The economic value of insurance broking
National Insurance Brokers Association
2.1.6 Advocacy for clients Clients are less likely to be dissatisfied with brokers than with insurers. This may be because clients see their brokers as their advocate in the market, and because the broker has helped them to develop expectations of their insurance prices and coverage limits.
2.2 Supporting clients with product tailoring and selection Brokers can support clients to ensure that their insurance solutions are relevant and aligned to their risk profile. A broker supports a client in selecting a more appropriate insurance product, by:
The Australian Financial Complaints Authority (AFCA), previously the Financial Ombudsman Service (FOS), reports the number of complaints made, by type of product. In sixth months to December 2019, 4,565 complaints relating to general insurance products were progressed to AFCA’s case management stage (accounting for 23% of all complaints). Of these, less than 1% (35) were complaints made against general insurance broker businesses. Brokers also support their clients by representing their interests when engaging in advocacy for the broader insurance industry. For example, NIBA has actively contributed to work being undertaken by Treasury regarding the proposed application of Unfair Contract Terms legislation to insurance policies (a recommendation of the Financial Services Royal Commission). In this instance, NIBA’s submission to the consultation process raised concerns on behalf of clients that uncertainties arising from the legislation could make insurance more restrictive and more costly for policyholders.32
• Providing advice about the level of cover, in terms of sum insured, limitations and exclusions • Providing advice about the type of cover, including introducing new or customised policies • Providing access to a greater range of product offerings, including products only available via intermediaries, and product variations only available through broker networks, and • Providing access to tailored products; including niche and industry specific products, and individualised policy wording.
NIBA has also represented the interests of insurance policyholders to support state government decision making. This includes a recent submission to the NSW Treasury Small Business Strategy 2020, where NIBA highlighted the impact of the emergency services levy on general insurance premiums resulting in under and non-insurance of property due to higher fees.33 Where brokers engage with policy makers about the impact of regulatory changes, they can support optimal outcomes for clients.
2.2.1 Levels of cover Brokers support clients by arranging a level of cover which best reflects their needs. This often includes reducing instances of underinsurance, but may also see brokers support clients in tailoring policies in order to limit instances of overinsurance. Clients expressed that using a broker minimises their risk of being underinsured, given their broker’ ability to understand the extent and nuance of their businesses’ risks. Brokers were surveyed about the new clients they gained in 2019, and their level of insurance prior to engaging their broker. These clients may have previously engaged a different broker, purchased insurance through the direct channel, or not been insured at all. On average, brokers estimated that 45% of their new clients were existing business that were underinsured or not insured, prior to engaging a broker (Chart 2.7).34
Chart 2.7: Previous insurance levels of each broker’s clients
Average proportion of brokers’ new clients
40%
36%
36%
30%
20%
17%
9%
10%
3% 0%
Same level
Underinsured
Source: Deloitte Access Economics, Broker Survey (2020) Note: n=421. Single response per broker per category.
26
Not insured at all (new business)
Not insured at all (existing business)
Overinsured
