How to communicate broker value

Vol 47: Issue 1 | April 2024

Technological developments such as comparison tools, chatbots and the Internet of Things have made it easier than ever for consumers to research, manage and personalise their insurance cover. Yet digital transformation in the insurance sector has so far failed to reduce broker usage says Robert Kelly, managing director and CEO of Steadfast. 

“Between June 1999 and FY23, the number of individual house and car policies that we sold rose from 4 per cent to 14 per cent of total sales,” he says. “At a time when everybody said the internet would take over and that advice would no longer be required, that hasn’t been the case. In fact, it’s been quite the reverse.”

Philip Kewin, outgoing CEO of Australia’s National Insurance Brokers Association (NIBA), agrees, saying brokers have an important role to play in the insurance ecosystem. 

“As much as technology is fantastic, people are realising they need to get the most value from their premiums, which is something a broker can facilitate,” he says.

“Technology has certainly made it easier to research the different insurance products out there, but I feel this can sometimes complicate matters — giving consumers so much choice that they end up suffering paralysis by analysis. Likewise, insurtech is transforming the claims process, yet managing a claim still requires effort at what is likely a stressful time. With so much going on in the world, brokers offer an invaluable service, helping us mitigate risk, understand how our cover works and avoid (or deal with) unwelcome events.”

It’s a similar story in New Zealand, where clients continue to seek advice from brokers, particularly as changing exposures amplify the pressure to be correctly insured, says Travis Atkinson, general manager of operations at Insurance Advisernet New Zealand. 

“We’ve seen from the volatility of recent years how much clients have relied on their brokers to guide them through challenging circumstances, whether that be relating to economic uncertainty or when faced with loss situations,” he says. “Importantly, where a client is looking to expand and potentially take on more risk, the broker’s role to tailor advice and recommend the best solutions will continue to be valued.”

How to articulate broker value

Although sentiment towards brokers remains strong, with Vero’s SME Insurance Index 2023 revealing high rates of customer satisfaction, there is still opportunity to capture a larger segment of the market, particularly among the 62 per cent of direct buyers considering future broker use.

Sharing quality information with clients, such as risk management advice and new product offerings, is a simple way to communicate value throughout the year, not just at new business or renewal time, advises Atkinson. “Fantastic value continues to come where brokers have strong personal relationships with clients and underwriters,” he says.

In addition, Kewin recommends brokers declare their value proposition on their website or other marketing channels, outlining the benefits they bring as purveyors of professional advice, tailored risk management solutions and claims support. 

“You should articulate the value of what you do, not the products you’re dealing, because clients want to see what you will provide them,” he says.

This could include time and economic savings. Deloitte Access Economics research found brokers save clients an average of 11 hours in selecting and purchasing insurance, which translates to over A$230 million in value for business customers. 

Meanwhile, managing claims on a client’s behalf equates to an average of 2.5 hours saved, alongside the added benefits of alleviated stress and more timely and comprehensive outcomes.

“Brokers offer peace of mind,” says Kewin. “That’s a hard thing to put a value on: working with a professional who knows what sort of cover is important and that the insurance is going to deliver.” 

Communicating fees and commission

Economic and price factors continue to impact insurance-buying behaviour. According to the Vero report, price is increasingly cited as a reason for direct buyers not to use a broker, with 36 per cent claiming it would be more expensive.

The debate around broker commissions and transparency has likewise been an historic barrier to broker uptake.

However, the revised Insurance Brokers Code of Practice, which came into effect in Australia in November 2022, stipulates that brokers must provide retail clients with terms of engagement that disclose the remuneration they will earn — and organisations, including Steadfast, have created their own codes to encourage transparency with all clients. The result is that there’s now less ambiguity around how brokers are paid.

Similarly in New Zealand, the Code of Professional Conduct for Financial Advice Services, which came into force in March 2021, holds brokers to higher standards of accountability and transparency, which Atkinson says has “only strengthened their value proposition”.

