BrokerFest 2021: Brokers act as ‘buffer’ to mitigate ‘appalling’ insurer service for SME risk

BrokerFest 2021: During the Covid-19 pandemic and into today’s ‘new normal’, UK insurance brokers have acted as a “buffer” to SMEs in the face of “appalling” service from insurers that “have lost their ability to service clients”, according to Nick Houghton, group chief executive of JMG Group.

Houghton was speaking as part of a panel discussion at Insurance Times’ BrokerFest 2021 conference on Monday 11 October, titled ‘Rethinking the hard-hit SME landscape’.

Praising the broker market, Houghton explained: “Thank god for independent brokers out there that act as that buffer to customers, whether SME, corporate [or] private.

“The last 12 to 18 months, what it’s shown is a number of insurers in the market are really struggling to service brokers and customers are relying on brokers to smooth that challenge out, whether it’s just response times to emails, phones not being answered [or] people working at home.

“Service is appalling, generally speaking, and that hasn’t come back.”

Communications breakdown

Houghton told delegates that there are “a number of insurers that have lost their ability to service” brokers due to “an over-reliance on technology and online trading”, “consolidation, centralisation, closing down of offices” and “investing in lots of [artificial intelligence] capability for the future”.

For him, these developments mean that insurers have lost “their ability to have a sensible conversation about an SME risk on a Friday afternoon”, with fewer technical underwriters available for brokers to approach and talk to.

This also makes renewals more difficult, Houghton added – even if brokers are able to collate the required information from their clients three months or so ahead of renewal, this preparatory work is not beneficial if brokers are unable to subsequently speak to underwriters.

In turn, this means renewal terms could come through later than desired, posing more challenges for brokers, while errors on these documents is still an issue, according to Houghton. This makes it harder for brokers to deliver a “slick service”, he noted.

Promoting value

Granted, public perception of the broking market is also working against the sector following Covid-driven business interruption insurance claims.

Houghton said: “What’s frustrating is the negative PR that’s hit the market, many thanks to Boris Johnson - loose comments at the beginning saying that insurance will pick up the tab, which [has] just caused brokers a huge nightmare with customers because suddenly we’re being accused of letting everyone down.”

Pair this with the cyclical nature of the insurance market, which can be tricky for brokers to explain to clients, and firms may have difficult conversations with SMEs ahead.

Richard Brooks, broker development director at Markel UK, recommended that brokers “take the conversation away from price” – although this undoubtedly has to be one facet of the conversation with clients, Brooks noted that the level of coverage and value-added services, such as legal and tax support, can help demonstrate the advantages for SMEs in using a broker.

“The industry has proven the tangible value of some of those value-added services that have been hidden,” he explained, citing legal expenses insurance as an example.

Product push

In terms of the insurance products themselves, Houghton said these need to be constantly developed to “move forwards”, yet today’s product suite isn’t “fundamentally broken” as they offer tried and tested solutions.

The issue for him, however, comes with “putting add-ons on to products to try and make them a bit sexier and more appealing”. He believes this “is not the right answer”.

He cited cyber additions as an example – he raised a “question mark over the true value” of this type of add-on as “cyber is a discrete risk” that he thinks the market still does not fully understand.

Brooks, on the other hand, noted that certain business sectors are “poorly served”, with many companies simply relying on general commercial combined cover rather than investing in suitable, sector-specific policies to support business functions, such as medical malpractice insurance for example.

Markel UK thinks that 65% of care and technology customers do not have fit for purpose cover, Brooks added.

SME risks are also continuously being pushed online – because these businesses are smaller, their risks are perceived to be less complicated by insurers, Houghton said. He disagreed with this view, however, arguing that SMEs still have complex risks because these businesses are extremely entrepreneurial, so a more tailored approach is often more suitable.