Independent broker blog: The big audit-ion

It feels like I’ve spent more time out of the office than in over the past few weeks, what with various insurer meetings and a few 'jollies'. I always try to take something from these events, something that I think may help develop my business and its people and it’s also really interesting to talk with fellow brokers about our continuing trails and tribulations.

There are common themes to the discussions I had with a number of insurers I’ve met in the past few weeks. One is their determination to try and find a solution to the poor loss ratios that they are seeing via internet sales and another is to try and retain more control over claims costs and I anticipate that more and more pressure will be applied to the broking channel to assist in both these matters.

Many brokers will have already received correspondence from various insurers interested in the volume of business they generate from the internet and aggregators, some have also issued a revised TOBA with additional clauses about transparency in the broker’s distribution channels and I believe we need to prepare ourselves for even more scrutiny and examination next year.

Some I’ve talked to are introducing a two-tiered pricing structure dependant on where your business comes from, with the connected or traditional sale to a known or local customer generating a better rate. Others are grading their brokers and the level of support will be adjusted according to which category you fit. Most if not all appear to acknowledge that they must do something if they are to achieve the rate increases we all crave.

I also suspect that the current economic climate and our slow and painful emergence from the crisis will mean a lot more interest in our balance sheets and bank accounts!

What I don’t hear them saying is that they intend to tighten the audit procedure for business generated via the internet/aggregators. Human intervention in the sales process will provide an element of control that cannot be replicated in an automated process, if you want to try and control sales on-line then do more audits and make them more thorough. I know for a fact that the audit process can differ depending on the size of your account, a natural conclusion would be; the more business we do the more audits we can expect; however I suspect this not to be the case.

As the clamour to maintain market share continues and new and ever drastic measures are taken to convert that sale, no insurer should consider themselves to be immune from this type of business. I've seen and heard from what I would consider to be very conservative underwriters who have found their book of business affected.

The general insurance buying public do not understand the significance of exaggerating their bonus or being more liberal with their circumstances when applying for a quote online and this isn’t just restricted to those intent on deliberately committing an act of fraud this is of epidemic proportions. Verifying customer information can be difficult enough when the client is sitting in front of you and I suspect that online it is near impossible.

Experience tells us that not all customers react the way insurers think they should, they don’t always report a claim immediately after its happened, indeed if they think they’re not at fault or there is no damage they wont report it at all.

At the moment the internet is a good short-term solution for the client, long-term the insurer will suffer. I don’t believe that they can control pricing; however they can control the audit process, if they want too!

Peter Smits is managing director of The Ashbourne Insurance Group.