Intermediaries who have depended on purely providing the cheapest insurance quotes are now competing with not only apps and low-cost telephonic and digital interaction, but also intermediaries who focus on the advice relationship, which adds more value for clients.
“Research shows that value remains the most important buying consideration for clients,” says Andrew Coutts, CEO of Santam Broker Solutions. “Price-focused intermediaries therefore need to move away from solely the price element to the risk-and-advice element.”
Risky business
Coutts hyphenates “risk-and-advice” because, as he sees it, exploring risks and providing advice are inseparable. “In the current environment, intermediaries need to play a more meaningful role in a client’s insurance decision-making – for many reasons. Businesses, for example, are exposed to a number of risks that didn’t exist decades ago, many of which are non-physical. Cyberattacks, loadshedding and strikes interrupt business activities, so our clients need to know with certainty whether they will have cover for such ‘unforeseen’ events.
“Obviously, risk of non-physical, or non-damage extensions is growing, and how we as insurers respond is important. It’s not sustainable to sell existing products for ever-increasing prices, or to offer the same products with ever-reducing risk cover. There has to be a shift somewhere, and that shift will increasingly manifest as prevention risk management gains traction – in other words, how risk is managed and reduced over time.”
This is being enacted with digital systems and connected devices through the internet that have evolved to prevent risk at the source – for example, digital warnings of required maintenance and alerts to potential hazards, which minimise the danger of an incident that would normally result in a claim. Insurers can, in effect, reward users of such technology with reductions in premiums.
Enter the intermediary
The intermediary’s role here is clear. “It’s all about finding the point of value for the client,” says Coutts. “Intermediaries have to identify, and communicate to the client, the interplay between commodity and risk.”
Coutts provides a simple example: “A one-car insurance policy is standard, but what choices do you have if you have three cars on your policy? Do they have the same or different drivers? How and where are they housed? What are they used for? Etc. Each of these aspects is exposed to variable risks. The client needs to know and understand the options, which brings us back to risk-and-advice as a single concept.”
Aggregators (companies that acquire a selection of quotes from different insurance brands for customers) neither explore risks, nor provide advice. The algorithms aggregators use are based on generic underwriting, which is usually so broad-based that customers may be frustrated by rejected claims. This is because the policies are not bespoke, nor is there an initial understanding of what is not covered. Similarly, direct insurers driving their price-based offerings do not address the risks their policies do not cover; policyholders are left to work this out for themselves.
This adds further credibility to the role of the intermediary, who applies the risk-and-advice principle – the intermediary who asks the questions a client has not considered, who presents possible scenarios, and explains that, should a specific event occur, cover under a standard policy does not necessarily translate into a guaranteed claim. And should a claim be disputed, this type of intermediary will be best positioned to defend their client.
“An intermediary is in effect an advocate who fights insurance battles on behalf of their clients. They work 100% to retain a relationship with their clients, which is where the intermediary’s true value lies,” says Coutts.
He says the modern-day brokerage uses the digital evolution to augment their value, and works to enhance face-to-face client engagement. “They consistently manage every policy based on market changes and potential risk influencers. They encourage tailor-made solutions, because they view every client as unique.
“When we talk about ‘insurance good and proper’ at Santam, we are really talking about peace of mind for our clients. It’s never been about being the cheapest, but about the ability to deliver a value chain of risk-and-advice, and advocacy. And we do this through our intermediaries.”