Brokers warned their ‘professional credibility is at risk’

Brokers warned their ‘professional credibility is at risk’ | Insurance Business Australia

Brokers warned their ‘professional credibility is at risk’
A “crisis of market share” is causing a panic in the broking industry that could put the professional credibility of the broking industry at risk, according to Steve Ball, chairman of JLT.

Speaking at the ANZIIF NSW Annual General Insurance Breakfast in Sydney yesterday, Ball warned the broking community that the regrettable panic within the industry could lead to a loss of professional credibility.

In a wide-ranging discussion about pricing within the industry, Ball noted that as consumers become more focused on price, the value of broking advice will come under more intense scrutiny.

“The broking profession at the present time is going through a crisis of market share.

“Our professional credibility is at risk. The value of our professional input is likely to be under greater scrutiny. The cheaper and more ridiculous we get with our fees the less serious people will take the value of our services.”

Ball called fees a “measure of the value of your worth,” and warned that brokers who cut costs too much risk belittling the “many other things that our profession should be highly regarded for.”

The discussion of pricing highlighted the soft-market of insurance at the moment and Richard Enthoven, CEO of The Hollard Insurance Company, saw consumers as the winners in the short-term.

“Clearly, consumers of insurance are benefitting in the short-term from reductions in prices but my personal sense is that most consumers and particularly business consumers, the thing they like least about our pricing methodology is the volatility and I think most small business customers would actually prefer not to be subject to the whims of the cycle and to experience small, measurable increases as opposed to reductions and then increases.

The discussion shifted to the debate surrounding Far North Queensland with Donna Walker, executive general manager of broker business commercial insurance at CGU, highlighting the need for prevention as well as cure.

“I think we need to change the question a little bit to be not about the price and more about how do we understand and mitigate the risk, how do we put more focus on prevention rather than just pulling the price lever.

“I think mitigation and understanding risk and prevention is such a critical factor.”

Ball called upon government to use regulatory bodies to create “an abridged version of the regulatory framework for the new operators [UFIs].”

“That wouldn’t be particularly difficult and it certainly would be a way to sustain new entrants to the markets, insurers may not like that but maybe this market does need some new entrants, and maybe the barrier to entry lies within the APRA regulatory system."

Enthoven noted that he couldn’t see many brokers placing business with a company that doesn’t have the financial capacity to pay out a claim but noted that the logistics of UFI’s entering the market in North Queensland and across Australia could have “tremendous social consequences.”

“What worries me is not the financial capacity; it is the physical wherewithal, the boots on the ground.

“The Brisbane hailstorm last week is a great reminder that when things go wrong, we are talking thousands and thousands of claims and the industry has armies of people right now in Brisbane dealing with people’s problems.

“If we allow unauthorised insurers to come in, it’s actually going to be fine on a day-to-day basis potentially, but when something really goes wrong and communities are devastated, they are just simply not going to have the boots on the ground to deal with it and that is going to cause an enormous social problem.

“I urge everybody in the debate to bring the debate back to what is in the communities’ interest.”