Bob's blog: Beware the weakest links

As a broker and businessman I’m involved – as most readers of this blog are in one way or another – in the process of choosing suppliers. And insurers are one particular type of supplier (much as some would not like being described or positioned as a ‘supplier’).

The question, as always, is why you should choose one particular insurer against another. They all offer similar products in the main, despite all the marketing gumpf. They all want to write our business, within the constraints of their underwriting criteria. And they all gladly tell us that their systems, operations and machines and so on are in perfect working order.

Frankly, service standards across the insurer market remain pretty appalling. And I’m sure they will continue to be so, if history is anything to go by, despite new management teams trying to stamp their thinking on the situation to make things better.

Why do insurers get service so universally wrong? Because they don’t need to get it so right. They pay for a broker to bring in the business through commission that can relate to profit, work transfer and standard payments. Once the business is placed, the insurer uses its machine to attempt to do the rest. If the machine fails from time to time they can, of course, make exceptions to the rules. But if the money rolls in the majority of the time, the business model is working for the insurer while the broker is taking the strain of any failures.

Infuriatingly at times, we put up with it, demand more of our own people, encourage insurers to get it right and eventually the client gets what they want and so do we. It might take a bit of kicking and screaming, but at least with some well chosen markets we have an ear or two that will listen.

Phil Bayles of Aviva said recently: “We have two ears and one mouth.” So the assumption must be that the majority of insurers are listening using this 2:1 ratio. Well, I’m sure lots of listening goes on, but I’m not sure that ratio is quite right!

Insurers are having to drive down costs, machining and packaging much of what’s on offer now, and so the abyss continues to grow. There’s always a market for cheap, “pile ‘em high” products, and we all as brokers and insurers sell some of that sometimes. But bespoke underwriting calls for an understanding of geography, risk profile, process and logistics, and no underwriter can possibly know everything about everything. That’s where the communication between the broker (who has seen and appreciates the risk and knows the client) and underwriter flourishes.

Today, and certainly in the medium-term, there’s a whole raft of new insurers and pen-holders emerging. They are offering tempting niche covers, vibrant imagination, serious risk appraisal and knowledge and fairly slick systems – the latter largely because, I suspect, they’ve no legacy issues.

My concern is whether they will be there when it counts – at claim time and renewal. We brokers are entrusted by the client to identify insurers that will be there. Sorting out the wheat from the chaff is difficult and checking insurer credit ratings is only part of the answer.

The basis of choice revolves around reputation, ability to pay claims, ability to offer a good range of product, flexibility with underwriting and a genuinely good, commercially viable trading relationship – alongside that listening ability alluded to earlier.

The result? Great value for clients, policies that actually do what they’re meant to when they’re meant to, and a happy client, insurer and broker!

If you get all of that, the minutiae will sort itself out and your life will be as easy as it could be as a broker.

After taking a pop at insurers this month, please remember that, while we can all recall unflattering memories of dealing with insurer suppliers, to the client YOU are the supplier. Make sure they don’t start gathering similar unfortunate anecdotes about your behaviour, which will spread in a local domain much quicker than you’d like to believe.

And blaming the incompetence of a supplier to get yourself off the hook is tantamount to admitting you chose your supplier badly!

Good luck negotiating. It’s all good fun.

Bob Pybus is a director of the Institute of insurance Brokers (IIB) and director of NPA Insurance Broking Group.