We have been asked to present to hundreds of Brokers this year on Business Insurance (ISR, Buspack and All Risk policies). In particular, we have been asked to explain business Interruption Insurance using a practical focus so that Brokers could discuss even more real life scenarios and examples of the importance of Business Interruption Insurance. We have been asked to highlight, in this training, examples where the right Business Interruption Insurance put together by a Broker has enabled companies to survive a major claim event that otherwise could have been catastrophic for their business. We have been able to contrast that with examples where businesses have organized business insurance directly and at claims time been unpleasantly surprised that they are not insured as best they could have been – and the dollar cost at claim time compared to the relatively small dollars saved by organizing their business insurance directly.
With that in mind, we note that the Vero 2013 survey of over 800 Australian business surprisingly showed that only 75% of businesses with 20-200 employees used an Insurance Broker. This was down 12% compared to one year ago, when 87% of these businesses had an insurance broker. These statistics prompt the question:
“Why are 1 in 4 Australian businesses with 20-200 employees NOT using an Insurance Broker?“
The usual reason suggested is generational change and the internet. Statistics tell us that younger buyers, and Gen Y buyers in particular, are more likely to use the Internet to buy directly. This simple explanation needs to be considered with the reality of how many decision makers on the purchase of business insurance for companies with 20-200 employees fall into these categories - 93% of all survey respondents were over 30 (i.e. 93% - including companies with < 20 employees & companies with 20-200 employees).
There were other reasons quoted for clients leaving brokers. 1 in 3 business decision makers stated the reason they left their broker was that they either:
- couldn’t see the benefit they were receiving from having a broker (understanding),
- their broker didn’t understand their business (perception) or
- their broker was unresponsive (service).
These are not “generational change” reasons. These are “old school” reasons where the business decision maker has not felt or understood that the true value of a good broker is the “sleep easy” feeling that you have the right cover which is proven at claim time not at time of purchase.
As the CEO of a major Australian Insurance company recently noted, about the value-add provided by brokers:
“Even when you get to very simple – or simple looking - businesses, the risk can be quire complex and people need advice as to the coverage they need and the amount of cover they need to buy . . .” He further noted brokers can also prove their worth in the event of a claim.
Brokers have told us that they see a great opportunity in the statistic that 1 in 4 Australian businesses, with 20-200 employees, do NOT use an Insurance Broker. Many brokers have told us they have found real value in discussing, with clients and potential clients, real-life examples where brokers’ expertise in advising on the right business insurance has meant companies have survived major claims events. Ultimately this has assisted them in selling the right Business Insurance to clients. Importantly, it has also assisted clients’ to better understand the benefit of having a good insurance broker who is a trusted adviser.
We hope in 2014 that those 1 in 4 broker-less Australian businesses, with 20-200 employees, can come to a better understanding of the benefits that a good insurance broker can bring to their business. Hopefully it doesn’t require a major claims event to enable that realization.