Focusing on price and commodotisation is threatening to destroy broking, according to one of the industry’s leading figures.
Speaking at the Steadfast Convention in Adelaide on Monday, LMI Group founder Professor Allan Manning says brokers must stop lamenting clients’ focus on price and instead educate them.
“There are a lot of brokers going out there saying ‘I’m the best. I can get you the cheapest price’,” he says.
“One of the problems for us, as an industry, is we’ve been focusing on price for so long we keep going to our customers and just talking about price, price, price.
“We forget that our clients don’t know what we know. They don’t know about risk mitigation, underinsurance, all those other things. They don’t know much about insurance at all. If they’re only focusing on the price, then you really can’t have that intelligent conversation with them about that issue of protection.”
With direct insurers able to offer cover at an average of 30% cheaper than intermediated offerings, Manning says brokers have no choice but to differentiate themselves if they wish to survive in the increasingly digital age.
“Fewer and fewer people are using a broker. We have taught them to buy their home and their car insurance online,” he says.
“We’re seeing more and more advertisements on television from the major insurers, offering business packs and professional indemnity direct.
“If we don’t show what our value proposition is, and price remains the sole determinant, we will not have a place in the future.”
He says brokers must start seeing themselves as the outsourced risk managers for their clients and prove the value they can offer.
“To move away from just selling on price, the salesperson’s got to see value, and I don’t believe in my heart that enough brokers really value their own position,” he says.
“If you’re only going and selling on price, then that’s all the client’s going to measure you on.
“If you go in start talk about protection, risk management, having a broad coverage, having all the exposures covered, then people will understand it and pay for it.
Manning says research by CGU and Steadfast shows that over the past year, just one in five property, business interruption or liability policies had any increase in sum insured. The research also found 60% of property clients had no business interruption insurance.
“That statistic broke my heart, I can tell you, because I’ve been pushing for years now the importance of doing annual reviews and getting the sums insured up, along with how important business interruption cover is,” Manning says
“If 60% of our clients don’t have it, then what sort of protection are we offering them?”