Brokers can prosper during tough times by updating renewal processes. Bob Trott describes why partic...
Brokers can prosper during tough times by updating renewal processes. Bob Trott describes why particular attention should be paid to clients' net worth.
As the financial markets creak under the weight of the credit crisis, insurance is focusing hard on how to strengthen its position. For brokers looking for an edge with mid net worth and high net worth clients, some simple procedure changes could be all it takes.
At a corporate level and for insurance staff personally, the dramatic developments in the economic downturn are resulting in an increased focus on winning and retaining business - to ensure their business is in the strongest position possible. In these unusual times, a stoic 'business as usual' approach seems to have been adopted across the insurance community.
The soft market cycle pains the insurance world has been suffering in recent years pale by comparison with the current banking woes. That said, with the advent of direct writers, the last 20 years have hardly been a bed of roses for brokers who, like others, are currently looking with renewed keenness for that extra edge for their businesses. Despite dubious predictions of their imminent extinction over the last two decades, brokers now find themselves in a position to take advantage of some of the gaps that have been overlooked by the very channels that threatened to overrun them. Particularly with MNW and HNW, there are opportunities that brokers could benefit from just by introducing some simple measures.
The message is that where models are systems-driven and put the emphasis on volume processing, clients are automatically replaced at renewal at the same terms and with the same level of cover. These automated models do not, therefore, allow for yearly appraisals of clients' material wealth. Because of this, they miss the opportunity to find out if an individual client's wealth has increased, along with the chance to migrate them to more appropriate levels of cover - that is to move them from a MNW policy to a HNW one. Knowing the point at which a client's wealth reaches the threshold where they become eligible for a HNW policy is key for brokers to ensure their clients have the proper levels of cover.
While many brokers will carry out a fresh assessment of a client's wealth before renewal, many others do not have the controls in place to actively look for ways to upgrade clients' cover. In fact, some brokers only re-broke and obtain alternate quotes if the client requests it or if they receive unfavourable renewal terms. Some brokers will protest that they do not have the time to spare on the additional administration this involves. But a proactive fact-finding procedure can be inexpensive and simple to set up and run and can reveal the opportunity to upgrade cover.
In addition, a request by the client for a mid-term adjustment - for example, to include cover for a recent expensive purchase - is a signal to the broker that their client's affluence is on the increase. Keeping a note on file about MTAs as a reminder at renewal costs nothing and, put together with other findings from an assessment, could result in the client being moved to a HNW policy. So brokers, if they do not already, would be well advised to have these controls and checking procedures in place to allow them to take full advantage of the fact that the commoditised channels are missing these opportunities precisely because they do not check.
Brokers may find when they assess their MNW clients, they are one route to becoming HNW but do not yet qualify. Even in this situation, brokers can offer to package their insurances to include all assets, which brings the usual benefits of a single renewal date and everything under one roof. This could include home buildings and contents plus optional products such as a family fleet motor package. So even though making the upgrade to a HNW policy may not always be possible, there are amendments that can be made and brokers can begin transitioning clients with additional or packaged covers along the way.
As well as these potential benefits to brokers and their clients, keeping abreast of clients' needs and checking the markets for the best cover further helps brokers to demonstrate that they are treating their customers fairly. So there is also an added regulatory benefit of doing this for brokers.
These initiatives form part of the wider debate about how brokers can meet the challenges they face from direct writers. While the issue of personal service has been well-documented and debated, it is worth emphasising its importance again, particularly as brokers still have everything to play for with MNW and HNW. Although brokers may have lived with the direct threat for some time, concerns remain about creeping commoditisation and the extent to which this will permeate through the various lines of insurance.
However, to set this in perspective it should be remembered that the UK's largest insurer gains the lion's share of its income from broked commercial business. This is a fact and one that demonstrates that brokers' expert advice is alive and well. Equally, in both HNW and MNW, brokers' expertise is vital and there are further parallels with commercial that can be drawn. For example, in much the same way that smaller commercial business is being targeted by direct players, MNW is now being singled out for similar treatment. This was recently highlighted when one HNW insurer announced it would place its MNW book direct.
Again, it is important to view this single fact in the round and further perspective can be gained by observing the buying habits of MNW clients, particularly online. Brokers may be concerned that the internet has not yet stopped eating away at their market share but this is certainly not something that is out of their hands.
Take, for example, the time-poor professional in the emerging wealth bracket. As busy people they are bound to look online to try to arrange their insurances. However, these often financially literate buyers will get so far into the process before questioning whether cut-price deals on the internet can really provide the protection they require. This is the point at which the client realises they need to understand and be informed about the alternatives that exist. Brokers - rather than mass-marketed products - should be their natural choice.
While the industry has done its best to persuade the public that price is the single most important consideration when purchasing its products, the astute individual still knows that you get what you pay for. It is crucial that potential clients are aware that brokers are available and appropriate for them.
Visibility is key
The specific methods brokers can employ to do this are well documented and for some it could be worth reviewing their marketing efforts as visibility is a pivotal aspect in the fight to win and retain MNW and HNW custom. As the profile of potential clients in the MNW and HNW category fits perfectly with brokers, so having strategies in place to ensure they are aware of that fact is key.
Again, this need not be expensive as the experience of one north London broker shows. By placing single adverts at carefully selected train and tube stations in the north London area, it has enjoyed a very reasonable pipeline of clients. So brokers may feel up against it when they see the mass marketing efforts of the direct players but this mass marketing is for a mass audience. MNW and HNW is a specialist market that can be accessed by inexpensive but clever strategic marketing; a surgical strike rather than a cluster bomb.
So, while the rest of the world may be feeling the downside of globalisation for the first time, the insurance industry and particularly brokers have many good reasons to stay focused. Brokers genuinely have everything to play for as direct players and the onset of commoditisation has failed to turf brokers out of their rightful place in the food chain. While undeniably these phenomena have taken away a chunk of standard risks from brokers, at the larger commercial and specialist personal ends of the spectrum brokers continue to thrive.
By ensuring they are aware of and engaged with opportunities such as MNW and HNW, there is further scope for brokers to reclaim ground by exploiting the gaps left by the entities that were once tipped to topple them.
Bob Trott is managing director of Oak Underwriting.
Oak Underwriting specialises in high net worth insurance solely dedicated to high-value homes, fine art, antiques, collections, silver and jewellery. The management and staff have many years' experience in the HNW market and, with the backing of its chosen underwriters, this puts it in a strong financial position to provide a broad range of products and continually develop its high standards of innovation. The company offers a rare combination of tailor-made policies, experienced underwriting, quality service and worldwide protection.
Oak products are distributed exclusively through brokers and independent agents. Oak is focused on a policy of real commitment to its broker partners. To ensure this partnership works, Oak provides assistance with risk management, advice and marketing - enabling brokers to define, implement and improve their niche business in HNW. Oak offers greater flexibility in underwriting terms by working closely with its brokers. They all have direct access to its dedicated team of underwriters, and Oak also offers a commitment to provide personal, flexible underwriting and broker underwriting visits.
Oak's strategy is based on its perception that its clients, who are all HNW, are entitled to the best service in the industry.
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