More than a year ago, IB interviewed John O’Brien (pictured), then managing director at Kobe Insurance. It was April 2020 and Australia was experiencing its first COVID wave. The country’s borders had just closed to non-residents, states were shutting down non-essential services and social distancing rules were being enforced for the first time.
“I believe this pandemic will have a major impact on the global insurance industry,” said O’Brien. He was right about that, and other things.
Since then, O’Brien has settled into a new role: director of AIIRS insurance brokers. COVID, much as he predicted, has wrecked lives and economies around the world.
O’Brien said an unexpected COVID issue concerns clients involved in shipping and transporting their goods and services. Rising costs are “having a huge impact” on their margins, he said.
“The costs that the shipping companies are putting on the end client and charging, maybe, another $2,000 per container, has the clients saying, ‘Well, that’s my margin gone!’”
O’Brien said some transport companies are taking advantage of COVID. The result is suffering clients and what could be a new industry term: “They’re calling it COVID tax. You’re paying a lot more for a lot less.”
According to a recent ABC report, rising transport costs are linked to increasing fees charged to load and unload cargo by port operators, or stevedores. The Australian Competition and Consumer Commission (ACCC) says stevedoring revenue is at its highest level in 10 years.
Other pandemic impacts over the last year have also surprised him. Perhaps the most surprising: how the lack of physical human interaction is impacting the mental health of his clients.
“I had a Zoom meeting with a client the other day who looked very tired and weathered as a result of not being able to go and see the staff and do what needs to be done,” said O’Brien.
Ongoing lockdowns and the need to work from home have increased brokers’ use of digital tools to replace face-to-face contact.
“The other challenge is, what platform is the client using? You’ve obviously got Google Meets, Teams, Zoom – so you’re managing all these different platforms.”
Younger insureds are coping, but O’Brien said the older generation is suffering.
“The challenge is the older clients who’ve not really been in that technical world before – they’re struggling,” he said.
But even technology agile industry members are experiencing a negative impact on brokerage business.
“The old school way of doing insurance is obviously to press the flesh, but unfortunately at the moment you can’t do that,” said O’Brien.
“If you are meeting face to face it’s a lot easier to convince the insurer that it is a good risk to insure,” said O’Brien.
“Everything is digital and insurers are seeing copious amounts of emails come in every day and its quite easy to just decline an opportunity rather than have the hard discussion.”
The other digital development with insurance implications: clients that once had big offices full of employees are reducing their assets and physical locations.
O’Brien said turnaround times are still a major COVID related issue for the insurance industry.
“People are obviously working remotely, they’re not able to go and speak to their boss to get something approved and you just join the queue really,” he said.
There’s also the sheer number of COVID prompted claims that are coming in, including fines for delays and investigation costs.
“That’s had a huge impact on the insurance industry and the loss ratio is quite high currently,” he noted.
