Keeping pace with rising inflation

In times of rising inflation, the broker relationship is about making sure your customer’s insurance stacks up.

In times of stress, people need experts to rely on. And, in a high inflationary environment, insurance brokers have a hugely important role to play to help clients navigate through the coming months and years.

It’s going to be a few months of tough conversations with clients to ensure they fully understand what the impact of high inflation means for them – both in terms of premiums, but also should a loss occur.

Underinsurance is an already pressing concern across Australia. Many customers are firmly focused on finding ways to cut back and save money, while the rising costs of repairs and rebuilding are widening the gap between valuations and true replacement costs.

“Most people are well aware that costs are on the increase, but have they actually done the math to assess the real cost to them if the worst case scenario was to happen?” asks Danny Adams, General Manager Insurance Claims for Allianz.

“The recent flood recovery in Victoria is a tragic indication of what can happen when customers elect to take the risk of underinsurance. They just can’t get back to where they were before their loss was based on their level of cover.”

Reviewing policies in an inflationary environment

It’s vital to touch on any exclusions in existing cover that should be reconsidered in the context of high inflation and detail the potential implications of declining the options presented. Valuations and terms and conditions that have been in place for some time will need to be reviewed to allow for the flow-on effect of rising costs. In the case of commercial property insured for potential damages, restoration costs have increased significantly.

In addition, it’s essential to be thorough with an assessment of assets. Valuations based on the original purchase price will warrant a reality check.

“The conversation to have with a customer whose business hinges on having the company vehicle, for example, is ‘what needs to happen to future-proof your turnover in these tough times when repairs or replacements can take months instead of weeks?’ ” Adams says.

Your customer relies on their insurance to come through for them once they lodge a claim, so a thorough review of policy inclusions and maintaining up-to-date valuations is vital in times of rising inflation.

Adams says, “Connecting regularly to keep that conversation going and review your customer’s current situation is so important in these rapidly changing times. We’re always looking for ways to improve the customer experience and sharing up-to-date knowledge with the insurer prepares us to fulfil expectations.”

Adding value will always come down to more than just the raw, upfront cost.

The dependability of an insurer’s supply chain largely determines their capacity for satisfactorily restoring your client’s home or business to full function, according to Bradley Bartlem, CEO of Hunter Premium Funding.

“In the context of a post-pandemic economy and political turmoil in Eastern Europe, premium funders who’ve developed robust strategies for dealing with market volatility will provide greater customer assurance than bespoke processes and supply chains.”

Bring solutions to your clients’ pain points

Cash flow is commonly a big source of stress for business owners in times of high inflation. Where you’ve identified a need to substantially increase a customer’s existing level of cover, providing them with the option of a premium funding product to meet that extra cost can be the real value-add. “Poor cash flow forecasting and financial management is the downfall of more than 80 per cent of businesses that fail,” Bartlem says.

“The flexibility of paying in instalments, instead of a lump sum, can be a welcome solution to the stress of cash flow in uncertain times.”

Not readily available in other industries, this facility can make it accessible for your client to commit to the level of cover they need.

“Soaring interest rates have prompted traditional lenders to crack down on borrowing requirements. This way, you help your customer to afford essential safeguarding of their business by freeing up the cash flow they need, without all the paperwork,” says Bartlem.

“Increasingly, it’s a benefit for many customers to be with a premium funder that has the capacity to be able to work with their clients through situations of hardship and work with the broker to bring them through that rough patch financially.”

In response to the widespread impacts of rising inflation, it’s vitally important for brokers to demonstrate their value to clients.

Making sure they have not only the right levels of cover in place, but access to premium funding should they need it, are two essential ways to help ensure clients emerge from this inflationary period unscathed.

Tips to start the conversation

1. Don’t wait until it’s time for renewal to prompt your customer to stay on track for the protection they need. 2.Check in regularly to discuss how their situation or needs may have changed and allow plenty of time for them to consider the options you present them with for better value insurance. 3. Encourage a review of existing policies and inclusions and talk through potential scenarios of how the process of a claim might look for them, and where updating valuations may be in their best interests.

4.Challenge the idea that cutting upfront costs will save money. Help clients understand the potential impact of underinsurance.