Vero index: opportunity knocks for brokers
Despite increasing pressure from direct players, brokers can still find plenty of opportunities in the SME market.
So says the latest SME Insurance Index from Vero, the seventh edition of the annual report analysing business owners’ insurance buying behaviour.
The good news is broker usage appears to have stabilised. In 2013 44% of SMEs used a broker for their last insurance purchase, dropping to 34% by 2016.
In this year’s report it has bounced back slightly to 37%.
However, this figure suggests SMEs are either broker users or direct insurance users, and it is rarely that simple.
Delving deeper than previously, with more specific questions, the report reveals the largest group of respondents uses brokers for some but not all their insurance needs.
About 31% do not use brokers at all, 42% use brokers for 1-89% of policies, and 27% use brokers for 90-100% of policies.
Vero says brokers must be aware of their clients’ total insurance portfolios, including the products obtained via direct channels, so they can attempt to gain more wallet share.
“While it’s a good news story that broker use is stabilising, we still need to talk about total insurance spend,” Head of Commercial Intermediaries Anthony Pagano told insuranceNEWS.com.au. “Brokerages may not be losing clients, but they are getting a smaller share of their clients’ spend.”
Vero believes this presents a major opening for brokers who can understand why clients are more comfortable obtaining certain products via direct channels.
“There is an opportunity for brokers to talk about what they offer across all levels, and remind the client each and every time that they are helping them by cutting out the need for them to think about insurance.”
Almost one-third of SMEs say they use brokers less than they used to; 56% of those say it is down to ease and convenience, with 46% highlighting price and 39% saying they received poor service or advice.
“SMEs told us one of the most common reasons to use a broker less is ease and convenience, particularly the use of online services,” Mr Pagano says.
“Some SMEs want options that fit in with their hours of work. How do clients place insurance between 5pm and 9am? Brokers need to streamline processes, consider easy online platforms for administrative tasks, and understand the way their clients do business so they can offer services at times that suit.
“The brokers who do this, and demonstrate their expertise, will find clients have less incentive to try other channels.”
The report also investigates what prompts SMEs to review their insurance arrangements.
About 59% of SMEs have a standard review in place, either annually or prompted by a broker, adviser or accountant.
About 37% say a change in premiums or having to make a claim will spark a review, while 26% say a change within the business will have the same effect.
Only 16% say they “set and forget” their insurance arrangements.
“The community is getting smarter,” Mr Pagano told insuranceNEWS.com.au. “What is good for today is not necessarily good for tomorrow.
“There is a real opportunity for brokers to understand when clients are making changes, and they can help when clients are most likely to be renewing. They need to be continually asking whether the insurance need has been met.”
The final opportunity outlined in the report arises from the fact so many SMEs rely on peer advice.
Some 58% will turn to peers, colleagues, friends and family – up from 52% in last year’s index.
In one way this is concerning for brokers, because it suggests SMEs may shun professional advisers for those with no training or formal skills. But brokers can tap into this by encouraging their clients to refer them to others.
Vero says almost eight in 10 clients would be willing to recommend their broker, but fewer than two in 10 have been asked by their broker to do so.
“The trend demonstrates the power of word of mouth for brokers, yet the index suggests there are very few exploring this option,” Mr Pagano says.
The report again highlights the many challenges facing brokers, but this year the real focus is on the opportunities that go with those challenges.
Mr Pagano believes most brokers are on the right track.
“There has been a mindset shift over the past few years. Brokers have been hearing the message that they need to continually evolve and adapt and show value and relevance.
“Brokers need to move from transaction provider to strategic partner.
“Our business is about people and relationships and great advice can only happen if the broker truly understands the client’s needs.”