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Broking: now for the hard part

The proportion of SME businesses using insurance brokers appears to have stabilised, halting a worrying shift to the direct market – but that doesn’t mean brokers can rest on their laurels.

In fact, the fifth Vero SME Insurance Index finds quite the opposite: a serious amount of hard work is required in relationship-building and digital innovation if brokers are to stay on top of the commercial distribution tree.

The two preceding reports focused heavily on the shift by SME businesses from brokers to direct, thanks in part to a new generation of DIY business owners who want  more active involvement in buying insurance.

But this year’s report, based on the responses of more than 1500 SME owners and decision-makers, offers more encouraging statistics.

Some 36% of owners exclusively used brokers last year, up from 34% in 2014 but still down on 40% in 2013.

Meanwhile, the increase in those buying direct slowed – 57% did so last year, compared with 56% in 2014 and 50% in 2013.

Feedback on brokers remains overwhelmingly positive: 68% of clients are satisfied, scoring at least eight out of 10, and a further 20% are “somewhat satisfied”. Only 12% rate their brokers less than five out of 10.

However, this is no time for complacency.

The report stresses the threat from digital disruption is real and brokers must get their online offerings in order. They also need to work on personal relationships and go beyond just providing insurance, to give clients an all-round advisory service.

For the first time, the survey asked respondents to identify the business risks that concern them most.

Some 47% are “very concerned” about increasing costs, with 42% fearing an economic downturn and 34% an increase in competition.

The fact the top three concerns are uninsurable puts insurance in perspective, the report says, and makes it clear brokers need to widen their remit.

Brokers have a role to play as “trusted advisers”, and should not be simply an insurance sales channel.

Anthony Pagano, National Manager Commercial Intermediaries for Suncorp Group, told insuranceNEWS.com.au he believes brokers will rise to the challenge.

“It’s natural for a broker to do that,” he said. “They are very often SMEs themselves, facing many of the same issues as their clients.

“It’s about moving beyond just the transactional arrangement, and the report is a reminder to brokers that this is a relationship business – it’s about how you engage with your client.

“If you have an intimacy with a customer, if you understand their pain points and opportunities, then you will have a much longer-term relationship.

“It’s about going back to basics.”

Other concerns raised by SMEs are insurable. Being unable to trade (32%), equipment failure (31%), cyber attack (25%) and being sued (25%) feature prominently.

But the report says business owners are not as informed as they think they are when it comes to cover.

For example, 80% of those who rank “being unable to trade” among their top concerns say they do not have business interruption insurance.

Likewise, 80% of those concerned about equipment breakdown believe they are not covered.

Mr Pagano told insuranceNEWS.com.au this apparent confusion needs to be addressed.

“Insurance is far from easy, and no two businesses are alike,” he said. “SME owners may think they are covered, but most are not reading the product disclosure statement.

“As an industry, we need to think about how we can bridge that gap.”

Relationships are crucial, but the Vero study finds brokers also need to develop their digital offerings.

Recent developments have changed the industry permanently, it says, and “brokerages must follow”.

A professional, mobile-enabled website that is optimised for search engines such as Google is “a necessity”, and objective reviews from satisfied clients are powerful assets.

A well-thought-out and maintained social media presence can also be “an effective addition”.

The survey finds that while Facebook dominates overall social media usage, LinkedIn is the platform most commonly used for business purposes.

More than one-third of those buying insurance direct are open to using brokers, and 64% would look online to find one.

As a result, having an effective digital strategy is “critical” for brokerages looking to attract new clients.

However, this must not come at the expense of effective personal relationships.

Brokers must fight on both fronts – but where there are challenges, there are opportunities.

“In the end, the brokerages that are able to most effectively engage with SMEs, whether online, through personal experience or via trusted referrals, will be the ones that will be most successful,” the report concludes.

It’s a tough call for brokers, but the market is changing rapidly with the onset of new technologies. While most service businesses in Australia are under pressure to “adapt or die”, the challenge for insurance brokers is to maintain important client relationships while moving into a new era of opportunity.