CLIENTS OF TOMORROW
A NIBA BROKERS’ GUIDE ISSUE 4 – APRIL 2021
CONTENTS ISSUE 4 FEATURES 4 A Path to Growth 6
Caring About Sharing
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Back to the Future
10 The Age of Opportunity
The NIBA Broker Guides are brought to you through a partnership of Allianz and NIBA. We hope the knowledge of our subject matter experts, coupled with Allianz’s industry expertise, helps you and your clients prepare for the future. We welcome ideas for future subjects - please email your suggestions to editor@niba.com.au. 2
In the fourth edition of A NIBA Brokers’ Guide, our subject matter experts help brokers leverage opportunities now and into the future by identifying emerging risks, highlighting growing sectors and examining future generations of clientele.
WELCOME
For many, the past 12 months has been the most uncertain and unsettling period of their life. In fact, the 2021 Allianz Risk Barometer1 was dominated by the global pandemic, with issues relating to business interruption, the outbreak and cyber incidents keeping company leaders awake at night. The outbreak of COVID-19 has taught us all a lot, but for brokers the lesson is critical – in order to deliver value to clients today, and into the future, the central conversation must transcend individual risk and focus on business continuity. Brokers ultimately have a choice, do they want to be a service provider, or do they want to help their clients understand risk, uncertainty and the future? Advising on risk transfer may have been sufficient in the past, but our experts say brokers are now expected to help businesses improve their ability to recover in the event of any loss or damage – insurance, while critical, is just one aspect of this.
DALLAS BOOTH Chief Executive Officer, NIBA
GLEN DRINNAN, Acting Chief General Manager Commercial, Allianz
Long before disruption brought on by COVID-19, the sharing economy had been growing exponentially. Now, thanks to the pandemic, it’s likely we’ll see the number of people working and earning money in non-traditional ways increase even further. And it’s not just millennials or Gen Zs, everyone is looking for flexibility in the way they work. For brokers, this is an opportunity to evaluate and educate their clients about the new risks they may be exposed to, without them even realising. As we consider the future of work, we must also explore the behaviours and attitudes of future generations of clientele. Their wants and needs do and will differ from those that came before them – brokers will need to provide expertise and knowledge via digital platforms, while aligning themselves to social causes, our experts say. Finally, it would be remiss to consider the future, without considering those that have lived through our past. In 2011, the Productivity Commission predicted that 3.5 million Australians will be accessing aged care services every year by 2050, requiring a workforce of almost one million direct care workers2. Our experts say there are a lot of opportunities from a broking perspective – there will be requirements for specialist professional indemnity policies for those consultants working with this growing demographic. We hope you find this a relevant and interesting read. 1 https://www.agcs.allianz.com/news-and-insights/reports/allianz-risk-barometer.html 2 https://www.pc.gov.au/inquiries/completed/aged-care/report
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A PATH TO GROWTH
generations of clients are more nuanced than merely targeting areas of business that are expanding and reducing exposure to those contracting. “While we’ve identified the COVID-trio as being uppermost in the minds of most business leaders, the gamut of risk remains,” says James Stack, Pacific Distribution Director for AGCS. Stack says the central conversation brokers must have to deliver value to their clients today and into the future needs to transcend individual risks and focus on business continuity.
Leading demographer Bernard Salt, futurist Gihan Perera and Allianz Global Corporate & Specialty’s James Stack say the broking industry has a unique opportunity to position itself to forge new paths, ways of working and enhance its role with clients as a true partner in risk. Michelle Dunner reports. The 2021 Allianz Risk Barometer1 was dominated by the global pandemic with issues around business interruption, the outbreak and cyber incidents keeping company leaders up at night – dubbed the ‘COVID-trio’. While Australia’s economic recovery from a year like no other seems to be more rapid than many other countries, there are clear winners and losers in the business arena. But the implications for brokers in looking to attract future 1 https://www.agcs.allianz.com/news-and-insights/reports/allianz-risk-barometer.html
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“If COVID and the other major issues we saw last year, including bushfires and floods have taught us anything it’s the need for a working, living business continuity plan (BCP). There’s been a lot of talk about business disruption, supply chain issues, ‘near-shoring’, but it always comes back to having a robust BCP and that’s where brokers really can help their clients. “If the focus for brokers is to attract new generations of clients, it’s more than looking at individual industries. The broker today, tomorrow and into the future has to go beyond advising on risk transfer and help businesses with their ability to recover. Insurance, while a critical component, is just one aspect of that.” EXPANSION AND CONTRACTION At the 2020 NIBA conference, Bernard Salt identified healthcare, technology, logistics, high-end manufacturing and agribusiness as having the highest growth potential.
