the fires have no insurance at all and, of the 90% who are insured, around half are underinsured.

The figures are by no means unusual – a recent report by Aon found that, in 2017, 56% of Australian losses related to natural disasters were uninsured.  

Marcus Vaughan, managing principal of growth strategies at Aon Global Risk Consulting, said both brokers and the wider insurance industry have a role to play in closing the gap.

“I think there is more we can do as an industry to really understand what the risks are, what the threat landscape to a particular business is, what risks they’re exposed to, if they have their numbers right, if they’re conducting valuations and if they’re even managing their risks,” said Vaughan.

While Vaughan points to Australia’s ‘she’ll be right’ attitude as the reason behind some underinsurance, he also says there are plenty of astute consumers who remain inadequately covered.

“You’ve got prudent business people who are just not as educated as they probably need to be given all of the other priorities they have in terms of growing their business and keeping their business running,” he says. “There’s a real lack of education around the intricacies that come with insurance, including getting their declared values right for both property and business interruptions.”

The most effective way to improve education, he says, is for brokers to spend more time with clients and really challenge them to see what could happen in a worst case scenario.

“It comes down to being professionally assertive with the experience we have around the impact of having insurance versus not having insurance or having the wrong level or type of insurance,” he says.

“It’s about sitting down with clients and having those ‘what if?” discussions around losing the life blood of a business, having those conversations with clients that aren’t always the easy conversations, challenging clients in terms of the decisions they’re making around insurance and the impact of those decisions, should a catastrophe or a significant event take place.”

 

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