The agenda of the recent National Insurance Brokers Association (NIBA) Convention, Beyond The Status Quo, focused on the big challenges facing insurance brokers. These include increasing climate risks, regulations and compliance, talent shortages, rising premiums and affordability.
However, across such a diverse industry, these challenges have different impacts depending on the insurance firm and their chosen sector.
On the marketplace floor, Keystone Underwriting’s Neil Sheppard (pictured above) told Insurance Business that his biggest current challenge is compliance. Sheppard is managing director of an agency with specialty areas including financial lines, life sciences and specie.
“There’s just more and more red tape you've got to do,” said Sheppard, who is based in Melbourne.
Many insurance firms would agree.
Some of the tape includes more stringent disclosure and audit standards from regulators. For example, from next year, many firms will need to submit annual sustainability reports to the Australian Securities and Investments Commission (ASIC). CPS 230, an operational risk standard, also comes into force in 2025. Some industry stakeholders say this standard is a “game changer.”
Sheppard said compliance is important but the increasing amount of time it takes is impacting his business.
“If you're running a small business, like I am, you've got to try to find time to grow the business,” he said.
Sheppard said that means spending time with brokers and providing quotes and assessing risks.
“But you find yourself stuck doing more and more reports and putting in policies and procedures,” he said.
Insurance Business asked if Sheppard was looking into any of the new compliance assisting technology that’s out there?
“A little bit,” he said. “I do have someone who's implementing some of that.”
However, he was concerned about adopting any of the compliance tech on offer too early.
“It’s really expensive and you could be ironing out the bugs,” said Sheppard. “Ideally, what you want to wait for is other people to lay the groundwork and then you just buy the package off the shelf.”
The underwriter said he’s really hoping something like this can reduce his compliance burdens.
Sheppard said his next biggest issue is finding good staff, training and retaining them.
“It's hard to do that,” he said.
His niche focused business depends on having specialist staff.
However, there’s one major insurance challenge that Sheppard doesn’t have.
In the property and motor sectors, rapidly rising premiums are an acute ongoing concern for underwriters and brokers. For Sheppard’s insurance specialties, premiums tend to be very stable and don’t rise dramatically.
His focus areas – like specie and life sciences – also don’t rapidly grow like a property portfolio but they don’t suffer sudden big losses after nat cats.
“We want to grow in a disciplined way and make money,” he said.
Another factor that supports the stability of his business is pitching for a customer base, through brokers, in the SME space.
“We're not doing big corporate stuff where there can be a lot of competitors because people want to write the big accounts,” said Sheppard. “The lower end premiums require a lot of work, good systems and good structures, which is what we have.”
He said the firm likes to stick to its lane of niche offerings.
“That’s what we do and it seems to be working for us,” said Sheppard.
For brokerages at the Convention, fee disclosure and breach reporting were two big compliance topics.
The Insurance Brokers Code of Practice is currently under review and fee disclosure obligations are a key sticking point.
“We have been vocal about our desire to see the Code strengthened in this area, and we hope that the upcoming review will address this critical issue,” said Oscar Shub, who chairs the Insurance Brokers Code Compliance Committee (IBCCC).
The IBCCC has also reported that only about 63% of brokers report breaches. That number is worse than it looks because, says the IBCCC, “many brokers continue to submit incomplete, inaccurate, or inconsistent compliance data.”
“We want more breach reporting to come through to the IBCCC,” he said. “I think it’s really important that we learn from what we do.”
Okely said this approach would “help make sure we are in that self-regulatory mode.”
Is compliance your biggest insurance challenge? Please tell us below
