In the hard market, are you selling on price or coverage?

Price point and carrier capacity have become increasingly important factors for brokers in recommending insurance coverage to their clients over the past year, according to Canadian Underwriter’s 2021 National Broker Survey.

Canadian Underwriter asked 234 Canadian P&C insurance brokers across the country what they considered to be the most important factors for them. Seventy-one per cent of brokers ranked price point among the highest factors, while 67% rated carrier capacity highly.

Broker experience plays a role in whether a broker is more inclined to consider price point or insurer capacity, the survey shows. Brokers with fewer than 16 years of experience in the business — some of whom may never have sold insurance in a hard market before — are more likely to take the price of the policy into consideration. On the other hand, more experienced brokers are more likely to consider a carrier’s capacity.

The broker value proposition in Canada is frequently described to the consumer as “the right coverage for the right price.” But the current hard market cycle, which has seen higher prices and deductibles, as well as shrinking capacity in some high-risk lines, has tested the broker’s ability to keep the conversation focused on cover and value, not price.

“The real key is presenting the right coverage options for the client to decide how much they are willing to pay for how much coverage they feel is right for them,” Hugh Fardy, a senior brokerage executive and a broker E&O specialist, posted on LinkedIn.

“As they say in court, I will stipulate there are buyers who only want to pay less and have little if any concern about cover. They may continue to shop each year, may pose extra E&O exposure [for the broker], and may be an accounts receivable issue.

“We need to change the narrative about insurance, moving focus to having clients in a position to make an informed decision on their insurance purchases. That means getting as much advice as possible in the client’s hands.”

While most brokers would agree with that, others in the LinkedIn thread following Fardy’s post observed that, in a hard market, trying to get the client to focus on coverage and not price may be easier said than done.

“I’ve been in this business for 46 years and the altruistic mantra has always been it’s about coverage and value-added, but the bottom line is for our customers, it’s about price,” Peter Johnson, president at Jo-Gam Investments (2010) Ltd., commented in the LinkedIn thread. “At the end of the day, we can’t blame our customers, because no matter how much we scream hard market, there is always [some indiscriminating consumer] out there that wants to buy their market share.

“The only way that we will ever achieve our goal of having customers pick their broker for service and value added is to have all pricing be the same and the chances of that are slim and none, so let’s stop fooling ourselves and realize that our industry is all about how much and not so much about coverage and service.”

To which Fardy replied that too much focus on price may lead to increased E&O exposure for brokers. “From an E&O viewpoint…focus on advice [it] has to be. [If] too many believe in price, [that] may be the downfall of insurance ‘advisors.’”

Feature image courtesy of iStock.com/olaser