LOOKING AHEAD TO 2024

Insurance Adviser caught up with Nick Cook, NIBA Vice-President and the Executive General Manager –Partner, Broker Services and Agencies for Steadfast, to get his thoughts on what trends stood out for him this year as well as his outlook on the challenges and possibilities that lie ahead in 2024.

A challenging year for insurers

Reflecting on how this year has fared for insurers, Mr Cook acknowledged that it has been a challenging year for them, as they’ve had to adapt to a changing and evolving landscape.

“Insurers continued to be challenged on a number of fronts,” said Mr Cook.

“Some of these challenges have been around compliance, remediation, and regulation. There have also been challenges around technology that hasn’t allowed insurers to be as nimble in capitalising on new opportunities, and around managing a hybrid workforce.”

The evolving role of the broker

In this evolving industry landscape, brokers have taken an important step in beginning to be seen as trusted advisers for their clients.

“The updated NIBA Code of Practice was released [this year], with improvements across the Code including around vulnerable customers, the terms of engagement, acting ethically, and remuneration disclosure,” said Mr Cook.

“There is much to be proud of with the updated Code, ensuring brokers move towards being seen as a trusted professional for their clients.”

The rise of underwriting agencies

One of the more interesting trends this year has been how brokers have moved towards underwriting agencies, as they see that underwriting agencies have broader risk appetites, among other advantages.

“There has been a continued move by brokers towards underwriting agencies,” said Mr Cook.

“While insurer risk appetites have narrowed, underwriting agencies have broadened their risk appetite, and are critically providing the service response and turnaround levels that brokers need.”

Mr Cook believes the rise of the underwriting agencies will be a long-term challenge for insurers.

“Insurers will remain challenged by this move to underwriting agencies over the next few years as they come to grips with improving their technology, risk appetite, and service levels.”

Here’s what to keep an eye out for next year

Looking ahead towards 2024, Mr Cook identified some key areas of focus for the industry and the broking profession. One of these issues is around the continued pressure that’s being placed on insurer margins due to various factors and the impact this has on the broker.

“There is continued pressure on insurer margins, and that’s leading to further reductions in broker commissions, or ultimately, the withdrawal of a product from the broker channel,” said Mr Cook.

“I reference the broker channel, because the large domestic insurers here in Australia operate across the direct, banking, agribusiness, and broker channels.

“I expect there will be some pragmatic conversations across the insurers as to the best return for their deployment of capital, be it about the distribution channel and/or product.”

The rise of underwriting agencies also brings with it major possibilities of collaboration between the insurers and the agencies, which can only benefit both parties.

“Insurers are increasingly looking at providing capacity for underwriting agencies,” said Mr Cook.

“With their [insurers’] constraints across technology, people and compliance, the underwriting agency segment looks particularly attractive to insurers; particularly those underwriting agencies that can provide the insurer with technology, compliance, actuarial, and distribution support.”

“Large insurers must look at the success of underwriting agencies and look at how they can find the next opportunity to deploy their capital.”

Knowledge transfer to the next generation of brokers

As one generation of brokers enters our profession and one generation transitions out, it’s important that the knowledge capital and skills of senior brokers are passed on, and the younger brokers can feel confident as future leaders of the profession.

“For the first time, we have four generations working alongside each other,” said Mr Cook.

“While the Baby Boomer generation are looking at succession plans, the younger generations – the Millennials and Generation Z – are still looking for their place in the industry and how they can contribute to the future of broking. Unfortunately, I don’t think we give enough voice to these key generations coming through.”

Technology is just an enabler

As technology and technological disruption continues to have a transformational impact across industries including the broking profession, Mr Cook emphasises that technology is just a tool, and we shouldn’t lose sight of the fact that the crux of the profession is still about building strong relationships with people.

“With so many of us living our non-work lives through our devices, we are enabling more and more of our work lives to also be technology dominated,” said Mr Cook.

“We need to ensure that we don’t lose a very important part of our industry, which is all about relationships: with our business partners, our customers, and the community.

“Technology is an enabler, not a replacement.”

Monitoring emerging risks

With rising costs of living placing pressure on Australian families and businesses, Mr Cook warns of certain emerging risks – such as the threat of exposure to underinsurance and increasing supply chain costs – that brokers need to consider as they head into the new year and have conversations with their clients.

“We have a concerning dynamic occurring at the moment around the pressures of cost of living,” said Mr Cook.

“This places pressure on insurance budgets. Then, add in ever increasing building and supply chain costs, with sums insured not increasing in line with either inflation or building costs, and you have a real exposure to underinsurance at the time of a loss.

“This also extends to business interruption sums insured and indemnity periods.”

“Brokers should be using the various building replacement and business interruption calculators available to them,” added Mr Cook.

“They need to ensure that they [brokers] are making their clients aware of the correct sums insured the client needs to be looking at for the correct level of coverage.”

A promising year ahead

Despite the emerging risks, Mr Cook has a positive outlook when he casts his eye over to 2024 and believes that the industry and the broking profession should take pride in what they’ve achieved this year. According to him, the profession is well placed to capitalise on the opportunities that lie on the horizon.

“We have a lot to be proud of,” said Mr Cook.

“We have a comparatively quiet year ahead of us regulatory speaking, and we need to use this clear air to ensure that we continuously move ourselves forward, focusing on our professionalism, people, and communities.

“If we can achieve progress in all these areas, we are well placed for a bright future.”