Bridging the generation gap

Generation Y

They are the future owners and managers of every business in the land but those aged under 40 are proving to be less likely to use brokers.

Earlier this year, the 2013 Vero SME Insurance Index found that while brokers remain the dominant channel for the insurance needs of small and medium enterprises, a substantial and growing portion of the market is electing to purchase their insurance direct.

Medium-sized businesses, previously the key market with the highest penetration for brokers, experienced the largest decline.

The report found more than 80% or medium-sized enterprise owners aged over 40 used brokers, compared to 60% of owners aged 18 to 39.

Meanwhile microbusinesses continue to be the most likely to purchase their insurance direct.

The index found the main barrier to SMEs using a broker came down to a lack of understanding of a broker’s benefits.

More than half expressed the opinion there was no benefit to working with a broker, as they “can do it easily enough themselves”.

Internet age

Young business owners are resourceful and tech savvy, and as a result are extremely confident conducting their business online says Jack Delosa, Managing Director of The Entourage, an entrepreneur support community.

“They have grown up in an information age where they understand they can learn anything via the Internet and therefore will constantly seek new answers and solutions to doing things, rather than becoming comfortable with the status quo,” he says.

If brokers are to sustain their relevance to younger generations, they must communicate that their value lies in their expertise in identifying risk exposures.

“Insurance brokers need to look at how they add more strategic value to their clients above and beyond just broking insurance deals,” Delosa says.

“They need to offer clients the best possible solution available on the market, because if they don’t young owners will go searching for it, and if it’s out there they will find it.”

Unless brokers demonstrate that they are doing more than price checking, young owners will believe they can do just the same, if not better

Value over price

Pricing continues to play a key role in business owners’ insurance buying behaviours.

The Vero index found three-quarters of SMEs expect the cost of insurance to rise this year, and more than half expect the increase to be 10% or higher.

Typically young owners will experience premium increases at renewal or will hear of someone paying less and will look into direct insurance pricing.

Milne Alexander Account Manager Quinton McCauley says: “The smaller SME clients with simpler insurance requirements are extremely sensitive to pricing and may be trying to cut costs to make ends meet.

“Young owners will see the price difference and make what seems to them like the logical decision.”

If brokers are to combat the impact of rising premiums and the growing independence of younger owners they need to communicate that they are not only comparing price, but also the differences in cover.

“Unless brokers demonstrate that they are doing more than price checking, young owners will believe they can do just the same, if not better,” McCauley says.

McCauley says common factors in SME businesses moving towards direct insurance are simple insurance requirements and low premiums. He says the risk of larger SME clients who pay premiums of more than $10,000 moving to direct insurers is low.

“These clients tend to have more complex insurance programs that involve a number of different policies and often multiple locations as well. They lack the time to do a number of online quotes for different risks and better understand the value that lies in having a broker advise on the aspects of cover that are most important,” McCauley says.

Where younger SME owners differ is that often they haven’t been in the business long and are yet to experience a complex claims process. “Because they haven’t needed a broker to represent them and act in their best interests during a claim, they aren’t aware of the value of a broker,” he says.

Risk education

An obstacle for brokers trying to communicate their value to clients is the high number of commercials from direct insurers, which make insurance appear simple and accessible.

NIBA Victorian and Tasmania Young Professionals Committee Chair Ben Pruckner says a common trait among young professionals is that they want everything instantly, which makes the quick information offered on comparison websites particularly attractive.

Where comparison websites fall short is in presenting only a selection of the products on the market and at the end of the day are a business in their own right, he says.

“A broker can provide advice and guidance on the many different products provided by the many different insurers, which allows the business owner or manager to decide which risks they wish to take insurance cover for and which they wish to self insure,” he says.

Make a connection

At the crux of an insurance broker’s role is their duty of care to their clients.

PSC Coastwide Account Manager Sally-Anne Townley says regardless of whether they are potential or existing clients, young business owners are the future and their success is a driving force for the economy.

With this in mind, Townley recommends brokers embrace younger owners’ tech skills and independence, approaching them in a way that allows them to remain in control.

“It’s important to regularly consult with the client to illustrate how and why you have come to a recommendation, while also presenting the other possible options so they can make an educated decision.”

Townley advises that female clients in particular appreciate this approach. The Vero index found female SME owners are especially likely to conduct their own research online and in turn source their own insurance services.

While brokers witness a range of differing client needs, Townley has found in general women respond well when they are given options and an explanation for the recommendations.

Gabriele McDonald, Suncorp’s Commercial Insurance National Market Manager, says younger businesswomen tend to be fiercely independent. “They do their own research online, weigh up alternatives and then choose the insurance that most takes their fancy,” she says.

“It’s like choosing a dress – you don’t always buy the first thing you see.

“Today’s women have done their homework and know precisely what they want. Unless marketers acknowledge the determination and independence of this key target group and adapt to meet their needs, they will simply miss out.”

Caroline Gough, Assistant Associate Director at Austbrokers Countrywide, says she has found social media to be an effective way to communicate with younger clients, alongside email or text messages.

However, traditional face-to-face meetings still hold their place.

“You need to get Gen Y in a room to prove why you are a necessity and why you are the best,” she says.

Give them what they want

While young business owners share many characteristics with other business owners, brokers need to embrace the generation’s differences if they are to stem the trend.

When initially meeting with prospective young clients, Milne Alexander’s Quinton McCauley says the first question to ask is ‘what do you want from a broker?’

In his experience the biggest desires are good service, availability and commitment.

This means they can get a hold of you when they need to, you are willing to do the hard work behind the scenes and you won’t over-complicate when communicating results to them.

“Young SME owners increasingly suffer time pressures and do not have the time to read a 15-page renewal report.

“They need to know we have identified what is most important for them to be aware of and if we haven’t mentioned something, it’s because it’s not important.”

Ultimately, if brokers are to bridge the generation gap the industry will need to commit to promoting its merits, leaving young SME owners with no doubt that nothing compares to a broker’s advice.