Across the industry debate has been raging about insurers enhancing and promoting their own direct distribution channels. But in a world where risks are becoming more complex and severe, is it really a good time to turn customers away from advice-led sales channels?
One of the big takeaways from the Royal Commission into Financial Services is that the onus is on financial institutions and their intermediaries to make sure that customers are in the right product, at the right time, at the right price. The idea of “buyer beware” or “read the fine print” no longer seems to fit with community expectations, irrespective of where the legal or regulatory
responsibility actually sits.
In this environment, the growing trend from general insurers to promote sales channels that place responsibility on the customer to do their own research seems a bit out of kilter.
I’m not suggesting that good customer outcomes can’t come from direct channels, I’m sure they do. But with the bar around duty-of-care to customers getting higher, it seems odd to promote a sales channel which de-emphasises the role of brokers in helping clients manage their risk.
Now more than ever, customers need a professional advisor to help them mitigate and manage risks in a world where adverse events are becoming more frequent and severe.
There’s a view that digital technology will inevitably move up the value chain and put pressure on the broker channel, including in the commercial insurance segment. It’s our view that digital technology will play an important role for brokers in the future, but it won’t displace the value that a human advisor can bring.
As anyone who has worked in the small-to-medium enterprise (SME) segment will tell you, no two small businesses are the same, and it is hard to see digital channels replicating the experience and advisory capabilities of brokers. The increased product choice that digital channels bring doesn’t necessarily make it easier for customers to choose what’s right for them.
However, digital technologies can definitely support brokers and enhance the way they do business.
For example, using technology to automate and simplify low-value tasks will help brokers spend more time with their clients giving advice. Hand-in-hand with a focus on advice is the ability to provide more specialist and bespoke solutions, and the increased premiums they attract over more commoditised products.
With the likelihood of continued close oversight and scrutiny of customer outcomes for the foreseeable future, and the riskier world we are now operating in, the stage is set for a golden era for brokers and their advice-led proposition.
What makes the broker channel attractive is the value brokers deliver in terms of really knowing their customers, bringing insights, and providing advice. As long as brokers continue to focus on the value they bring, they will be remain attractive to clients who value their advice and the confidence this delivers.
In terms of bringing more value to customers, the way brokers work with insurers is also worth looking at. The intermediated model of the future may be less about insurers working through brokers and more about brokers and insurers working together to bring the best solution to customers. Zurich has a global network of more than 1,300 risk engineers who can speak to the benefits to brokers and their clients of this model.
And it’s not like the world is becoming a less risky place.
A World Economic Forum survey of more than 12,000 executives, with Zurich and Marsh as strategic partners, found that nearly 60 per cent of respondents expected aggregate risks to increase in 2018. Just seven per cent predicted a reduction in risks. In Australia, energy price shocks, asset bubbles, cyber attacks and failure to adapt to climate change topped the list of executive worries. These are all issues that brokers will need to be mindful of as they advise their customers.
With the likelihood of continued close oversight and scrutiny of customer outcomes for the foreseeable future, and the riskier world we are now operating in, the stage is set for a golden era for brokers and their advice-led proposition. The key will be using technology so that more time is spent with customers, and working side-by-side with insurers to bring even more value and insight. Brokers who embrace these opportunities will have every reason to be confident about their continued relevance both now and in the future.