The Knowledge - Expert View: Commercial lines – broker-insurer collaboration

Many commercial lines areas are giving brokers reasons to be optimistic this year. Two in particular – construction and directors’ and officers’ (D&O) – have specific factors at play: the building sector’s recovery is in full swing, while increased regulation is making companies mindful of the need to protect their directors. In both areas, the role of the broker is, as so often, critical.

 The construction outlook

Expansion in the construction sector is strong, building on almost 8% growth in 2014 with a predicted upturn of 5% this year. But with growth comes a heightened degree of risk; materials and skills shortages, tight project timescales and inexperienced people working on building sites present a range of risk management issues.

While construction risk management has moved on considerably – with a variety of schemes devoted to upskilling the industry and the Health and Safety Executive paying close attention – there are still customers that can improve.

Of course, this gives brokers the opportunity to demonstrate the value they, and insurers, can add when advising customers. The key is to understand what the construction customer does in detail and what the individual risks are in order to offer the right risk advice and the right cover with the flexibility to run their business successfully. For example, making sure a construction business has the right controls and checks in place to manage risks relating to specific trades, projects and activities.

There’s no hiding from regulation

Increased regulatory activity is driving an ever-heightening need for D&O cover: a growing number of investigations by government agencies and a focus on directors’ individual responsibilities are at the heart of this, along with the increased costs of defending any allegations.  

Most brokers already see D&O insurance as a must-have for directors and officers of any business and discuss cover directly with those being protected. But risks are constantly changing. As well as the increase in regulatory activity, there’s the impact of potential cyber breaches, which senior executives need to be mindful of.

In the USA, shareholders are resorting to litigation against directors where a data breach has occurred and regulators are coming down harder on poor data governance. Closer to home, European Data Protection Regulation will – in 2016 – change the game on business responsibility for data protection, meaning greater weight of regulation and actions against executives who aren’t in control of these exposures.

 Commercial lines fraud

Although we most often hear about the impact of fraud in personal lines, organised fraud is increasingly afflicting commercial lines. Moreover, it’s increasingly difficult to spot as fraudsters become cleverer, more determined and tech-savvy. An example is the increasing numbers of ‘slip and trip’ claims, which expose many businesses to higher costs and reputational damage.

Our experience is that when identified, brokers and insurers work well together to fight fraud. As an industry, we’re absolutely right to seek ever better outcomes and clarity for our genuine customers, while being hard on fraudulent claims or applications. The two are entirely compatible in Zurich’s eyes, as illustrated by the recent announcement to adopt key law commission reforms with immediate effect.

 The future of distribution

Customers still favour purchasing commercial insurance through brokers because of the professional advice they provide in what is potentially a business’s most important purchase. There’s an evolving expectation, however, from customers to be able to connect online, and more seamlessly, and insurers need to continue responding to that and invest in being easy to trade with from both a broker and customer perspective.

With commercial risks remaining complex, the broking market is likely to remain vibrant. Maintaining professionalism across the market and keeping on top of the latest developments in industry sectors is vital. Developing in areas of specialism and focus, such as construction and D&O, can make a big difference. Having knowledge of what’s happening on-site enables brokers to recognise where standard cover isn’t going to be sufficient and ensures the insurance cover provides the right outcome for customers.

Brokers show the value they add by asking the right questions, offering advice and providing guidance on what cover is needed. And that aligns well with an insurer like Zurich that looks at commercial risks on an individual basis, and can tailor even the more simple risks where needed. This broker-insurer collaboration is, and must remain, at the heart of what we do together.

For the latest insights, practical expertise and to accumulate CII CPD learning hours, visit www.insider.zurich.co.uk and follow us on Twitter @ZurichInsider.

 Join the debate in our new LinkedIn specialist discussion forums