Lloyd’s General Representative for Australia, Chris Mackinnon, says the soft market risks hampering brokers’ professional development, as well as undervaluing the role of underwriters.
Prior to taking up his position at Lloyd’s Australia last year, Mackinnon spent nearly three decades as a broker both in Australia and overseas. He says that, while the soft market may be receptive to harder-to-place risks than in previous years, this may not be good for younger, or less experienced brokers, in the long term.
“Many brokers have never had to trade in a hard market,” Mackinnon told NIBA. “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.
In soft market conditions, some brokers may have a tendency to 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.”
Mackinnon advocates the importance of brokers putting all their efforts into really getting to know their clients’ business exposures to ensure the best outcomes for all parties.
“The best thing a broker can do is be prepared,” Mackinnon added. “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 also believes that a more holistic approach to broker education is required. As well as formal broker qualifications and training, Mackinnon says that sending young brokers to spend a few days at the client’s place of business is a great grounding in helping understand their business risks.
“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 said.
“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.”
Mackinnon’s views on the matter will appear in the first issue of NIBA’s new magazine, Insurance Adviser, which is released this week.