Hard markets are not only tough on the entire insurance industry, they can also disrupt the way brokers are perceived by their clients.
Canadian Underwriter’s Trusted Advisor 2021 survey contained several responses that revealed low levels of satisfaction and the hard market may have been a contributing factor.
For example, upon renewal of a policy, or to make policy changes, only 64% of business respondents and 50% of consumer clients agreed or strongly agreed their broker provided ‘a wide variety of options and choice.’
And, only 61% of business respondents and 51% of consumer clients said their broker gave ‘advanced warning about a rate increase, and [explained] why it happened.’
“In a hard market we have less options that we can offer our customers, particularly if markets are not providing options, so availability of coverages in the marketplace certainly hamper us in providing choice to our customers,” said Robyn Young, president and CEO of Calgary insurance brokerage Excel & Y Insurance Services Ltd.
“The same thing with rate increases in a hard market – it is harder to get rates at all, so when coverage is offered, it is often at a much higher rate,” added Young, who is also president of the Insurance Brokers Association of Canada.
A difficult market
Ted Harman, president of Accent Insurance Solutions in Montreal, said the current difficult market conditions aren’t emblematic of a technical hard market related to capacity, but rather “a flight to quality by insurance companies who are chasing after a pool of risks that they define as better than risks in the non-standard market.”
What they are doing is applying increasingly strict underwriting criteria to those risks, he explained.
Harman also noted it’s possible that respondents applied different standards to the survey phrase ‘wide variety of options and choice.’ For example, if a client called to say they’d purchased a new car, Harman said he would normally substitute the new car on their existing policy rather than cancel the policy mid-term and place it with another insurance company.
“That could be perceived by the client as not giving a wide variety of options, but I don’t believe it’s appropriate for us to shop all of our insurers mid-term when a client is substituting a car, unless there were extenuating circumstances, such as if insurers applied surcharges to certain vehicles,” he said.
Market impacts perception of service
In another key survey question about brokerage services, the category ‘is a good problem solver’ scored a low 66% satisfaction level for business clients and 57% for consumers.
Market conditions might have impacted responses to that question, said Harman. “The restrictiveness of insurers on underwriting criteria can put a broker in a difficult position to try and find solutions,” he said.
For example, an insurance company may have an arbitrary cut-off for the year of a building’s construction, but that has nothing to do with the quality of the structure, the maintenance of the building or whether that building has been significantly updated.
But, Harman explained, “that’s the type of thing that happens in flight to quality … and that limits the ability of the broker to be a good problem solver for that client.”
Young said that when brokers’ hands are tied due to market conditions, this can contribute to a perception by certain clients that brokers are not adequately solving their problems.
“We don’t create the coverages,” said Young. “We sell the coverages and provide the options for what coverages exist,” she explained. “So, when a customer comes to us with a problem that they need solved, if the coverage doesn’t exist or is no longer available, we can’t help them.”
The broker can only explain why the problem exists and help the client find ways to manage their risks and improve their premiums over time.
Young added brokers should view a hard market as an opportunity to burnish their credentials as a trusted advisor to their clients. Yet only 70% of business clients and 74% of personal clients agreed or strongly agreed their broker ‘is a trusted advisor’ in the 2021 survey.
This, she explained, is why it’s important to help clients understand the details about the hard market. That will help them grasp why their coverage conditions and/or prices have changed, or why certain coverages they had in the past are now unavailable.