At a glance
- Even brokers sometimes struggle to come to terms with insurance industry jargon
- Brokers welcome Zurich’s new publication, which aims to demystify whole process
- Document will help brokers in their dealings with customers
“We sometimes assume that everyone who works for a broker understands all the terminology around commercial insurance.”
So says Patrick O’Connell, Oval’s Managing Director of Insurance Broking, who has 25 years of experience in the insurance industry. “I remember from my own days as an account handler that this is not always the case,” said Patrick, who joined Oval in 2007.
Zurich has tried to demystify the whole process with the recent publication of ‘Understanding Commercial Insurance Premiums’, which aims to make the financial workings of the industry easier to understand for brokers and customers alike.
“To put sometimes complex terminology in a simple way is very helpful,” said Patrick.
Although the principle of insurance is fairly straightforward, the internal workings of an insurance company and its jargon can be baffling to many on the outside.
Enhancing broker knowledge
Patrick describes the Zurich document as a user-friendly summary of important information that is not always well understood.
And the publication is particularly timely given the work Oval Group is doing to improve awareness of key issues among its brokers. For example, at its recent conference the firm’s broking director made a presentation around insurer expenses and CORs (combined operating ratios) and how they drive the insurer’s actions in the market.
According to O’Connell, dialogue between insurers and brokers is essential to ensuring all parties have as much information as possible on which to base policy decisions.
“When we sit in front of a client and discuss why a premium is set at a certain level, understanding the drivers for the insurer and underwriter enables us to explain things more clearly,” he explained. “More informed buyers are customers who understand that for every pound of premium they will not receive a pound back in claims, because there are other costs built into that premium.”
The more industry documents like ‘Understanding Commercial Insurance Premiums’ that are produced, the more informed the industry will be
Patrick O’Connell, Oval’s Managing Director of Insurance Broking
Every client’s insurance arrangements are different, but when the broker explains why a premium has risen or fallen, they have to understand where the insurer is coming from.
“Similarly, customers need to appreciate that there are costs built into their premium for the work done by the broker and the insurer, plus the catastrophe premium in addition to the attritional premiums that get paid day to day,” added Patrick.
Continuing the dialogue
Information also enables brokers to manage their business more effectively. “Clients are price sensitive and when a business is struggling, any increase in costs is very hard to bear and will tend to trigger a requirement to retender for business,” said Patrick. “If there is some rating movement that we can properly explain to the client (for example, as a result of claims inflation) the chances of that business going out to tender is reduced.”
Most customers don’t want to move insurer, but they don’t want to pay higher premiums either.
“If our account executive is well trained and informed, the client will respect their advice and listen to their recommendations,” said Patrick. “The more industry documents like ‘Understanding Commercial Insurance Premiums’ that are produced, the more informed the industry will be.”
Insurers sharing information with brokers on a regular basis can have tremendous benefits.
“The better our understanding of the differences and relative strengths of insurance companies, the more we move the purchase of insurance away from being just about price,” said Patrick. “Cost is always a factor but it is just one element – and the harder an insurer works to help brokers understand the nuances of the industry, the more likely the broker will be to recommend that insurer to their customer.”
The bottom line, he concludes, is that if brokers understand the marketplace better, they can manage it better for their clients.