Briefing: Are brokers forgetting a fundamental issue?

By Stuart Reid

Changes to regulation, appalling claims service from some of our suppliers and a difficult economy with direct implications to the clients we serve – there is a lot going on in the world of insurance.

And given all of these challenges, it is understandable that some may be finding the mere servicing of clients and the basic provision of advice more time consuming and difficult.

But while that might be true, the findings of Aviva’s latest broker survey make for shocking reading.

After service from insurers, the second biggest issue facing brokers, according to the survey, is the underinsurance of their clients.

This is truly concerning – 73% of surveyed brokers were worried that their clients could be underinsured. Let me repeat that – 73%.

The defence from many will be that, with inflationary pressures – and no doubt the cost of living crisis – underinsurance is inevitable as clients look to save money.

But that surely belies what our most basic job is, to ensure our clients are covered – and covered correctly.

Getting the message?

Somewhat strangely, Aviva’s report goes on to say that brokers have, for the most part, been educating customers on the impact of inflation.

Only 10% of customers did not recognise the impact inflation could have on sums insured, according to those brokers that responded to the survey.

So, if I have read that correctly, 73% of brokers were worried their clients are underinsured, but only 10% of those customers were unaware of the danger associated with this?

Taking commercial insurance as my example, clients must then be actively aware that, were a significant claim to occur, any settlement would, at best, have any payment reduced or, in certain significant cases, see cover declined altogether.

Plainly, if this were the case, then brokers should consider that a professional indemnity notification following such repudiation or reduction in settlement would become a very distinct possibility.

I am guessing that a defence would have to show – at the very least – that a client had formally accepted such underinsurance and understood the implications. Is that really the case with 73% of clients insured?

And what of insurers? If 73% of a broker’s claim-making clients are underinsured, does that not start to call into question the adequacy of the broker’s advice, their professionalism and, consequently, the insurer’s desire to continue trading with that broker?

It’s all very well applying average settlements or declining claims, but that is not in the broker’s or the insurer’s interests – and is least of all in the client’s.

Ticking time-bomb

Aviva’s survey also showed that the main ask from brokers on how to tackle this issue was for more data and insight when reviewing a customer’s cover, as well as quicker quotes from insurers.

Really?

The main response from brokers should be an active campaign to resolve the issue directly with the clients, which I am genuinely hoping many undertake.

We can blame insurers for some of the ills we suffer, but to blame them for a client’s underinsurance is weak – very weak.

This could be a massive time-bomb for our industry.

Has there always been underinsurance? Of course there has.

But while it has always been our job to sell insurance to those that need it – and accept the client’s decision on which policies they need – to have in place cover that will simply not provide the protection that we have sold, in part or in whole, opens up the broker to serious consequences.

As a customer myself, I hesitate when sums insured have to increase, especially at a time when premiums are increasing anyway. But what is the point of having a policy if it won’t respond as intended, or at all?

If your client is underinsured, don’t hide behind insurer service as the issue.

Get out and visit your customers, fully explain the implications of underinsurance, memorialise your discussions and try to amend the existing cover to lighten the load of any extra premium that might be payable.

Simply put, do anything you can to get things right.

To not do so could open up serious issues for brokers, let alone the reputational damage it could cause us all as an industry.