Buying insurance may be easy enough but buying the right type of insurance is often not so straightforward. There’s a lot a stake when it comes to insurance – choose wisely and a person’s financial security and peace of mind is guaranteed, and a business can survive the lean times but choose poorly and loss of livelihood can loom on the horizon.
That’s why a general insurance broker is often the unsung hero of the insurance world. They are the person who is the vital link between a customer and an insurance company, an advocate for their client, the one person who will go into bat to make sure valid claims are paid on time, and fairly.
With more than 2500 general insurance brokers working in New Zealand and with issues such as climate change and rising sea levels looming on the horizon, there has never been a busier – or more important – time for the industry.
So, what does a typical insurance broker in 2019 look like? Covernote spoke to the industry experts to find out more about the challenges – and rewards – facing general insurance brokers in the year ahead.
Gary Young, the Chief executive of IBANZ, says there is no such thing as a "typical" insurance broker, because they come from all sorts of backgrounds.
However, there is one thing a lot of insurance brokers have in common – they fell into the profession by accident.
“A common response from insurance brokers to the question ‘How did you get into insurance broking?’ is that it was by accident,” Young says.
“A lot of brokers seem to find their way into the industry rather than it necessarily being a career choice. For example, when I was on my OE in London, I took temp jobs over the winter I was there, and a couple of those jobs happened to be in insurance.
“So, when I returned to New Zealand and needed work ASAP, I took a role in insurance, despite it never being on my radar at school or university.
“This ‘accidental’ introduction to insurance and broking is common in our industry.
“But ask any broker and they will tell you that once in, it is seen as an interesting, varied career with many opportunities.”
Vicki Squair could be counted as one of the "accidental brokers" who has carved herself out a flourishing career for the past 18 years.
Squair owns Risk Advice, a full-service insurance brokerage based in Hamilton, shebegan her working life in a career in sales
“I was drawn to something that was less about selling widgets, and more about working with people,” Squair says.
“My sense is we are seeing people who are attracted to matching a need with meaningful solution, not merely ‘sales’.”
Squair says she has noticed the typical "face" of a broker is getting younger.
“This is very exciting for our profession,” she says.
“I am also seeing people coming into general insurance broking from different industries, and a few are finally seeing this as a career earlier in their working life, including recent university graduates.”
But while the backgrounds of brokers may vary, a good broker must have certain traits,
“Professionalism is essential,” he says. “And a good broker must have good listening skills, have an in-depth knowledge necessary to provide competent advice, and excellent relationship skills.”
Squair lists empathy, maturity (“in thinking, not necessarily age”), financial literacy and good strategic problem-solving skills as the must-haves for a good broker.
“Insurance brokers do come from all walks of life and most of us stumble upon insurance,” she says.
“Those of us who stay in the profession do so because we feel like we are making a difference.”
With almost two decades of being an insurance broker under her belt, Squair says that the one constant in the industry is change.
“It seems like our industry is always changing – mergers and acquisitions, then new start-ups fill the gaps left (thankfully) – this is business,” she says.
“Increasing regulation and compliance for the most part has vindicated the brokers who have been following best practice anyway, but certainly increases a broker’s cost of doing business.
“There has been a real shift towards independent brokers, with a greater level of transparency and accountability, which I believe is a positive direction for the profession.”
Both Squair and Young list compliance as one of the biggest challenges facing the industry in 2019 and beyond.
“As with many professions and industries, compliance is forcing us to spend more time justifying what we do, when most of us just want to get out and help our clients understand their insurance needs and solutions,” Squair says.
The increase in compliance is something the industry has not had to deal with in the past, Young says.
“The new requirements around competency will be a challenge for experienced brokers whose proof of competency has always been based on their experience rather than formal qualifications,” he says.
“Compliance is becoming more and more onerous, running a simple broking company from the kitchen table is no longer an option.
“It will only get worse as regulations become more complex, so back office support to meet these demands is essential.”
Remuneration by commission/brokerage is also coming under increasing scrutiny, Young says, and that will be another challenge the industry will face.
“There is an assumption that this model produces conflicted remuneration for advisers,” he says.
“In general, this is a flawed argument as commissions are essentially paying brokers to handle an insurer’s distribution channel.
“However, it is possible that in future new remuneration models may have to be developed to satisfy the pressure from consumer protection groups and government and regulators more focused on ensuring advisers meet client expectations.
“Just meeting legal requirements is longer seen as sufficient.”
The coming year will also see Big Data and increased technology have an even greater impact on the industry, says Young.
“Technology is both a help and a challenge to brokers,” he says.
