Brokers must build ‘muscle memory’ to be ‘match fit’ for future grey swan events

Biba 2021: Brokers must focus on scenario planning if they are to “build muscle memory” and “get to a level of match fitness” to tackle future grey swan events, said Julie Page, chief executive of Aon UK.

Page was speaking as part of a panel discussion on the future of broking at Biba’s two-day virtual conference this week.

In response to a question from session chair Ashwin Mistry, executive chairman at Brokerbility, around how brokers can better prepare for future events akin to the Covid-19 pandemic, Page emphasised that “it is about scenario planning”.

She continued: “We may not have anticipated this particular scenario, but we anticipate lots of other scenarios that create similar impacts on business and we plan for them and we learn how to deal with them.

“And if we take multiple scenarios and strengthen our capability, we get to a level of match fitness, if you like, where we’re starting to build muscle memory. Then, whatever happens, that muscle memory kicks in and it makes a difference.”

This mantra is reflected in a recent piece of work conducted by Aon that was published last month, titled Respecting the Grey Swan. Page explained that while an inconceivable event is generally known as a ‘black swan’ event, a ‘grey swan’ incident, on the other hand, describes a complex event that is known about before it occurred – she said this is “arguably” what the Covid-19 pandemic is.

This report found that “the most significant factors” in “makes a winner in a crisis” are “risk preparedness and culture, and then obviously effective leadership because in order for risk preparedness and culture to kick in, you need an effective leader”.

Page continued: “There are all sorts of complexities around that, but unquestionably, risk preparedness comes from that muscle memory. It comes from having prepared for the things you can anticipate and then just having the ability to respond when something unexpected occurs.”

Brokers that adopt this approach can then help their clients to also prepare for future events.

This aligns with Partners& chief executive Phil Barton’s perspective on the role of brokers as a “conduit” in the value chain. However, Barton emphasised that brokers do need to work harder to help clients fully understand the insurance products they are buying.

Page agreed, noting that brokers have a “meaningful role” to enable advice. She added, however, that “words matter” – she has found that many clients are often confused by the name of a product, let alone the policy wordings themselves.

Accepting the pace of change

For Ian Donaldson, chief executive of Atlanta Group, the role of brokers hasn’t fundamentally changed as a result of Covid-19, however he acknowledged that brokers have had to be flexible during the pandemic and accept that no one size fits all when it comes to adapting to clients’ needs and demands.

This is especially true when considering digital solutions. Donaldson explained that digital offerings were certainly in the pipeline prior to Covid-19, so although the pace of change around digital transformation has not slowed down for brokers themselves, customer acceptance of digital solutions and the demand for 24/7 services has accelerated due to the pandemic.

These digital solutions must be clear, concise and show an awareness of potentially vulnerable users, he added.

Solutions he has seen here includes the move from telephony to web chat functionality and the switch from annual insurance policies to monthly or pay-per-mile arrangements.

Productivity versus presenteeism

As for other lessons learned from the pandemic that will impact the future of broking, Page pointed to the rise of hybrid working models, where staff combine office-based and home working.

She explained that during the national lockdowns, the industry has seen that productivity and presenteeism – where employees show up for work despite being unwell – are not the same.

For her, teams worked brilliantly remotely, so she believes brokers should accept the challenge of implementing genuine hybrid working models into their businesses, which embrace the best of both worlds to “keep the gains” from the past year but “add missing value” – for example, social connections.

“A lot of the old school thinking where if you’re not present, you’re not productive, has disappeared,” she said.

Deep correction difficulties

To conclude the session, Mistry asked the panellists whether the current hard market was warranted.

Donaldson responded: “In some markets it is, in some it isn’t. Different insurers have got different approaches. Some insurers have been enjoying [really] good ratios in this period in the motor segment, but they’ve been hit hard in some property [products].

“Those with varying books of business are challenged, those with an overall motor book, not so much. A hardening market is not a bad thing overall anyway, given where we’ve been pre-pandemic.”

Page added: “Corrections that have occurred in the market have been deep and that, I think, is difficult for clients to deal with – the depth and the steepness of it. But there’s no denying the need for some degree of correction.

“It’s very variable – it depends on the product, it depends on the market. But we have a very, very competitive marketplace, so you can be sure [that] at the point at which the market feels it can start to bring it back down again, it will. I just think there’s a peak issue that’s been difficult to manage with clients.”

Carl Shuker, A-Plan’s group chief executive, also featured in the panel session.