Guarantee COO advises carriers, brokers to diversify as world becomes “full of extremes”

With extreme weather patterns, protests that shut down cities and sudden economic downturns, it’s becoming more important for insurance carriers and their brokers to offer a wider variety of coverage, suggests Bob Dempsey, president and chief operating officer The Guarantee Company of North America.

“The world has become full of extremes,” Dempsey said Wednesday during a breakfast presentation at the Insurance Institute of Canada in Toronto.

“We’ve never seen weather patterns like we’ve seen in the last decade. We’ve never seen such a sinusoidal curve to the world’s economy, where we’re riding high and then all of a sudden within two years due to some over-leveraging of mortgages of houses in the U.S., the whole economy goes to hell in a hand basket worldwide and it kick-starts a domino effect.”

He added that social media is changing the nature of political demonstrations. “Before when we used to object, we used to write a letter to the editor,” Dempsey said. “Today you rally up 1,000 people through Twitter and social media and you go out and you protest and you close down streets and you close down cities.”

To mitigate their own financial risk, he suggested, some carriers may need to expand their offerings. “The only way the insurance industry in my mind can survive that is to diversify, to make sure you’ve got a spread of products that not any one of those extremes kicks you in the slats so badly that it affects your result.”

Dempsey’s presentation, titled “Innovating and Winning in a World of Change,” focused on industry factors that are changing and some that remain constant.

One thing that isn’t changing, he suggested, is the importance of helping clients.

“You provide the help because when someone has a claim that’s an out of body experience for them,” he said. “It’s not like putting butter on your toast if you do it every morning. It’s a unique situation and unless you are convincing that you are the trusted advisor, that you can give them an opinion that they can trust on how they should handle their claim or how you are going to handle it on their behalf, that’s never going to change.”

But one thing that is changing is the rise of direct writers, or what is referred to as disintermediation.

“That is the middle man,” Dempsey said. “The broker. Is there a need for the broker any longer? The Guarantee has committed itself that there is a value, there is a need.”

A broker needs to be a trusted advisor, he added.

“That’s your cornerstone as opposed to the direct writers or the banks because I would hardly say the banks come away with this reputation as being this trusted advisor because of the other aspects that you deal with. They hit you with mortgage rates, they hit you with car loan rates.”

Brokers, like carriers, also need to diversify their business offerings, he added.

“Brokers, if you’re not diversified into not just the P&C business but also the life and health business, you’re not giving that one stop shop to your clients and all of a sudden somebody will blindside you with some product that you don’t offer and you will lose that entire account to a competitor.”

Another thing that is changing, he suggested, is the 24/7 nature of the business.

“When I graduated from university in engineering, 724 meant seven bottles of beers and a case of 24,” he quipped. “Today it’s vastly different. Today it means you’ve got to be visible, you’ve got to be accessible seven days a week, 24 hours a day. In the insurance industry, if you’re not, you’re falling behind.”

Although technology is changing the business, Dempsey suggested some may be relying too much on computer modeling.

“I constantly say to our staff, ‘We have two computers. We have the one that sits on your desk and you’ve got one on your shoulders.’ It’s the computer on our shoulders that isn’t given the opportunity to function often enough.”