“It’s still pretty bad.”
Those were the words of James Fletcher (pictured), referring to the insurance market, when Insurance Business recently caught up with the advice director from Pyrmont-based Malton Road Advisory Pty Ltd (Malton Rd).
Fletcher stated: “It’s tough in that we’re trying to navigate a very difficult insurance market at the moment. There are some areas that have settled down, which is a sign that maybe it’s stabilised a little bit, but it just depends.”
“You’ve got some fairly niche industries like security contracting, for example,” he illustrated. “Depending on exactly what the client does, they can be almost impossible to insure. If it was a huge company and there was some element of the risk that could be better managed or controlled, then maybe.
“But when you’re a small guy with a handful of contracted security guards that work for you, it’s hard. And even if [insurers] could price it, it wouldn’t be affordable to the client. I look at it as, if I was the insurer, would I want to write it? And the answer is ‘no’.”
While not necessarily representative of the issues being faced by brokers, Fletcher pointed out that it’s an example of risks not being attractive, so to speak, for underwriters.
Using the security contracting example, the advice director said “pain and suffering” claims by people who are kicked out of venues get caught up in costly legal disputes.
“Some of these settle for 300, 400 grand,” he noted. “And when the client only spent $10,000 or $15,000 in premium, it just doesn’t make sense for an insurer to write it. You put yourself in the insurer’s shoes – would you insure it?”
In cases where Fletcher’s camp can’t arrange cover, the broking boss said they try to help out by passing on the client to those who might be able to assist.
“We put them in touch with niche brokers or other brokerages that have bigger portfolios so they can try and leverage off the back of that,” Fletcher, whose firm is part of a wide broking group, told Insurance Business. “That obviously means that we say goodbye to the business, but it’s about helping that client.”
Meanwhile, according to the Malton Rd leader, both brokers and insurers are currently being selective, given that everyone is getting “so much” business to quote on amid high prices and reduced capacity.
Fletcher explained: “It means that everyone’s having to remarket stuff to justify whatever they can get from either the incumbent insurer or another provider. There’s a lot of reluctance out there to seriously look at new business submissions – you have to really sell it to the insurer and make them feel like it’s worth investing their time.
“That’s business. They’re not going to quote on everything, knowing that they’re only going to pick up 5% or 10% of it, so they want to try and be more selective about it. And we’re the same – we try to understand a customer’s motivations for involving us. And if those motivations align with our values and it’s something that we feel that we can assist with, then we’ll take it on.”
He also highlighted the value of longstanding relationships with insurance providers.
“Working with the incumbent insurer is important,” stated Fletcher. “Relationships and loyalty, I think, under these circumstances, are what’s going to start paying dividends. We as brokers have to accept that insurers are under pressure to push rates and wind back cover, so it’s about minimising how much of that they pass on to the client.
“And if you’ve got a relationship with an insurer that you’ve been with for a number of years and the underwriter has been happy with the performance of the account over that time, then you’re better positioned to be able to sort of soften the blow. A lot of businesses aren’t necessarily moving from those insurers that they’re with; it’s just about minimising the impact, or the increases that have to get passed on.”
As for the client side, the broker pointed to the importance of not keeping policyholders in the dark. Additionally, he said “you get crappy outcomes” when things are left to the last minute.
Talking about their approach, Fletcher shared: “We try to be upfront with clients about what to expect. We’ve incorporated a bit of a warning message in our renewals with customers, depending on industry and what policies they buy, just to manage expectations from the very beginning; to say, ‘Look, this is what’s happening in the market, this is why, and this is probably what we predicted as an outcome for your policies, but just know that this is what we’re doing to mitigate that’.
“We might also send them a different set of questions so that we can approach more insurers and obviously anticipate what questions they might ask. We want to find out exactly what the insurers need to know so that we can prepare the client. If that means changing something or preparing something for them so that they can satisfy that, they’ve had plenty of notice.”
In Fletcher’s view, it’s time for brokers to really demonstrate that they are trying to present the client’s risk as best it can be, to the market.
“That means being more proactive about making sure that the risk is well presented, it’s well protected, and you’re highlighting those things that an insurer is immediately interested in,” he declared. “That means making clients aware of what insurers expect to see as well.”
