Phil Barton: Industry has become ‘incredibly lazy’ in providing advice

Insurance2025: As the UK starts to emerge from the Covid-19 pandemic, brokers will have to “redefine” their core service because “the industry has become incredibly lazy in the provision of advice” and has “dragged itself towards commoditisation and a transactional approach”, according to Phil Barton, chief executive of broker Partners&.

Barton was speaking at this week’s Insurance2025 virtual conference, hosted by Insurance Times. In a spotlight session discussing the future of commercial lines broking with Markel UK’s sales and marketing director Nic Brown and Insurance Times editor Katie Scott, Barton emphasised that brokers need “to be more extensive in the advice it offers” as a result of the pandemic.

He said: “We need to redefine what is our core service. The industry has become incredibly lazy in the provision of advice. It’s dragged itself towards commoditisation and a transactional approach and everybody seems to be focused on placement as the arbiter of whether you win or lose a client.

“Fact of the matter is most, if not all, brokers are competent at placement and so, the pandemic has challenged the marketplace to be more extensive in the advice it offers, to get back to the core elements of offering advice, risk diagnosis, risk advice – whether you retain that risk on your balance sheet or you transfer it to the insurer.

“It’s asking us new questions around programme design as well rather than just placement.

“Clients have been hugely disappointed by fulfilment of the promise the industry has given them and that’s because the industry is over-focused on placement and under-focused on the areas of advice which can create a huge delta in the outcome for clients.

“Part of the challenge for our industry is to get back to do what we were supposed to be doing better. I’m embarrassed to say that we’ve disappointed many of our clients through this period.”

For Brown, broadening risk management provisions is “a fantastic opportunity” for brokers, especially since “the industry is coming out of a period of time where it’s had the worse possible media attention for some time” and there is still “work to do to rebuild that trust with the customer”.

He explained: “We as an industry have got a fantastic opportunity to broaden our relationship with the customer and be there to support them on advice, information, guidance and widen that risk management relationship out of the pure insurance relationship.

“Dusting off the policy handbooks as a response to a global crisis to work out what’s covered or not is an unfortunate reality that some of the providers in this space experienced.

“For me, understanding the risk management capabilities that we’ve got, [providing] proactive contact around supporting them from a legal perspective, widening it to a tax perspective - I think there are many routes for us to have a wider conversation with the customer and understanding them other than just the pure risk for the insurance. Ultimately, the insurance is there as a last resort. There’s a great opportunity through the added values to get in as a first port of call.”

He added that brokers that broaden their services in this way will have more to talk to their clients about, beyond annual renewals – in turn, this makes clients “sticker” and creates more revenue opportunities to help firms differentiate themselves.

Trusted advisor

Alongside a sharper focus on providing advice, Barton identified two further elements that will be key facets within commercial broking of the future. Firstly, adopting a partnership-led approach to work with an ecosystem of local businesses and secondly, ensuring that brokers have a “client service lens”.

On developing partnerships, Barton said: “Our view of the marketplace is that it has become incredibly short term and focused on transaction and we want to call that out and think about long-term mutually beneficial relationships.

“The marketplace has been dragged into commoditisation and dragged into a transactional approach and if you adopt that approach, you live and die by it. If you win a client on price, you’ll lose it on price ultimately.

“So, working in partnership with a broader set of ecosystem partners enables you to differentiate your proposition and move away from that transaction. You can establish yourself as really relevant to the client firm and as a consequence of that, you become their trusted advisor.

“If you achieve that status, because you are their centre of influence, because they come to you for advice across a broad swathe of issues that they face, then you can guarantee that you’ll improve retention, you’ll improve referrals, you’ll increase the revenue you generate from each of those clients and those clients will remain with you for longer.”

Breaking the cycle

In terms of brokers differentiating their services by looking “through the customer’s lens”, Brown believes this can help with current capacity challenges.

“Brokers [are] having a really hard time at the moment because placing and finding capacity, finding it at a price that isn’t driving a huge increase for the customer, is the big challenge at the moment,” he said.

“When you think about what’s causing that – the commoditisation, the over-capacity by short-term insurance provision, facilitated by brokers trading on price – this cycle has to stop because it causes problems.

“Looking at what we do every day in the industry and looking at that through the customer’s lens is why we’ve got to differentiate and change because that as a cycle drives small, short-term unsustainable returns for everybody and it’s got to stop.”

Barton agreed: “The industry has become very short term and, some would say, has been exploiting clients for their own ends. We think that client service lens is what will differentiate us.

“Looking at what is right for the client will ultimately create loyalty, which will then drive outstanding financial performance for our business in the long-term.

“That philosophy, which I think has [been] forgotten, has been shown to be much more beneficial than a transactional approach, which is at the root cause of some of the problems the industry has faced over the last year.

“Being there when your clients need you is an underrated value. We need to return to those fundamentals. They’re fundamentals of client service.

“If the industry can return to those and get away from trying to generate cash in the short term from policies that generate bad profit rather than good profit, then we will prosper and we will, most importantly, help our clients prosper.”