Steer the conversation away from price

While many people may be concerned about the rising cost of insurance premiums, both Kelly and Kewin urge brokers to educate customers about the importance of finding the right cover, rather than focusing on cost. 

“We need to convince people that they should seek advice first, make a decision on what is the best-quality product for their needs, then seek the price for that particular policy or set of conditions,” says Kelly.

Kewin points to the case of people living in flood-prone areas, who — in the wake of recent catastrophic events — have found they aren’t adequately covered at the time of claim. This is where brokers could have delivered major value: helping people identify the full scope of their risk and ensuring they are protected, or at least understand the limitations of their cover.

“The thing not to say is, ‘I’m going to get you the cheapest premium’,” adds Kewin, “because price doesn’t guarantee the cover the client actually needs.”

Quantifying broker value

• Quality of advisory service: ranked as the number-one factor by clients when choosing insurance.
• Tailored risk-management solutions: 40 per cent of clients are under-insured or not insured at all, on average, before engaging a broker.
• Greater choice: the average Australian NIBA broker offers products across more than 10 different insurers.
• Time savings: using a broker saves each client an average of 11 hours, which equates to more than A$230 million in time savings for business customers.
• Claims support: having a broker’s support saves each client an average of 2.5 hours in the claims process, and 41 per cent of SME clients agree that it would otherwise have been a “much harder” process.
• Understanding and managing risks: brokers identified that 62 per cent of clients had limited understanding of their risks.

Source: Deloitte Access Economics, The economic value of insurance broking, National Insurance Brokers Association, September 2020

Leveraging disruption in Asia

Digital disruption has created exciting opportunities for brokers in Asia, says Neelay Patel, managing director and head of growth, Asia, at Aon. “Risk advisers and consultants are outpacing investment to transform their business processes,” he says. “Brokers are investing in artificial intelligence and automating processes that aim to help (re)insurer clients make better business decisions.”

Aon is investing heavily in areas where insurance and risk management innovation will be key for clients as they tackle exposures such as cybersecurity and data breach, failure to attract and retain the right talent, and climate risks. Patel says Aon Business Services, for example, “creates globally scaled operational and technology capabilities that allow us to deliver insights and connect subject matter experts with clients that enable them to be better informed and make better decisions that drive business performance”.

In Singapore specifically, customers from both private and public sectors are increasingly seeking the services of brokers, says Jenny Lim, CEO of Howden Singapore.

“In a highly competitive economy, clients are focusing resources on their core business and it’s widely recognised that partnering with the right brokers can help them to derisk more effectively and efficiently,” she says.

Lim believes most customers in Singapore see the value of brokers, especially when expanding their business regionally or globally.

“They will pay for broking services to get the right insurance protection for their business,” she says.

“A broker’s value proposition extends far beyond just the transactional aspect of understanding and securing the policies. Our experience and expertise in risk improvement and loss control, loss modelling, data analytics and other risk management advisory add tangible value that clients recognise and are willing to pay for, making us valuable partners in managing risk and protecting assets.”

In the Philippines, relationships likewise run deep between customers and intermediaries — especially with agents, says Raul Tan, CEO of Howden Philippines. “A broker’s role is to articulate and illustrate their value through diligence, expertise, practice and advice,” he says.

This requires brokers to wear many hats, starting with a clear understanding of client operations and their values. “Their values determine the resulting objectives and when price is of primacy, it is of urgency that we display the difference in our expertise vis-a-vis the competition,” he says. 

A calm approach that is methodical, practical and measurable gives brokers the ability to produce desired results on behalf of the client and the market in the vein of a long-term partnership.  

“Our value is illustrated through the transparency of policy design, premium objectives and earnings disclosure,” says Tan. “It is further enhanced through the management of expectations and process that augments their team structure with our addition as the insurance broker and expert.”

Read this article and all the other articles from the latest issue of the Journal e-magazine.

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