The broking industry has a unique opportunity to position itself to forge new paths, ways of working and enhance its role with clients as a true partner in risk. “While those five industries still hold true, if I was giving my conference address today, I’d be leading with home furnishings and home technology businesses,” he says. Salt says this is driven by ‘VESPAs’. “The acronym stands for ‘virus escapees seeking provincial Australia’. It’s a movement of people scootering out of Melbourne and Sydney looking for escape to a sea change or a tree change. We saw that 20 years ago led by downshifting retirees but VESPA takes that theme and injects youth and energy into it. People relocate because they can now take their jobs with them, particularly into what I call the ‘Goldilocks zone’ within 120km of the CBDs. “These are people who may need to get to the city once a week but are now focused on lifestyle. There are also people moving who are taking their businesses with them, to meet the demand for local services. For me, insurance agents should see a lot of opportunity unlocked with this movement; it’s about running with the current, reading the trends and looking to capitalise. If you’re waiting for everything to return to normal it may well be a death knell.” If brokers have traditionally focused on businesses impacted by industry contraction, Salt advises them to “look laterally” to reap the advantages of the demographic shift exemplified by VESPAs. “Rather than, say, a hospitality business, which may or may not come back, look at the suppliers of appliances, furniture, technology contractors, tradies involved in building improvements. “But even with hospitality clients, there is a potential role for brokers in helping them rethink their business.” Brokers can use the PESTLE analysis, which is a framework used to monitor the macro-environmental factors that may have a profound impact on an organisation’s performance, to help them accelerate the “rethinking” process. Futurist Gihan Perera says it’s an optimal tool looking at political, economic, social, technological, legal and environmental factors. “Brokers should first take a step back,” Perera believes. “If they used PESTLE to look at their own businesses, to see what’s happening in the insurance industry, the political
KEY CONSIDERATIONS FOR BROKERS • Have conversations with your clients that transcend individual risks and focus on business continuity. • Acknowledge that insurance is just one component of enhancing the ability of a business to recover. • Recognise that your client may no longer be local – you can pick up new business without having to shift yourself. • Build a social media presence and engage your target audience online. If you don’t have the skills to do so yourself, subcontract someone to deliver engaging messages to potential clients. • Be aware that in the future you may not be competing with another broker to attract clients. Be prepared that apps, online software and other disruptors may impact your client base.
and economic changes, the new technologies available, they can then have a greater awareness of how to do that for their clients. Ultimately, all brokers can choose whether they want to be a service provider or go further and help their clients understand about more than insurance products, but about risk, uncertainty and the future.” Perera says to attract future generations of clients, or indeed continue to deliver value for existing clients, “Brokers need to be closer to clients and customers and understand their priorities have changed. Technology means even if you’re a small broker it doesn’t mean you can’t compete with the big guys. It’s all about going beyond the transactional; most businesses don’t think about risk in the same way as brokers and you need to understand their environment. Run an online webinar, a client loyalty event, educate your clients, build the relationships by bringing your clients together so they can network with each other. “People have problems they want solved and help with goals they aspire to.” Perera suggests brokers carefully consider what’s in their wheelhouse that can help their clients solve problems and reach goals. He says, those brokers that do, can feel confident about their future.
