Has the insurance broker become an endangered species?
Peter Olyott, Managing Director, Indwe Risk Services (Pty) Ltd
‘Cut out the middleman!’
‘Save on broker commissions!’
‘Personal insurance is becoming increasingly commoditised’
‘It’s all about price!’
No matter how true or accurate, if you repeat something often enough it is believed, particularly in the public domain. Within the insurance industry, we have reached a stage where even brokers and other intermediaries are starting to make these statements.
Should I feel wronged when my contemporaries make these statements? If what they’re saying is true, surely I have to conclude, and accept, that my brokerage days are numbered? Yet the insurance intermediary business is still going strong!
The big question to ask is if there is still a role for the broker today and in the future? Furthermore, if there is - what is it?
A good place to start such an investigation is by looking at risk.
Either as businesses or individuals, we face a broad spectrum of risks. These vary in their level of complexity and are far greater in number than they were ten or even twenty years ago. In addition to this, despite all our technology and labour-saving strategies, we are all living with increasingly tight pressures on our time. The average individual needs more than just a cursory review of their car, home, and health insurance. It doesn’t matter what the risk relates to - a comprehensive risk profile evaluation, followed by professional advice and the ability to integrate modern solutions to modern problems is what is required.
This need for modernity is clearly highlighted when looking at products such as motor insurance. The vehicles we drive today are almost more computer than car, yet we still insist on selling products which are very similar to those from 20 years ago.
A lack of insurance advice leaves individuals exposed
The commoditisation of personal insurance (perceived, or otherwise) is something else which needs to be addressed. One way to prevent an almost total lack of meaningful differentiation between products, is to acknowledge that risk is becoming increasingly complex. Even a really good insurance product is only likely to protect us against 10% to 20% of the total risks we face, and that is with the assumption that it is relevant to our individual lifestyle and risk profile.
All too often, people are not given a balanced, objective and encompassing view of the risk exposures they face. They have insured their watch, the ring that has been in the family for generations, along with their cell phone – believing it to be the responsible thing to do.
Yet, due to lack of advice, they leave themselves completely exposed to the significant, negative financial impact that can be caused by an accident or illness.
Business insurance is no longer a ‘one size fits all’
Turning our attention to business owners: protagonists advocating direct insurance will have them believe that the majority of the potential risk they face, can be sufficiently guarded against with income protection and an off-the-shelf legal liability policy. These products are supposed to sufficiently guard against the majority of the potential risk they face. When you consider that the complexity of legal liability has increased almost infinitely, since 1996, this simplistic and ‘one-size-fits-all’ attitude is grossly insufficient and irresponsible. In addition, few clients are aware that traditional insurance risks generally accounts for less than 20% of the threats faced by organisations.
Professional risk and insurance advisors need to understand why people purchase insurance. It’s not because a policy covers a wide range of risk, comes with extra benefits, and has a cheap premium. People buy insurance to provide financial restitution when an unexpected event results in loss. They are also paying for a ‘helping hand’ which will assist them with putting their life, or business, back together again as quickly and painlessly as possible.
Keeping insurance simple and up to date
On examination, there is clearly still a need for professional risk and insurance advisors to service both personal and business insurance sectors. Complex risk exposures are not going to become less so, and customers require simple, cost-effective, and modern insurance solutions. To ensure we as brokers meet these needs, we must embrace new technology and distribution channels and dramatically increase our levels of knowledge and expertise.
Brokers do not need to be consigned to the history books, or the insurance industry disintermediated.
The question is not whether brokers still have a role to play, rather: which of them will recognise the increasingly complex and ever-changing demands of modern insurance customers and provide a service that meets those demands?
Those who do, will always have a valuable role to play and can be assured of their survival in today’s world, and in the future.
About Indwe Risk Services (Pty) Ltd
Indwe Risk Services first came into existence in 2006, the product of a merger between Thebe Risk Services and Prestasi Brokers, both of which had a formidable history in insurance.
The company’s excellent service, innovative products and timeless values are borne from decades of experience garnered by South Africa's insurance leaders and trailblazers. Indwe is an independent broker and deals with all registered and approved insurers in South Africa.
The company has some of the most experienced and respected brokers in the market. Their expertise ranges from pioneering solutions in personal lines insurance and innovation in commercial insurance solutions through to creative and effective problem solving for the larger and more complex businesses.