Gone are the days when brokers could throw an asset schedule, set of values and a claims history an insurer’s way and expect to get the best available terms from the market.
Rather, says Marsh’s Steven Hills, a speaker at ANZIIF’s 2019 Let’s Get Technical Seminar, they must firstly understand their customers’ risk profile and be across the technical details of the full underwriting data insurers now crave.
TOUGH INSURANCE MARKET
Hills, who is the organisation’s South Island Regional Manager based in Christchurch, says buying insurance in New Zealand is not going to get any easier with insurer appetites, capacity, pricing and coverage issues set to be regular challenges for many years to come.
‘Secondly, he says, it will be critical to have some level of focus on global risks and understand how such risks impact clients locally.
‘As an industry, we have made great strides post-earthquake but we do still default to product. We need to consistently take a risk approach with our clients,’ he says, adding that it won’t be enough for brokers to just concentrate on the risks they can insure.
‘There are multifaceted risks impacting our clients, such as environmental, economic, societal, economic and geopolitical risks and many of these can’t be insured.’
EASIER SAID THAN DONE
Hills says it’s easier said than done, but that if he was a young broker again, he’d embrace global risk and get his head around what it all really means in order to give clients better advice in this space.
‘For example, all of a sudden, we have to be aware that climate change as well as rising sea levels compounded by extreme weather events and lack of infrastructure investment are starting to impact our clients’ ability to buy insurance in New Zealand,’ he says.
‘We need to help our clients understand how they can help themselves and that insurance is not always the only answer.’
THE BROKING CHALLENGE
Having spent the first 11 years of his career with State Insurance, a business division of IAG, Steven Hills received an offer to work with a local broker in Christchurch in the mid-1990s.
‘Ultimately, they wanted me to become their branch manager,’ Hills tells.
‘But I had to prove I could be a broker first.
‘I didn’t really know how I would go, but I haven’t regretted it. Subsequently, I worked for Willis Towers Watson and for the last three and a half years, I’ve been with Marsh.’
PULLING TOGETHER IN CRISIS
When the earthquakes of 2010-11 hit, Hills was with Willis Towers Watson.
‘We had employees who were personally impacted by the earthquakes and those same employees had clients who were impacted,’ he recalls.
‘Everybody who lived in Christchurch or the greater Canterbury region had some level of damage at home so we all had to deal with many personal and business challenges.’
Despite the tragic events, Hills says it was satisfying to be part of a team that pulled together to help support colleagues as well as taking responsibility for clients.
‘That’s what we signed up for when we joined the insurance game and now we had to deliver on that commitment’ he says
‘Getting through what was probably the biggest natural disaster New Zealand has ever experienced was an incredible feat.
‘It was hard work — blood, sweat and tears, and at times we wanted to give up. But we had a commitment to being there for our clients in their hour of need.’
That said, Hills says that in many ways, his time at Marsh has been the most satisfying part of his career to date.
‘I’ve had the opportunity to prioritise leadership in the Christchurch branch and the wider South Island Marsh business, actively demonstrating my belief in my colleagues and helping them believe in themselves,’ he enthuses.
‘This focus on our colleagues has led to an enhanced focus on the client and allowed us to deliver the best possible service and advice.
‘It has also provided career development and increased colleague engagement.’
Hills adds that nothing is ever achieved without hard work, and some luck, including strong peer support and people that will believe in your vision and come on the journey with you.
THINK GLOBAL, ACT LOCAL
At the 2019 Let’s Get Technical Seminar, Hills aims to impart the importance of gaining an awareness of how global risks and how these may impact clients at a local level.
‘It’s naive of brokers to think our clients in New Zealand are too far away to be impacted by the likes of geopolitical, societal, economic and technological risks,’ he says.
‘Brokers should take time to familiarise themselves with the global risks report by the World Economic Forum, which ranks risks according to likelihood and consequence, he says.
‘The report also looks at the similarities between countries and how risks interconnect globally.’
THE RELEVANT RISKS
By way of example, Hills points to the China trade crisis with the US.
‘If we think this kind of political and economic predicament isn’t relevant to our clients in New Zealand, we’re foolish, because there will be impacts globally across many economies and geographies.’
Another example is the impact of rising sea levels on coastal cities and ports all over the world as a result of climate change.
‘Our clients are doing business globally and locally in regions subject to this risk, which extends to their supply chains,’ he says.
Hills asserts that it’s not necessarily the role of brokers to decide whether a risk is relevant or not.
‘Rather our role is to inform clients of risks that exist to their business and give advice on managing those risks and the risk transfer options available.
‘The actions our clients take after receiving risk advice is up to them, but we need to get away from selling insurance products to selling risk, of which insurance is simply a by-product.’
Hills believes there is clear evidence that clients recognise the value brokers add to ‘what seems like the dark arts of insurance’ for clients.
‘We help them navigate what can be tricky waters by taking away some of the uncertainty that sits in their business every day.’
He says the earthquakes of 2010-11 forced clients to better understand what their policies did and didn’t cover and ‘reinsurance was well-known to represent increased premiums’.
‘Equally, when insurance markets hardened, our clients had a greater reliance on us to help them manage increased prices while still securing the correct levels of coverage required.
‘Clients still rely on brokers to help them understand what insurance they do or don’t need to buy and how they can mitigate cost by holding risk.’
A MARKET CHANGED FOREVER
Hills adds that prior to the Christchurch events, earthquake risk wasn’t a significant focus outside Wellington and much of the industry had no real understanding of liquefaction.
‘As a result, the market was quite soft and market conditions made life easier,’ Hills relates.
‘In the “good old days”, insurers were able to discount with half the information they now require.
‘Now it’s a new ball game — it’s all changed. Authority levels held by local insurers are much lower than they were.
‘Compliance and regulation play a major role in the lives of our insurers and often offshore sign-off is required for harder-to-place risks, regardless of the size of a business.’
'Brokers that can embrace change with agility and speed for the challenges ahead are those that will ultimately be successful while those that choose to remember the “days of old” will ultimately be left behind.’
GETTING TECHNICAL WITH DATA
In that sense, Hills points to the critical nature of analytics and how this can inform an insurer’s understanding of a client’s risk profile.
‘Information is king for insurers, as they have to model their capacity and deploy it where it makes economic sense,’ he says.
‘Our job as brokers is to be technical enough to assists the insurer to model and ultimately make decisions about capacity and pricing.’
Steven Hills will elaborate at the Let's Get Technical Seminar.