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CARING ABOUT SHARING
The sharing economy – think Uber and Airbnb – has grown exponentially over the past decade. However, Urtzi Grau, Jim Minifie and Allianz’s Philip Heath warn that with new business models come new risks – Martin Wanless investigates. Traditionally, brokers could look at insurance rather simply. On one hand, there were personal lines, on the other were a vast array of business-related insurances. The same client may well have needed both, and indeed from a clientrelationship perspective, it often paid to help ensure the client’s full range of risk was covered. Over recent years, however, those two areas have begun to overlap. Thanks to the connectivity enabled by the internet, and the growth of opportunity that’s followed, we’ve seen the rise of the sharing economy, in which people use personal possessions – from a hammer to a holiday home – to earn a few extra dollars. NEW BUSINESS MODELS, NEW RISKS When we talk about the sharing economy, the best examples are the likes of Airbnb, Uber and Airtasker. Whether you want to ‘rent’ out your home, car or tools to someone else, you can feasibly do so in a matter of minutes, thanks to a third party facilitating the transaction. Urtzi Grau, Director of the Master of Research and Director of the Master of Architecture at the School of Architecture at UTS, and co-author of the Future of Living1 report, commissioned by Allianz in partnership with UTS, says “These platforms are basically 10 years old, so they’re still extremely new. “There’s been two models of backlash – one a rejection of some of these models by some elements of society, and another in terms of attempting to understand and regulate these models of business, and trying to figure out how to do it well.”
When new business models emerge quickly, it presents challenges to all concerned – as we’ve witnessed with restrictions on the number of Airbnb properties in some areas, and restrictions on the presence of Uber in others. “Even the bite-sized transactions you find on sharing platforms such as Airbnb can have big implications for risk,” says Jim Minifie, former Productivity Growth Program Director at the Grattan Institute and current visiting fellow of the Committee for Economic Development of Australia, and author of Peer-to-Peer Pressure: Policy for the Sharing Economy2. “Hosts and guests are usually well-behaved, but things can go wrong for them or for third parties, whether it’s injury, property damage or theft. Not surprisingly, they and insurers have been keenly interested in who bears the costs and risks of the sharing economy.” ATTENTION NEEDED “It’s an incredibly complicated area of insurance,” says Philip Heath, General Manager of Consumer and SME/ Farm Platform Solutions at Allianz. “Airbnb and Uber are good examples of where you’re using a domestic item normally used for personal use, for business use. “On most private domestic policies, you’ll have exclusions or limitations as to how you use that asset for business.”
“Even the bite-sized transactions you find on sharing platforms such as Airbnb can have big implications for risk.”
1 https://www.allianz.com.au/aalaus/aalaus.nsf/docs/future-of-living-report/$file/Allianz_The_Future_of_Living_FINAL.pdf 2 https://grattan.edu.au/wp-content/uploads/2016/04/871-Peer-to-peer-pressure.pdf
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“There’s significant risk in terms of damage, as well as liability for injury to third parties.” Similar risks come hand-in-hand with Uber. Given a vehicle will be on the road for business, a client will need more than the usual domestic cover, as they’re exposing themselves to commercial risk, like loss of business income and again, higher liability exposure.
KEY CONSIDERATIONS FOR BROKERS
THE EVOLUTION OF THE SHARING ECONOMY
• T he demand to work and consume products and services in new ways is growing. Ask your clients whether they’re participants of the sharing economy.
The rise in popularity of different ways of working is only going to grow – and, thanks to COVID-19, it’s likely we’ll see the number of people working in non-traditional ways increase.
• I f your clients are using their personal items to generate revenue, they may need to re-evaluate their insurance needs.
“It’s not just millennials or Gen Zs,” says Heath. “Everyone wants that flexibility in the way they work. You’ve got the technology that can enable it, and you’ve got the increased demand from small businesses and householders who actually want to use the service.” And that demand will only see flexible ways of working increase.
• E nsure your clients are aware that most private domestic policies have exclusions or limitations as to how assets are used for business.
Aside from growth, however, what else does the future of the sharing economy hold? One evolution is a collective approach to construction, for example. “We’ve been researching a series of collectives that operate at a smaller scale,” says Grau. “For example, The Commons in Melbourne. Basically, people have used the sharing economy concept to cut the developer out of building a building. “A group of people bring that kickstart thinking; everyone buys into the building and they’re the developer – they operate and make decisions over the design and construction, for example.
