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Quo Vadis, Insurance Intermediaries?

When American insurance guru John F. Carroll started his successful InsuranceSplash in 2009, it was informed by direct observations which led to some profound conclusions:

  • It’s getting harder and harder to successfully market an insurance agency every day;
  • Insurance companies are far more concerned about their bottom line than those of agents; and
  • Agents are pounded with marketing offers but knowing what really works is nearly impossible.

So what does today’s insurance agent (or broker) need to do to ensure that they stay relevant in an exceedingly challenging market? Advice from insurance companies is great but in an increasingly challenging market that finds itself in the middle of what is widely known as the age of uncertainty – what will the golden nugget be that sets a broker apart from other insurance service providers, such as direct marketers?

Carroll believes brokers sometimes forget they’re selling themselves. “Insurance is one of the most expensive things people buy and they can’t see it or touch it. So you’re selling an idea and a promise. In short, you’re selling yourself.”

Marketing yourself certainly can have a variety of meanings but generally, it means that you are in a state of constant self-education. If you are selling an idea, you need have done all your homework. This means that you need to be prepared and well-versed in developments concerning insurance companies and their products, people who buy insurance and external factors which affect the buying and selling of insurance.

Spectrum Insurance Group insurance agent, Keith Daniels, urges brokers to stay on top of technology that is relevant to the insurance industry all the time. “As much as it is a challenge for us, it is to the benefit of our clients and insurers. Thus, keep on top of it. In my view, the age of the generalist is about over for the most part.

Daniels, who is based in Minneapolis in the USA, says insurance brokers are constantly falling into the same routine of going after the cheapest possible quote rather than building on the relationships of their existing markets that have so much more to offer than just being cheap.

While it’s true that most consumers have come under immense financial strain, making the choice to choose value has become even more important. Carroll says that if you as a broker are selling on price, you might as well quit today. “Sure people are shopping on price. You buy everything on price too, right? Wrong. You need to learn how to sell value.”

In South Africa, the first phase of the Retail Distribution Review (RDR) is set to arrive early in 2017 and industry experts agree that its framework will redefine the way value is calculated and framed for the client, the broker and the short (and long) term insurer. In terms of the RDR, a broker will (among other remuneration regulations) earn a fee for “servicing” a short-term insurance policy (being actively involved in the claims process with the product supplier, for example) as well as the advice rendered around that policy. In short, brokers will face the significant but hopefully rewarding challenge of articulating their value proposition to clients and then linking it an appropriate fee.

While a number of South African intermediary firms are concerned about the high implementation costs and initial disruption of RDR, the clients as well as the adviser adept at providing a valuable short-term insurance experience – both where advice and the servicing of the client is concerned – may well end up being the real winners. Clients are bound to receive better quality advice which in turn means they are sold more appropriate products while advisers armed with a sound client value proposition will walk away with their fair share of business in this sector.

A major extra will be better client retention, while those who sell on price only will constantly have to be on the lookout for price pirates.

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