Every so often, clients throw their brokers a real curve ball. From Bitcoin companies needing D&O cover, to structural engineers with multi-million dollar claims, unusual or complex risks can really put a broker through their paces. But how can they best convince a risk-averse underwriter to help them save the day?
Like most, PSC Gordon Wilson Insurance Brokers Account Manager Steven Purser has come across his fair share of tricky risks, even once having to source insurance for an entire island off North Queensland. In this case, due to the high cyclone risk, Purser was unable to find competitive options within Australia, but was able to find cover through Lloyds.
Although covering difficult risks can be daunting, Purser says that it offers a great opportunity for a broker to prove their worth as a trusted adviser and partner to clients.
Engineering the outcome
“Difficult risk scenarios are a challenge and a learning experience,” he says. “Finding out more about a business, the unique exposures it faces and the appetite of the market is very valuable.
“While it might save time by lumping it into the ‘too hard’ category and passing on the opportunity entirely, finding a solution to these clients’ needs comes with a great sense of satisfaction.”
Purser has found that there are very few risks that the Australian market can’t accommodate, but that doesn’t mean there’s any room for complacency.
“If you want an underwriter to even consider a difficult risk, it helps to have as much information about it as possible upfront. Make sure you can answer all the underwriter’s questions so they can properly consider it” says Purser.
Finding out more about a business, the unique exposures it faces, and the appetite of the market is a very valuable experience for brokers.
“Once an official decline has been recorded it’s extremely hard to have it overturned. That’s why you need a comprehensive understanding of what you’re selling from the get-go”.
Earth Insurance’s Ben Attenborough often deals with multi-million dollar exposures in the engineering space. With so much potentially at stake, an assiduous approach to completing underwriter submissions is a prerequisite to successful outcomes.
But as well as knowing the client’s business inside out, he advocates paying extremely close attention to the state of the market and the risk appetites within it.
“To get the best result for the client, an insurance broker really needs to know who will underwrite the risk in the best way,” Attenborough explains. “This will always be a challenge because insurer’s risk appetites change, and it’s best to have an understanding of these changes as they develop.”
Snap happy in the NT
Tougher times ahead?
Chris Mackinnon is Lloyd’s General Representative for Australia. Prior to taking up the role last year he spent nearly three decades as a broker both in Australia and overseas. He too promotes the importance of brokers really getting to know their clients’ business exposures.
“The best thing a broker can do is be prepared. As an underwriter, you expect the broker to not only have a thorough understanding of the product, but also a complete understanding of their clients’ risks, and to be able to articulate those risks,” he says.
While the market may be receptive to difficult risks right now, Mackinnon urges caution – particularly to younger, or less experienced brokers.
“Many brokers have never had to trade in a hard market,” he says. “In the current soft market conditions they may have a tendency to undervalue the role of the underwriter, and put less effort into knowing the client’s business risk profile.
“At the same time, underwriters in a soft market can be keen to make the most of premium income opportunities. They may not necessarily ask the brokers the right questions, so neither party gets the best arrangement. That’s not good for the client. I wouldn’t say this sort of behavior is rife, but it does happen.”
To ensure brokers become fully versed in their clients’ business, Mackinnon says a holistic approach to education is required. As well as formal broker qualifications and training he advocates sending young brokers to spend a few days at the client’s place of business.
“Once you can see how a production process works, or the consequences of machinery breakdown, you’re in a much better position to advise the client, and to satisfy the underwriter,” he says. “The underwriter may even be able to modify their product to suit the needs outlined by the broker when all the information is to hand.”
Now for something completely different…
Computer says no…?
Insurance is still a relationships game and a broker’s ability to forge bonds with their underwriting cohorts is vital.
Shane Brady of Sear Insurance Brokers says a collaborative approach to finding risk solutions is the only way to ensure the best outcomes for all parties.
“It isn’t so much a case of ‘selling’ the risk to an underwriter. I see it as more of a joint effort by both the broker and underwriter to understand the risk well enough to come to an agreement as to the terms and pricing of the risk.”
The challenge the modern broker has had to learn to overcome is the increase in automation and insurers’ reliance on computer systems throughout the underwriting process. Brady believes this can strain the relationships between brokers and underwriters, and is slowly eroding the industry’s skills and knowledge.
“As technology advances, and more tasks are automated, we’re at risk of losing the art of negotiation and being able to build strong, trusting relationships with underwriters,” he cautions.
“I’ve experienced environments in which it’s very difficult for SME brokers to build relationships with underwriters because of the structure of their service model.
“That can be frustrating, because broking isn’t an art of how to undertake data entry. It’s the art of understanding, assessing, negotiating and arranging tailored programs for clients and their specific risks.”
It’s a natural area for discord, but Toby Salmon, Brooklyn Underwriting’s Manager, Property, believes there are ways to minimize the threat of conflict.
“Instead of focusing on what the risk is, I recommend brokers focus on why the underwriter should consider that risk,” he says. “There could be many reasons: future growth opportunities, positive management processes, highly trained personnel and a strong claims history.
“My advice for any broker would be to collaborate with an underwriter to solve sticking points, rather than combating them. The precise nature of the risk will always be important, but the process will become easier once you have sold the ‘story’ of the risk.”
Broking is not an art of how to undertake data entry. It is the art of understanding, assessing, negotiating and arranging tailored programs for clients.
Is anything off limits?
While there are a countless ‘oddball’ risks out there, they’re not always as difficult to place as they might first appear.
Joe Lo Surdo, Managing Director of Sura Film & Entertainment, has seen it all in his 25 years providing insurance for the film and TV sector, including Arctic exploration, blockbuster motion pictures and reality TV shows where presenters harass deadly animals.
“When it comes to niche risks, what might seem difficult to a broker really might not be,” he says. “We still require full information, but specialist underwriters can hold a broker’s hand to a certain extent, and help them improve their own understanding of the risks. That’s great for the client, but also the broker, whose reputation can be enhanced.”
According to Chris Mackinnon of Lloyd’s, the truly difficult risks of today are those which are rapidly evolving – particularly in the cybercrime space.
“The unquantifiable threats surrounding cyber represent one of the biggest challenges the industry has ever faced,” he says. “The perils are evolving more rapidly than the products. Liability wordings become exposed to risks that didn’t exist at the time of writing, so how do you price that risk?”