• C lients may be under the impression that the sites they trade through offer adequate cover. You have an important role to play in encouraging them to read the policies so they can determine whether it is right for them.
“It has some major insurance implications, but it’s another example of how technology is changing the way things are done.” It’s another to add to the brokers’ watchlist – and another example of the new risks your clients are potentially being exposed to, sometimes without even realising it.
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BACK TO THE FUTURE Millennials and Gen Zs want more from life than previous generations may have – however, millennial broker Kate Martin and Allianz’s Pierre De Villiers agree that it doesn’t mean it’s all new. In fact, social commentators Claire Madden and Katie Iles reveal that due to the pandemic, some of their values are more in keeping with a post-war generation – Steph Wanless reports.
Account Executive at Marsh, and NIBA’s 2020 Young Professional Broker of the Year.
When working with a multitude of different generations every day, it’s important to understand how they operate: how they think, how they work, their motivators and, crucially, how best to work with them.
“We have a focus on maintaining, creating and curating brands – not just the brand of the company we might be employed by, but our personal brand too.”
The millennial generation, which attracted a few raised eyebrows when entering the workplace, is now a dominant sector of the global workforce. Born between January 1983 and December 1994, they account for more than 40 per cent of the workforce1 – and 70 per cent of them have or want to own their own business2. Following them are Gen Z – born between January 1995 and December 2002, and the first generation that in its entirety are digital natives1. While millennials and Gen Zs – like generations that came before them – have a different context, life experience, priorities and motivators, it’s important not to pigeonhole them as something they’re not. “Millennials and the younger generations coming through aren’t a completely foreign species,” says Kate Martin,
When it comes to connecting with younger generations as an insurance broker, it’s important to align yourself with social causes you care about – and demonstrate your commitment to helping make the world a better place.
“We are still driven by doing the very best job we can.” Due to the consistent presence of digital and hyperconnectivity, Martin says there’s a huge understanding of – and value placed on – brand.
THE IMPORTANCE OF CAUSE That sense of brand is driven in a major way by an alignment to social causes. “In years gone by, a broker would be able to add value by knowing all about the product and educating the customer,” says Pierre De Villiers, General Manager of Allianz’s People Centre of Expertise. “That’s still important, but for millennials and Gen Zs it’s more about what’s beyond the product. A brand saying ‘we’re the best quality’ or ‘we’re the best value for money’ isn’t going to cut it anymore. People buy into the story behind the brand and what it stands for, not just the product.” Katie Iles and her colleague Claire Madden researched Gen Zs for the book Hello Gen Z: Engaging the Generation of Post-Millennials, and found that cause and purpose are hugely important for that demographic. “This generation is strongly driven by altruism,” says Iles. “They want their life to mean something – they want to make a lasting contribution. That’s going to inform their choices. They want to feel as if they’re making a positive contribution every day.” CONNECTING WITH YOUNGER GENERATIONS When it comes to connecting with younger generations as an insurance broker, it’s important to align yourself with social causes you care about – and demonstrate your
1 https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/deloitte-2019-millennial-survey.pdf 2 Hays Australia. 2013, Hays Gen Y and the world of work
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commitment to helping make the world a better place. This will build your brand story and your credibility as a business worth dealing with. In addition, you need to know about the beliefs and causes the insurer supports. Communicating these things consistently and digitally will be hugely beneficial in connecting with younger clients. “Here at Allianz, we have a long-standing relationship with the Paralympics and are focussing on creating better access to our products and services for people with disabilities. Globally we aim to be a leader in climate change action too,” says De Villiers. “We invest in these causes because we believe in them and they are deeply important to our customers and our people around the globe.” Hand in hand with the right company and the right policy, however, comes the need for knowledge. There is a thirst for information around the risks people are exposed to, says Martin. “Younger clients are reaching out and wanting more information. They want expertise and knowledge via digital platforms, and then they want one-on-one conversations.” Positioning insurance as something that helps maintain and facilitate the lifestyle they’ve created puts it into meaningful terms, says Iles. THE COVID IMPACT For all of us, the world changed dramatically last year – things we’d taken for granted disappeared in an instant, and we all had to re-evaluate our businesses, our approaches and our outlooks.
