Bridging the knowledge gap: trusted advisors
Relationships are the lifeblood of the insurance broking industry. The trust clients place in brokers to guide them through the complexity of insurance and help them determine the right solution for their needs, is something brokers take very seriously. The relationship between brokers and their clients goes well beyond the transactional; insurance brokers are invested in their clients’ outcomes.
The service brokers provide to their clients and the broader community is incredibly valuable and one that deserves to be appropriately compensated. It should be noted that while the Royal Commission into the financial services industry found that some types of commissions drove poor outcomes for clients, these commissions do not form part of the remuneration structure for general insurance brokers.
The financial services industry has rightly faced significant public scrutiny. As professionals placed in a position of trust, brokers accept that their activities and industry business models should be evaluated and tested to ensure they continue to meet the highest professional and ethical standards. As this scrutiny turns to the intermediated general insurance market, the industry must demonstrate the value it provides and explain why the current business model should remain.
Last month NIBA released a Deloitte Access Economics report into the economic value of insurance broking. Although commissioned by NIBA, the report is not simply a regurgitation of the NIBA position but rather an exhaustive exploration of the role brokers play in supporting their clients, insurers, governments and the broader community.
We are humbled by the findings of the report, most notably that brokers are among the most trusted professionals in the financial services sector, maintaining higher levels of trust than financial institutions and general insurers.
While it is undeniable that brokers provide value to their clients the scale of the benefits brokers provide to their clients would surely be a surprise to those who do not currently engage the services of a broker. Clients recognised brokers as trusted advisors, capable of providing tailored, independent advice. This advice is the number one reason clients gave for choosing to use a broker.
Clients also highlighted examples of brokers going above and beyond to advocate on their behalf following an insured event, with the majority of clients believing that the claims process would have been much harder without their broker in their corner.
Less obvious is the role of brokers in facilitating economic stability reducing the financial burden on governments and the broader society. Product matching by brokers ensures that household and business clients are matched with the appropriate cover to support their operations and improve their resiliency, resulting in minimal disruptions to the economy.
Brokers are risk experts, as such businesses and individuals with hard to place risks often turn to brokers for assistance. In markets where there is limited access to insurance products, brokers are able to reduce the incidence of underinsurance or non-insurance and reduce the burden on government disaster relief.
While the value brokers provide is as varied as the clients they serve, the role of the insurance broker is not widely understood. Our members are humble, quietly going about their work to support businesses and individuals all around Australia.
It is my sincerest hope that this report goes some way to bridging that knowledge gap and educating government, regulators and the broader community on the role of brokers and the immense value our members provide.
This report shows the value in taking time to properly examine the role you play, not only are insurance brokers as relevant as ever, one could argue that as markets harden, businesses look to focus on resiliency and extreme weather events occur more frequently the role of insurance brokers becomes more critical.
This report is simply the first step for NIBA, I look forward to updating you all on our next.