NBS 2020 What’s keeping brokers up at night
October 6, 2020 by David Gambrill
Print this page Share
Brokers are having trouble finding coverage for their clients these days, and the impact of Canada’s hardening P&C insurance market is fast becoming a strong challenge to the broker channel, as Canadian Underwriter’s 2020 National Broker Survey reveals.
Results of the survey will be published in the forthcoming October/November 2020 print edition of Canadian Underwriter. The survey of 220 Canadian P&C brokers nationwide did not list carriers’ reduced capacity among major challenges facing brokers this year. However, brokers rated all other challenges as less problematic than during previous years. And in the open-ended question asking brokers to highlight any top challenge not listed in the survey, many write-in answers cited the hard market as particularly challenging.
One open-ended survey question asked if brokers had any advice for their fellow brokers on how to further develop trusted advisor status with clients. One broker replied: “Stay out of the business. It’s the worst it’s been 35 years. Essentially ‘CLOSED’ for business!!!”
This tongue-in-cheek comment about the hard market aside, the job isn’t easy these days, as the survey numbers show.
As in past surveys, Canadian Underwriter listed 10 common challenges for brokers. Over the past three years, including this year, the Top 3 challenges have been:
- Competition with direct-to-consumer business models (62% in 2020, as opposed to 76% in 2018)
- Misperception of the value of insurance brokers (47% in 2020, as opposed to 58% in 2018)
- Broker consolidation (46% in 2020, as opposed to 52% in 2018)
Rapid technological change, a threat we added to the list this year, came in at 47% (1% above broker consolidation).
When asked this year about strong challenges to the broker channel, the hard market made its presence felt in the “other” category. In open-ended answers, several brokers reported anxiety about the impact of the hardening P&C market. Written answers linked to a hard market included: “lack of flexible underwriting,” “the companies unwilling to write business,” “lack of insurance capacity.”
A “plummeting economy, while rates are still increasing,” one broker observed about the channel’s strongest challenge in 2020.
Perhaps the biggest impact of the hard market could be seen in the survey question asking brokers to identify the most successful actions and investments for strengthening their business. The top overall strategy this year was product training and education, as it was last year. But perhaps most notable is the three-year trend of how many brokers graded “changing the carriers you work with” as a best practice (i.e. grades between 8-10). The number is noticeably on the incline — up to 36% this year from 28% two years ago.
This suggests brokers are giving more thought these days to switching markets, as carrier capacity for certain lines of business dries up. “From year to year, we all know that carriers are fickle,” one broker wrote. “We have to be on our toes, knowing when to change carriers for a client.”
But despite the rigours of working double-time trying to find appropriate markets for their clients, the angst has not played out in the brokers’ job satisfaction scores.
This year’s survey demonstrated that a vast majority of brokers enjoy the challenge. Eighty per cent of the 220 brokers in our survey rated their job satisfaction between 8-10 on a scale of 1-10 (with 10 being ‘Extremely Satisfied’). Of those who rated the job between 8 and 10, 42% rated their job a 10, which is the highest percentage of brokers to rate their jobs at the highest end of the scale over the past three years.
Two-thirds (66%) of brokers surveyed agreed either somewhat or greatly with the statement: “With all of the recent and anticipated changes in the insurance industry, brokers face more opportunities than threats.”
Feature image courtesy of iStock.ca/DNY59
In reference to the remark: “Stay out of the business. It’s the worst it’s been 35 years. Essentially ‘CLOSED’ for business!!!”. This is true, I became a retail broker in 1984 after 6 years underwriting. At that time on any day an insurer offering mid-excess layers on an already costly umbrella or excess e&o renewal would suddenly withdraw with no notice. Finding someone to replace that mid-layer within days of renewal was daunting, as other excess players refused to participate at a lower level and the marketplace was already significantly smaller.
Nonetheless, this is an incredible training ground for the young commercial broker, suck it in, absorb and remember the difficulty and how your more learned colleagues that have seen it before, overcame it. When the marketplace changes again in another 10 years or so, you’ll be ready for it, just like us older folk today. Well, it’s been a long time, we have to pull experience from deep within our minds so it’s not easy. Don’t be discouraged, learn.
The following two remarks go hand-in-hand to some extent:
“•Competition with direct-to-consumer business models (62% in 2020, as opposed to 76% in 2018)”
“•Misperception of the value of insurance brokers (47% in 2020, as opposed to 58% in 2018)”
As retail brokers we are always suspicious of the stock/contract insurer that starts to issue communication direct to insureds, or advertises with barely a mention of the role of the broker. The insurers to which I refer need to be more respectful as to where their business originates from and allow the brokers to handle client communication. Disintermediation is not inevitable and there will not likely be a day when all retail brokers are “owned” by insurers. The public generally has a deep mistrust of insurers and a great trust in retail brokers. In my opinion there will always be retail brokers, perhaps fewer but we will always be around as long as the buying public needs trusted advisers. An insurer cannot truly fill the role of trusted adviser, it is riddled with conflicts.
Add to this that the value of brokers is itself impacted by those insurers that refuse to share full loss information. How are we as brokers expected to handle replacement of an account when requested to do so by an insurer, when that same insurer will not share the full loss information including reserves? These insurers are forcing us to misrepresent loss information to other prospective insurers, so we are forced to state that the incumbent, that has a desire to dispose of the business, refuses to share the full loss history. Note, as brokers we must disclose if an insurer has refused to supply full loss information, otherwise we now have a potential e&o claim. Let it reflect negatively on the Insurer that refuses to share this, not on you as the professional broker.
How can we as brokers demonstrate our value to our clients when the insurers with which we place good business, think they are permitted to withhold crucial underwriting data? This practice by certain insurers needs to stop now, it has gone on too long and it serves no benefit whatsoever to the buyer. It does nothing less than make the marketplace even more difficult. The word co-operate comes to mind, if you work “with” brokers rather than against us, we will find solutions to replace business you no longer desire. Work against us and we all fall deeper into the abyss of this hard marketplace.