The Vero SME Index might show a decline in SME use of brokers, but Vero’s Head of Commercial Intermediaries Anthony Pagano is excited about the future of broking in Australia.
Insurance Adviser: What makes you optimistic about the future of broking in Australia?
Anthony Pagano: We are starting to see big investments in the young talent entering the industry. NIBA and others are promoting insurance broking as a trusted profession through schools and universities. Whereas most in the industry previously fell into insurance, we are starting to change that by making it a sought-after profession. We are beginning to see a different dynamic of people coming into the business.
Because of consolidation, brokers are going to get larger and the diversity of services that a broker can provide will change. Brokers can take a leaf out of an accountant’s playbook. Accountants have always been viewed as a trusted source of advice. How can a broker move into that space by being the SME’s go-to person, to offer help on things such as retaining quality staff, meeting sales targets etc? Broking is not only going to be transactional, I think it is going to be more about how brokers can create value for clients, for example, in services, looking at life insurance, finance and banking, etc. What are the other inherent services clients need that they can provide, represent or outsource to provide holistic solutions?
IA: What is the role of digital in all of this?
AP: Good brokers will adapt and embrace the online channel. Brokers have done a stocktake of their online presence, for example, their websites, their activity on social media and the way they interact with Customer Relationship Management (CRMs) software.
They should question the best ways of engaging with clients.
No doubt the future will be challenging, particularly with digitisation of the industry. However, the basic premise is that our industry is all about relationships. I genuinely do believe that. People have forgotten that it is a relationship business. You can be the cheapest, the quickest, the most comprehensive, but if I don’t have a relationship with you, I’m not sure I want to do business with you…I’m not sure I can count on you when it matters most. People do business with those they know, like and trust.
Along those lines, I believe you are going to start seeing brokers promote themselves in a different way. Take one of the findings from the Index: clients don’t know that brokers can help them with claims. Some brokers just assume that clients know this. This is an opportunity for them to be out there saying they can provide risk advice, property assessments, risk mitigation, services at claim time and can in fact look after a whole raft of different things for their clients. It’s reinventing themselves. From being reactive to proactive. This is the future of broking.
People do business with those they know, like and trust.
Brokers are not in this alone. Vero has developed over a dozen tools to help them reconnect with clients… giving them more quality time with customers and providing them with a customised service.
We want to harness all the resources that Suncorp has to support our brokers and hopefully that translates to better business success for them. Brokers’ success is Vero’s success. We want to become… a trusted business partner for our brokers. We want to protect our brokers’ business success and clients’ success and have a tripartite relationship that makes us all successful.
Seeing brokers fail is not an option for us.
IA: Yet the SME Index shows a fall in the percentage of SMEs using brokers. What are brokers doing wrong? How did we get to this point?
AP: I think… complacency has a lot to do with it. Some brokers have not thought about the change that clients want. The behaviours, expectation of clients have increased, and we need to evolve and step up to the service they expect.
When you are looking after a lot of clients, it’s easy to fall into a routine… offering clients a renewal program and calling them once a year, particularly for SME business and mid-market insurance.
Clients are wanting more and want to engage with their brokers.
But it’s very hard to give true risk advice. It’s hard because it’s expensive to give risk advice to clients at the lower end and top end of the market.
We need to start looking at what sort of advice we are giving clients and the business model that supports it.
IA: Considering what you’ve just said, how do brokers evolve to become trusted advisers?
AP: My view is that we are now probably at a fork in the road.
Brokers must ask themselves, ”how do I go from a person providing a price and a program to someone who provides advice and risk services?” and “what advice should I give?”. It’s a big step. There’s a lot of work that must go into it.
It could be the simple things like talking to clients about contractor controls using hot work permits, storing hazardous and flammable goods, electrical thermographic scans or protecting clients from signing hold harmless agreements. Brokers come across these sorts of things quite regularly, but clients don’t. It’s those simple things that reinforce the basics of insurance principles as applied to a commercial business.
We are in the business of helping people when they are at their worst after they’ve had a loss. We need to take those lessons and share them with our clients.
Another important role that a broker can play is to explain things simply to clients. There’s a lot of information out there… there’s perhaps too much information, so clients are getting confused.
Take the travel industry as an example. People Google ‘hotels in New York’ and thousands come up. And that industry is now seeing a trend of people returning to getting personal advice because they can’t find it by looking online.
With insurance, it’s the same. Self-service digital platforms can only help clients so much in terms of information that meets their specific needs. An insurance broker is the extension. They provide the ‘what does it mean for your business and your personal circumstances’ part of the story. They can ask: ‘what are the underlying risks your business faces and what can we do to eliminate or mitigate them’. This is the sort of thing that online platforms can never do.
IA: Where do you see are the opportunities for brokers?
AP: Business interruption insurance is one that came out strongly in the SME Index results. To us, it’s the most logical cover to have. But so many SMEs don’t know about it.
I think we need to simplify it. Brokers need to bring it back to truest form about what the covers are intended to do. Sometimes we try and promote insurance as an easy thing to purchase, but it’s far from easy. We need to continually reduce the complexity for clients.
For instance, how about talking about business interruption insurance as a lifestyle insurance cover? Ask: “Do you have a mortgage, kids’ school fees, car repayments, groceries to pay? The income you get from your business helps maintain your lifestyle. Is that something you might be interested in?” If the answer is ‘yes’, then business interruption is not an issue.
I think we haven’t simplified the need for that cover enough and what it means to clients.
It’s about making things real for the customer because… in essence, what we sell is a piece of paper with words on it. And when something happens we will be there to deliver when it matters most. People can’t comprehend it if they’ve never had a claim. In fact, there is a misconception among most policyholders that “it will never happen to me”. What we need to do is… say ‘this is what it means if something were to happen to your business: getting income, paying your staff wages, setting up new premises’.
Another issue brokers should be talking to clients about is underinsurance. What are we doing as an industry to ensure we have the right level of sum insured? It is something that brokers and clients need to continually reassess. What are the right levels of coverage? And what are we doing to get clients from the lower to higher sum insured taking into account the higher costs of materials and labour?
IA: Finally, what role does Vero play in all of this?
AP: As an insurer, we change the way we operate constantly and reinvent ourselves.
The most important thing for me is that we need to use our investment in the SME Index as an opportunity for brokers to take stock of where their business is at, how they engage with existing clients, and what potential new clients look like and how to service them.
Over the six years that we have produced the Index, it has hopefully become a resource for brokers, a reminder of what they should be doing to engage with clients and a snapshot of the landscape of competition in the insurance segment.
What it also does is it focuses on… the ideal advice model that clients want and reinforces industry best practice in terms of service.
The tools developed in conjunction with the Index give brokers the ability to connect with clients in a different way. Last year we released three and they were quite popular. What it is showing is that brokers are looking for unique tools that are relevant to the findings and insights in the SME index.
Brokers want to see this information, we think, because it supports them with different ideas and concepts to engage with their clients.
The challenge now is acting on it. If they don’t act, then they might be the next dinosaur broker.