For younger millennials and Gen Z in particular, the COVID impact resulted in some interesting changes in attitudes. “This generation has gone from having a total, clear prescription of their future to the pandemic affecting their home, education, work, income and/or social life,” says Iles. “It’s forced them to re-evaluate the world, and what we’re seeing now are values, attitudes and outlooks that are more in line with the generations that emerged from the Great War and Depression. “There’s a greater value now for saving, security and stability than there ever was – Gen Zs are now starting to use the same language as 85-year-olds.” From an insurance perspective, this means there’s never been a better time to connect with Gen Zs.
TIPS FOR WORKING WITH MILLENNIALS AND GEN ZS • M illennials are beginning to turn 40, so some of their characteristics over the coming years may change. • C ause and purpose are important to millennials and Gen Zs – ensure you know the causes insurers are backing. • C lients will be attracted to you if your beliefs are aligned. • T he pandemic has changed attitudes, with security and stability now hugely valuable and desirable for Gen Zs.
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THE AGE OF OPPORTUNITY The Productivity Commission has predicted that by 2050, Australia will require a workforce of almost one million direct care workers to support our ageing population. Tiffany Eastland speaks to Professor Peter McDonald AM and Allianz’s Peter Button about ensuring this growing sector, and those associated, have adequate professional risk cover. According to the Australian Institute of Health and Welfare, Australia’s older generation (those aged 65 and over) continues to grow and is projected to more than double by 20571. Peter McDonald AM, an Honorary Professor of Demography at The University of Melbourne, and Chief Investigator at the ARC Centre of Excellence in Population Ageing Research (CEPAR), says for the past 45 years, the Australian fertility rate has fluctuated between 1.7 and 2.0 births per woman. “This has driven Australia’s population ageing along with considerably lower mortality since the 1970s,” he explains. In fact, according to Professor McDonald, expectations of life in Australia are among the highest in the world. McDonald says the 80+ group presents the main challenges and is the fastest growing of all age groups. “For the 80+ age group, the major considerations are health care and aged care. The Australian health system is excellent but becomes increasingly expensive to run as new drugs and new procedures become available that make the lives of persons aged 80+ more comfortable.” Professor McDonald says the aged care sector is a disaster – read the Royal Commission findings2. In 2011, the Productivity Commission predicted that 3.5 million Australians will be accessing aged care services every year by 20503. Peter Button, Head of Financial Lines at Allianz, says the increase in the number of people providing consulting services within this sector, will increase the demand for professional indemnity (PI) insurance.
1 https://www.aihw.gov.au/reports-data/population-groups/older-people/overview 2 https://agedcare.royalcommission.gov.au 3 https://www.pc.gov.au/inquiries/completed/aged-care/report
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“Some independent or smaller aged care operators lack the ability to adequately facilitate insurance for themselves,” he adds. Looking beyond consultants working in the aged care sector specifically, Peter identifies an increase in demand for accountancy, financial and legal advice, driven by the ageing population. For example, Peter believes we will see the older demographic wanting to potentially draw down on the equity in their home, and mortgage brokers subsequently requiring cover to facilitate that. “There will be requirements for specialist PI policies for those consultants if they don’t already have them.” In turning his attention to the construction environment, Peter identifies an opportunity for brokers to provide risk advisory to those residential developers diversifying their portfolio to encompass purpose-built aged care facilities and retirement communities. Peter says there are a myriad of risks emerging from these communities, “From a PI perspective, there’s the initial design and construction of the community. Then there’s the ongoing management of the retirement community from both a care and financial perspective.” Peter concludes that there are a lot of opportunities from a broking perspective. However, he cautions brokers to partner with an insurer who is prepared to cover the services their client provides, and ensure the cover adequately meets their client’s exposure.
KEY CONSIDERATIONS FOR BROKERS • Seek opportunities to provide risk advice to independent or smaller aged care operators. • Consider how you can provide value to financial consultants offering unique services to our ageing population. • Highlight the challenges and risks that property developers face when entering the aged care category. • Promote your broking services via related associations and institutions.
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