Buying a mixed bag
Companies increasingly use a range of channels to purchase insurance – and brokers need to adapt
By John Deex
In 2018, 27% of small businesses surveyed by Vero were heavy broker users. This year’s SME Insurance Index sees that figure slump to 10%.
That might look like a negative trend, but as Vero’s head of distribution Anthony Pagano tells Insurance News, “context is critical”. That’s because the number of non-broker users has also shrunk significantly over the same period – from 31% to 16%.
Mixed usage is the “new normal”, with light users accounting for 48% and moderate users 26%, and Mr Pagano says brokers need to adjust accordingly.
“It’s vital that brokers – and insurers – are now looking at different ways of engaging,” he says. “If I’m going to be a client advocate, I should be looking after the entire umbrella operations of a client’s business.”
Broking companies should be able to provide different levels of advice, and direct options, so all bases are covered for the client.
Another trend that appears to be heading in the wrong direction is clients’ satisfaction with brokers. About 69% of those surveyed are satisfied, compared with 87% last year.
SME client satisfaction with brokers
But again, the devil is in the detail. Last year brought record highs; this year, those who are dissatisfied has remained the same at 5% and it’s the “neutral” bracket that has expanded, from 8% to 26%.
Declining satisfaction is driven by micro-businesses, and those where turnover has dropped. Satisfaction also seems higher in the first year after switching brokers, before falling significantly.
“The core brokers and the core services are relatively good,” Mr Pagano says.
“Having said that, if I’m a broker, whether I’m representing a one-person show or multinational conglomerate, I’m the advocate for that client, and I need to at all times be adding value.”
Micro-SMEs are not expecting “the ultimate level of insurance sophistication” but they still demand good value, good service and proper protection.
The drop in satisfaction after one year suggests there is a honeymoon effect, Mr Pagano says, and brokers can’t set and forget. “You’ve got to continually engage and understand that the client’s needs could have changed from the year before.”
The importance of expertise is increasing, with 88% of respondents identifying it as one of the reasons they choose to work with a broker – up from 81% last year.
Mr Pagano says his advice is for brokers to double down on expertise in relation to risk management and claims. “It’s their point of differentiation, and it’s a significant one at that.”
When it comes to the reasons for switching brokers, cost concerns lead the way. Some 51% flag brokers increasing fees or commissions, while 41% “found a broker with lower fees/commissions”.
When asked why they don’t use a broker for some of their insurance, 27% think an intermediary is “more likely to recommend a policy that offers them the biggest commission”.
Mr Pagano says it’s vital that brokers are transparent around remuneration and their value proposition.
“That’s where brokers can deal with that sort of mistrust, by continually showing what they do, in response to the income that they earn.
“Because I don’t think that earning an income to run a client’s insurance program should be a thing of secrecy. I think it should be open … If anything we should be very proud of the service we provide.”
