Insurance Brokers: Read the signs and act…or risk being left behind!


Extracts taken from the June 2009 edition

OK, so YOU know where you want the business to go and, hopefully, have a clear idea of HOW to get there but that is only the start of the process.

Even in large organisations, the latter is not necessarily true! Many brokers who have started down this path have realised very early on that quantifying how success will look is easy. Plotting a course can be relatively straightforward too. Identifying and developing the opportunities should not be difficult for experienced brokers. From my own experience, that is where the trouble starts…

Research by Buck Consultants

Research carried out by Buck Consultants has revealed that business leaders have unrealistic expectations about the success of organisational change in the current climate. Sixty-four percent of respondents at director level perceived changes over the last 12 months to be a success, compared to just 45% of those at staff level. Interesting, where leaders simply ‘told’ staff about restructuring plans, they achieved a 63% rate of success. However, those who sought employee feedback and engaged in two-way communication saw the rate of success jump to 96%.

…significant growth requires change and change is something that, unless handled carefully, can (not only) unsettle staff – particularly in such a “difficult” climate – but, in more extreme cases, have the opposite of the originally desired effect.

Discussing, sharing and establishing corporate goals with employees aids their understanding of the business. Staff inclusion and contribution to the company’s strategic plans can be as vital as is their day-to-day participation in the business. In addition, an understanding of what the company aims to achieve can help “make sense” of their own role, personal plans, Key Performance indicators, etc.

Insurance is a pretty mature industry whose leaders are accountable to vast numbers of stakeholders. Why then do we keep on making the same old mistakes?

Defaqto report

Insurers must decide whether to write for profit or market share, Defaqto has warned in its report: Commercial SME Insurance 2009: It’s Tough Out There. Mike Powell, principal consultant for general insurance at Defaqto, said: “Insurers are also under pressure to keep their existing business, as there is a need to provide more competitive premiums, or they face the prospect of seeing this revenue walk off their books. Those insurers that write most of their business through the broker market will be more likely to suffer compared with the direct market.”

Both insurers and brokers are constantly striving to “steal a march” on the competition. In so doing we participate (in) and perpetuate a market cycle that makes it notoriously difficult for both to accurately forecast for 3, 5 or more years.

No wonder 3 KEY elements are frequently overlooked: Strategy – Stability – Sustainability

You may have noticed that I have omitted to specifically mention clients and policyholders. Pretty strange when, without them and the premiums they pay, any other considerations are rendered academic. That was no oversight on my part. It is, merely, an attempt to illustrate the lack of prominence that a policyholders’ cover and service needs figure in the financial modelling of some of the most prominent, aggressive and acquisitive insurers and major brokers in UK.

I should qualify that last statement by acknowledging that pricing and service “promises” do figure VERY prominently…in expensive marketing campaigns! I can’t help but wonder, “IF marketing budgets were diverted into recruitment and/or training would that mean they would be better able to deliver on these promises?” I hope I have already (above) established how difficult it is for an organisation to change direction. To do so, requires [amongst other things] staff and IT alignment to a worthwhile strategy. The larger an organisation the more difficult the task. I have tended to visualise this scenario with the insurer as a damaged Ocean-going tanker whose Officers are determined to stick to their original course inspite of the concerns of their owners and deep misgivings of the crew (rather than admit to stakeholders that they are in the “wrong ocean”). Determined to navigate the “stormy waters” (between profit and turnover). Even though they don’t know how bad the storm could get the Officers draw comfort from the knowledge that their personal stock will rise IF their mission is successful. Sinking is extremely unlikely and that casualties or anything that has to be ditched to save the vessel or its cargo will come from the crew who are deemed “expendable”.

In a society where consumers are, understandably, less trusting of institutions (even Governments!) and sceptical of marketing messages, VALUE is enjoying somewhat of a renaissance. CONSUMERS ARE MORE LIKELY TO BUY ON VALUE RATHER THAN BE SOLD TO ON PRICE.

Trust me, I’m an insurance broker

Simon Taylor, sales and marketing director at Primary General

Regular readers of the insurance press cannot fail to have noticed the countless articles on issues facing small and medium-sized enterprises (SME) and how best to secure their business. With significant legislative changes in employment law and health & safety practices, it is not surprising that these have featured heavily. Given all the ‘noise’, how good are we as an industry at catering to SME needs? Do we offer real risk management solutions or are we just pedalling the same old products and services?

The Facts

In 2007/8, 2.1 million people were suffering from an illness related to their past or present employment. There were 229 work-related deaths and 299,000 reportable injuries, with all of this culminating in 34 million lost working days. Much of this lost production is uninsurable and so has real financial consequences for SME’s.

During the same timeframe, there were nearly 300,000 reported cases accepted for employment tribunals – a 50% increase over the previous two years.

We have also seen significant regulation enacted over the past few years, most notably the Health & Safety (Offences) Act 2008, the Corporate Manslaughter Act and amendments to the Sex Discrimination Act.

What SME’s say

In the BERR Annual Small Business Survey 2007/8, the third greatest obstacle to business success was stated as regulation, with only the economy and tax ranking higher. Of these regulations the top two issues were unsurprisingly health and safety, and employment.

So who do SME’s turn to for advice to mitigate these obstacles and risks? Accountants, trade bodies, consultants, solicitors and business support organisations are the top five. But insurance organisations do not feature.

What is the solution?

Firstly, and most importantly, there is a great opportunity for brokers to demonstrate real business value.

The solutions are varied but all start with the broker keeping up to date with the changes in order to make their customers aware. Various insurer services can help in this respect, so make sure you seek these out and guarantee the same service is available to your clients, with easily accessible information.

Including legal expenses is also a sensible approach to take. However, it is extremely important to remember that unless the appropriate due processes have been followed then the policy could fail to respond. So ensure that advice helplines and websites are incorporated as part of the service.

Summary

As has frequently been reported, a small business is five times more likely to face an employment tribunal than to submit a claim following fire. There is real business benefit in avoiding risk rather than covering the financial consequences of its outcome. Those brokers that win on this basis really do start to become a trusted adviser to their clients.

Contemplating change? Concerned about the current market or changing landscape? Want a sounding-board or some basic pointers from someone who has spent almost 10 years: structuring change; building & managing relationships; negotiating; recruiting senior brokers; assessing technology & processes; designing products, workflows & distribution networks; creating service standards; coaching; researching new media tools to prepare for the future. Give me a call for an informal chat – David G Wilson (m) 07919 917150

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