Insurers must tackle ‘computer says no’ approach as risks become ‘less standard’

It should have been a simple eTraded premium – instead it turned into a headache for broker Richard Hodson.

Hodson was placing an office risk for a client based in a swanky security-guarded building in London’s Mayfair.

However, the office had no lock on its door, meaning insurers refused to take it.

After trawling the market, the UKGlobal Broking Group director eventually pulled a favour with a friendly face at Aviva to get the risk placed.

Hodson’s case is a typical encounter for brokers up and down the country faced with ‘computer says no’.

If a risk falls short of being straightforward, it can be rejected by an insurers’ eTrade systems. Brokers can wait hours and sometimes even days for resolution with an underwriter.

This is a problem – Hodson believed risks are becoming “less standard”.

He said: “What the pandemic really highlighted is that smaller businesses are not easy to commoditise because they are entrepreneurial.

“Those businesses that succeeded over lockdown were those businesses which were able to pivot, be innovative and do things.”

Hodson believes that some brokers are now giving incomplete – or even incorrect information – just to get the risk placed quickly at a reasonable price.

This will “erode trust” even more in the insurance industry.

He said: “You are going to have a load of PI (professional indemnity) claims. It’s going to give scope to brokers to abuse the system because they just cannot get the right stuff across the line.”

Referral pains

Insurance Times’ research, the Five Star Rating Report: ETrading 2022, revealed that 41% of brokers surveyed said they waited on average two days for a complex risk to be cleared.

Head of research Savan Shah said: “Insurers must find innovative ways to ensure the referral process has been thoroughly thought about so that the balance is created between human interaction and online algorithms that can really capture the information, which then can ensure clarity at the point of risk.

“As the complexity rises, the need for a tailored approach is very much needed, rather than a one size fits all approach.”

David Perry, managing director at FSB Insurance Service, said he was a big supporter of e-trading and it was integral to his firm’s success – but recognised that the need for a tailored approach is a big issue.

“The sort of the expense at the time that’s been taken and the client annoyance around how long things are taking, this is being pushed into the broker’s office and that’s what we’re finding.

“That’s what we’re talking to the big composites about – just so that they’re aware and they can try and do something about it. A lot of them are listening.”

One of those claiming to listen is Allianz.

The insurer is frequently in the top five for eTrade service in Insurance Times’ surveys.

Allianz director of digital trading Helen Bryant said: “Over the past two years, we have been working hard to remove unnecessary referrals from the digital business model so more SME cases can be traded without intervention.

“This allows us to deploy our expert underwriters to support more complex queries, which do tend to be less frequent.

“Brokers can access this underwriting expertise via live chat or over the phone depending on their preference.”

The MGA answer

Apart from relying on insurers, there is one other option for brokers – MGAs.

MGAs have “come into their own” by filling the service gap left behind by insurers, according to Perry.

“Where the MGAs have jumped in at the moment and sort of hit the ground running is the area that sits between the basic, easy, straightforward, eTrade risk and the more complex risk that maybe the composites don’t want their highly trained underwriters looking at unless it generates over a certain amount of premium.”

Hodson agrees: “I think MGAs have covered this. There are some good MGAs out there.

“If you’re going to use an MGA though, you’ve got to make sure you are happy with the capacity.”

Despite the attraction of MGAs, few brokers completely rely on them for business.

As well as capacity concerns, they want a diversified book for risk management.

That means most brokers leaning on insures for the bulk of premium – and e-trading is only going to grow and grow.

Simon Bloomfield, head of Imarket at digital trading focused software firm Polaris, said a mini-fleet might have eTraded five or six vehicles without human intervention five years ago, but now this figure had reached seven or eight.

As the size of eTraded risks grow, brokers will be expected to show insurers their keenness to transact and to quickly flag up any issues.

“My expectation will be that as you move further up the food chain, insurers will say ‘well actually this is quite complex, it may involve a couple of people having to be involved in the referral’.

“If it’s a commercial combined it may involve a liability underwriter and a property underwriter, for example.

“Now you’re not going to get an insurer that will invest in the off chance that a broker is maybe interested.

“They’re going to be more insistent that the broker says ‘you need to let me know about this’.

“And so, I expect the brokers will need to say ‘yeah, look at the referral for me because I’m interested’.

“Because the last thing an insurer wants to do is waste their quite finite operational resource on a risk that’s already been placed.”

He concludes that referrals are here to stay: “I don’t think they are going go to go away. They’ll just become different.”