Defence policy

Brokers can help their clients stay recession-proof while also saving them money, says Ana Paula Nacif

While the global economy seems to be slowly recovering, the pressure is still on and both individuals and companies are looking to make savings on their insurance. But, by working in partnership with underwriters, brokers can make a real difference to their clients and ensure their insurance cover is recession-proof.

On the commercial side, brokers are seeing a decline in business, with SMEs particularly at risk. In the event of a loss, large companies may be able to foot the bill and still stay afloat, but smaller companies may not be so lucky.

When it comes to insurance cover, however, it is not a question of all or nothing and brokers who understand their client’s business can offer invaluable advice. Also, by working in partnership with Hiscox, they can find the best solutions for their clients.

“Companies wanting to implement cost savings may see insurance as an easy expense to cut out, but it is a false economy,” says John Heaney, Head of Professions and Specialty Commercial at Hiscox. “It is fine if nothing goes wrong, but if something happens, everything is at stake.”

Without risking everything, most clients will be looking to save money one way or another. The first thing brokers can do is to establish whether their clients are buying the right type of insurance. Other ways to save money are increasing the excess in the policy and choosing carefully the amount of cover their clients really need.

“Some clients may decide they can live with a £25,000 loss if they are victims of theft,” explains John, “but it is not wise for them to give up their professional liability policy, which provides protection up to, say, £5 million. Brokers are well placed to discuss what type of risks clients are prepared to take and which of them should be transferred to an insurer. Companies should be aware that, for the sake of saving a small amount every month, they can lose their business.”

Solid advice
John says that some smaller businesses are cancelling policies and trading without insurance but, before going down that road, there is always potential for them to save on premiums if they get good advice. “Trading without insurance is not advisable and, if a client is in financial trouble, brokers should come to us so that we can work out how to reduce premiums while still meeting the client’s needs.”

From the broker’s perspective, it is not only about saving money for the client. “If they help a client to manage their insurance needs in the downturn, brokers are more likely to have a loyal client for years to come, when things get better,” adds John. “So it makes business sense for everyone concerned.”

On the personal lines side, research from the British Insurance Brokers Association has revealed that almost a quarter of brokers have seen their personal lines customers reduce their cover – with home and motor policies being the worst affected.

Justin Gott, UK Property Underwriting Manager at Hiscox, explains that if clients want to save money, there are other ways to do so rather than by simply cutting rates. “There is a bigger conversation to be had between the broker and the underwriter. Brokers understand their clients’ needs, and underwriters must come up with flexible solutions to meet them. This is the best way to renew and attract business.”

Brokers are also under pressure from comparison sites and direct insurers, so a proactive approach may go a long way, especially as the best cover is unlikely to be the cheapest. “In the current climate, value for money is crucial,” says Justin. “It is therefore vital that the argument around price is carefully managed relative to the cover and service a client expects. It is a case of helping clients understand that they are buying a policy that is going to work for them rather than one that may let them down when they need it most.”

It is also the case that clients can take a bigger portion of the risk in exchange for a better rate, and it is always worth discussing higher deductibles, which will reduce premiums.

The right fit
Tailor-made solutions can also make a difference. For example, it is cheaper for clients to insure valuables, such as jewellery, separately from their household contents insurance, but many clients still don’t. “For clients with a large jewellery collection, it is cheaper to insure jewellery that is in the safe,” Justin says. “So brokers can work with clients to find out how much of it they wear every day and adapt the cover accordingly.”

With clients tightening their belts, it seems that the way for brokers to hold on to and grow business has less to do with lower rates and more to do with working with underwriters to suit clients’ needs.

As Justin says: “We need to give clients the cover they need, with service that meets their expectations, at a price that provides value for money. By working together and structuring the policy intelligently, we can ensure that this is what we deliver.”