General Insurance review

Potential mortgage crisis looming – don’t forget GI

Geoff Hall

chairman, Berkeley Alexander

Mortgage lending in the UK may be heading for its biggest plunge for more than a decade. According to one report from consultancy firm EY, loans may total just £11bn next year, a fraction of the £63bn seen in 2022.

An unhealthy mortgage market is obviously bad news for brokers, but it’s not all doom and gloom. If you’re a regular reader of my column, you’ll know how strongly I believe that advisers should grab the opportunity of general insurance (GI) sales to see them through hard times.

The good news is that GI sales deliver a differentiated point of service and additional value for clients as well as commission for you.

The even better news is that selling GI doesn’t have to be an administrative burden. Whilst you will probably have the expertise to handle the standard cases, for more complex ones, referrals to a GI provider enhance your opportunity to support customers and eliminate the administrative burden, whilst providing you with more income.

Don’t limit yourself to household policies. GI offers the chance to diversify, and access to potential new sources of income. Clients will be trying to save money across the board, as well as protect themselves as much as possible; talk to them about income protection, specialist mid- and highnet worth cover, and rent guarantee and other insurance for property investment portfolios. Likewise, don’t ignore non-standard, commercial, and difficult-to-place risks.

WINTER IS A HIGH-RISK TIME FOR YOUR COMMERCIAL CLIENTS

Your commercial clients can face significant risks when it comes to winter weather. Following is some valuable risk-management advice you can use to assist your clients.  Mitigate against potential liability issues. Companies have a duty of care to protect their staff from injury – something that becomes more difficult in hazardous conditions. The shift to home working may reduce the likelihood of claims, but it’s worth noting that businesses may also be liable for injury occurring to delivery drivers, customers, and other people visiting their business premises. Advise them to fill potholes and uneven surfaces, monitor ice on entry and exit points, and so on.  Protect against property damage.

In the current economic environment, clients may be tempted to turn the heating off when the property is empty to reduce fuel bills – but burst pipes present a major risk to property, equipment, and stock.

Encourage clients to uphold good property maintenance and arrange to lift stock off the floor (on racking or even spare pallets), away from potential floodwater.  Limit the risk of business interruption. Storms can cause damage that means business owners have no choice but to shut down operations. Protection and preparation are vital. Speak to them about their business interruption insurance policy, and ensure it is adequate for lost income and costs incurred.  Protect the motor fleet. It’s critical that businesses service their motor fleets and prepare vehicles for cold weather with oil, fuel, battery, and tyre checks, and so on. It’s also worth considering conducting safe-driver training; many providers offer this vital added benefit, so it’s worth checking whether your clients have this option.

SMES RISK JEOPARDISING COVER DUE TO UNDERINSURANCE

On the subject of your commercial clients (and that means your own business, too!), around 3.5m of the 4.3m SMEs in the UK may be underinsured. A report by Towergate highlighted that valuation experts Barrett Corp & Harrington found that on average 77 per cent of the commercial properties they survey are underinsured by an average of 45 per cent.*

Geopolitical risks, supply-side disruption, the high cost of living, and labour shortages can all increase the risk of underinsurance. Talk to your clients about the following:  Is their building insurance adequate? Getting the rebuild costs wrong can result in reduced claims settlements and delays that could affect the viability of their businesses.

GI providers like Berkeley

Alexander have a desk-based valuation service that can help avoid such underinsurance.  Is their business-interruption policy fit for purpose? Do they have the right limits of cover and correct length of indemnity period?

Many firms take 12 months’ cover, but many claims last well beyond that, leaving the client at risk of bankruptcy.  Have they reviewed their liability policy limits recently? Again, awards are escalating, but too many firms still want only £1m or £2m in public liability when £5 million should now be the norm. M I

Does the development of adviser tech need more input from advisers?

Louise Pengelly

proposition director, Paymentshield

The key in any industry when developing tech is not just to listen to what your customers or partners are saying but to go one step farther and really unpick the challenges being faced. Only then, once you have that input and really understand the problems you’re trying to solve, should you start to apply your own technology and insurance expertise.

When it comes to getting input from advisers, Paymentshield proactively gathers insight to support our understanding. From the day-to-day interactions of our sales team, to the GI Live roadshows that are currently taking place across the UK, through to our annual adviser survey, we strive to use every opportunity to understand the problems advisers are facing at any given time. We’ll also do live testing of our major tech developments directly with advisers to make sure whatever we develop is truly fit for purpose.

What we’ve learned over the years is that being able to offer clients a reliable and positive customer experience is actually what’s most important to advisers. It follows, then, that when trying to solve problems for advisers, it’s imperative never to lose sight of the customer, as this will only cause problems down the line.

The home-insurance quote experience illustrates this point perfectly. Advisers are under pressure to offer a fully protected home in the short time they actually get in front of the client, and therefore the quick and easy answer to the question “Why don’t you do more GI?” is often “I don’t have time.” Recently, this has led to an almost single-minded focus on trying to limit the questions asked to generate an insurance quote.

Whilst reducing the number of questions asked during the quote process will go some way to helping advisers, in our 2022 adviser survey, conducted with over 330 advisers, over 80 per cent agreed that an accurate quote is more important than a fast one.

What we’ve learned over the years is that being able to offer clients a reliable and positive customer experience is actually what’s most important to advisers

Furthermore, when we asked specifically about what might make discussing GI with remortgage customers more appealing, only nine per cent said a quicker quote process – far below things like sales training and a generous quote validity period to help match up renewal and remortgage dates.

These results highlight that advisers might have different priorities from what might initially spring to mind once you start to gather more insight. Rather than how long it takes to get a quote, the concern about time potentially arises from how long it might take advisers to feel comfortable with products, or from having to go back to clients if the quote expires and then spend time re-keying their details to offer a new quote.

Indeed, if we were to take the initial feedback at face value and just look at reducing the time it takes to get a quote, then there’s the risk of sacrificing customer outcomes. That’s where quotability comes in, which is arguably one of the biggest drivers of the customer experience.

The importance of quotability is often misunderstood, but it’s basically a measure of how likely an insurance provider is to offer a quote to clients based on where they live, what their property is like, and what they’re looking to insure, along with their personal circumstances and claims history.

The more quotability is optimised by a provider, the more likely an adviser will be able to offer their clients a quote in the first place, which is arguably the most fundamental part of the customer experience and not something that can be overlooked in the pursuit of speed.

To maximise quotability, you need to ask questions so the insurer has a good picture of the risk they’re being asked to cover – the more they know, the more tailored the price becomes to customers’ circumstances. You can further improve quotability by creating a panel of insurers, with each insurer having its own individual approach to risk (a property one insurer might not cover, another may). However, with more insurers, the chance is you will also need to ask clients more questions.

The answer to the question of whether innovating for advisers should involve more input from them is thus a resounding yes. But that input can’t be superficial. Furthermore, what businesses should never do is deliver tech enhancements just because they can. As an industry, we can’t lose sight of the fact that tech only adds value to advisers where it also adds value to customers. M I