“It helps in simplifying, automating many of the day-to-day tasks but the challenge comes in that clients have more options enabling them to go on line and purchase insurance.
“Ultimately this will focus the broker on the key role of providing advice.
“We have seen legislation in recent years define a broker as a financial adviser, there is a clear push to meet the clients’ expectations.”
Amid all those changes, however, a broker will always be able to add value by developing a relationship with a client, understanding their individual needs and meeting those needs, Young says.
“In future IT systems will handle sales, brokers will provide advice,” he says.
Christine Harrison, a commercial broker with Rothbury Insurance Brokers, says keeping abreast of the dynamic insurance market, business environment, regulation and legislation are some of the biggest challenges facing brokers going into 2019.
“That and of course evolving insurance products,” Harrison says.
“Keeping all these things in mind and then tailoring solutions that really serve my clients and provide a safety net if things go wrong.
“Being a broker in Wellington also presents additional challenges because of the local environment and what that means in terms of pricing and cover.
“I think there will be continued challenges in terms of pricing for risk and what that means for our clients.
“Cyber is a big one too – we’re seeing an escalation of cyber breaches and yet so many clients remain exposed and don’t have adequate (or any) cover.
“At Rothbury we’re always looking ahead so we can give the best advice to our clients and ensure they’re fully protected.”
Guy Worsley, Rothbury leader business Development and Sales, Senior Commercial Broker - Southern Lakes, says the hardening market means it’s even more important than ever to educate clients on the need for certain insurances.
“The cost of not doing can be far greater than the premium being paid,” he says.
“Over the last few years, we’ve seen the result of underinsurance in natural disasters and bad weather events, and for some small businesses who are left exposed after a cyber breach.”
But along with challenges come great career opportunities for insurance brokers, says Harrison.
“It’s the kind of occupation that has lots of scope for career development,” she says.
“I started out as a domestic broker and have now worked in lots of roles in the Rothbury business, giving me a broader understanding and knowledge base.
“You could come in as an 18-year-old and really have a fulfilling evolving career.”
Worsley says the opportunities are “huge” for insurance brokers.
“Don’t listen to the hype,” he says.
“As a broker I embrace change and technology; I know that increased automation will only help those brokers and clients willing to adopt,” he says.
“In 1973 the spreadsheet was going to be the demise of accountants, and in 1979, video was going to kill the radio star.
“Accountants are still alive and kicking; radio is still around, and brokers who forge trusted relationships with clients, underwriters and risk providers will be rewarded with opportunity.”
Being small, New Zealand offers less opportunities than overseas markets for specialising in particular lines of insurance, says Young.
“However, some brokers concentrate on particular areas such as liability insurance or perhaps cyber, but more common is having a focus on a commercial or professional sector such as rural or legal,” he says.
There is “definitely” a progression from junior to more senior roles, Squair says.
“Business ownership and corporate management roles are options,” she says.
While the career opportunities for insurance brokers are plentiful and clear, what is less easy to ascertain is exactly what a broker gets paid.
It can be hard to say what the average yearly earnings for a broker are, says Young.
“But there is plenty of potential for well-paid roles,” he adds.
In the meantime, all eyes will be on the reaction here to the recent Australian Royal Commission final report, which detailed several recommendations for the insurance sector across the Tasman.
General insurance products are set to be reviewed in three years’ time, though a ban on commissions hasn’t yet been ruled out by
the Australian Securities and Investments Commission (ASIC), one of the country’s main regulators.
New Zealand regulators will be paying close attention – though what direct action they will take as a result, if any, remains to be seen.
An impact on general insurance brokers, is, however, expected.
Insurance brokers have been known to suffer unsympathetic Hollywood portrayals of ambulance-chasing hustlers who care only about making commissions. Untrue, of course, but if there is one misconception about brokers Young and Squair would like to clarify, what would it be?
“For those outside the broking profession, I think there is the misconception that insurance is a boring office job and inevitably there are some desk-bound tasks,” Young says.
“However, broking is so much more. It is about developing relationships with clients from all types of backgrounds, industries, professions with needs for a wide variety of risk solutions.
“That is what makes it such a fascinating career.”
“I think it sounds like a dry occupation and I’d want people to know that it’s actually anything but,” she says.
“Insurance broking covers so many things and is really interesting.
“I get to work alongside businesses and partner with them to work out the best protection not only for that business but also for the owners and directors.
“It also means I get to learn a lot about different industries and get to meet some incredible people.”
Squair says she would like people to know that insurance brokers care about their clients and “not the bottom line”.
“We love people, not insurance,” she says.
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