Markets lack capacity, Underwriters increase premiums, customers are not satisfied with the new conditions � if all these look familiar then it is time to shift hats.
Brokers need to balance the power between Customers and Underwriters. On one side it is the customer whose needs are evolving and changing together with the changes in its dynamic marketplace. It is the broker who makes sure that the client is fully protected with minimum expenditure for insurance, but it is also the broker who needs to explain and justify any increase in the insurance costs.
On the other side there are the Insurers whose interest is to preserve a market where the quantification of the risk is not undervalued by the bargaining power of the brokers. The power of the two brokers Aon and Marsh and the consolidation of the middle level brokers into hubs and alliances seem to be in the best interest of one party: the customer, but the professionalism of these big brokers also creates and consolidates relationships with the Underwriters in seeking their help when placing “hard to place” risks.
My point is that the broker needs to shift their attitude from a buyer of protection on behalf of its customer to a seller of the client’s risks. One may argue that at the end of the day the result is the same, but the means of going there will set the outcomes of the future. Wearing the hat of a buyer can easily find the broker as a bidding manager. Setting hurdles, strict terms and conditions and putting pressure on a market which is slowly shrinking. Future outcome can shift the power from buyers to a few hands of underwriters solid enough to resist, but unwilling to make any more compromises from their determined prices. A good underwriter will maintain disciplined risks analyze and assessment based on experience, rating plans, shareholders objectives and knowledge of the risk to be covered.
The following steps will lead towards better sales:
Prepare the customer for any potential change. Brokers learned this lesson following the 9/11 events. They all start any conversation with their clients advising about the current market conditions and its trends.
Identify and explain the advantage. Adequate management of the risk can create competitive advantage and these need to be explained to the customer. A company can make and sustain superior profits by better manage industry’s key risks. Knowing how much risk a company can bear can help in deciding the risk of a future investment project.
Know everything about the operations of the customer, its expectations and the industry in which he activates. More information one has about the client, more solutions can be offered and tailored to fit. Major brokers have specialized departments of risk management for big corporations, but smaller brokers need to follow the same steps: analyze, quantify, identify, assess, protect and propose solutions.
Know the Underwriters expectations. How will they quantify a particular risk? What information will they need about the client company? How much do they know about the industry in which the client operates? What is their current strategy and what is the future vision about certain classes of risk?
Sell the capability of the client to minimize the risk. Meet Underwriters expectations by satisfying the client’s necessities. Transmit as many information as necessary, pack the client’s risks in a language easily understandable by the underwriter, design programs to cover bundles of risks in an efficient way and explain all steps and measures taken by the client in reducing or controlling the risks.
After sale follow-up. Brokers need to make sure that all parties are satisfied, that the documentation is error free and delivered in time and mainly that client understand the protection provided and the language of the insurance policies.
Other services and continuity. The sales process never ends. It is a continuous activity with value-added services such as claim handling, policy endorsement and contracts advise. It is the moment when the sale of the next renewal begins.
Sustainable competitive advantage may come from translation of the information about client’s risks into the insurance terminology that will convince Underwriters to accept and provide competitive insurance quotations. It is sustainable because it can hardly be imitated unless one fully understands the way Underwriters work and provide quotations.
Do brokers need to change their abilities? It may be necessary to do it, starting with support and coaching skills, having access to a lot more information resources, spending more time with their clients and with the Underwriters and designing motivation and compensation plans in line with their new tasks. It is not a major cultural or structural change, but merely a shift from acquiring to promoting.
Sorin Rogojinaru, Insurance Broker, can be reached at [email protected] The comments in this article represent his own personal opinion, and do not necessarily reflect the vision of his employer.
May 6th, Toronto