TV

Daniel: [00:00:21] Hello and welcome back to Insurance Business TV. I'm Danny Wood, news editor of Insurance Business Australia. Today we're looking at how rising inflation and costs of living are impacting brokers. We'll also discuss the hot topic of broker commissions. We're joined by Matthew Bates, managing director of the brokerage Bell Partners Insurance. Matthew's eight person brokerage is based in Sydney. Welcome, Matthew. 

Matthew: [00:00:45] Thanks, Danny. Good morning. 

Daniel: [00:00:47] Yeah, good morning to you, too. There's a lot of focus at the moment, understandably, on the rising inflation rate and cost of living. How is that impacting you as a broker?

Matthew: [00:00:57] Well, I think the current market we're in and certainly around the increased cost of claims has made insurance premiums have been rising for some time now, probably over 24 month period. So we've had some practice explaining to our clients about the rising cost of clients for some time now with increased, I guess, focus on the rising costs and inflation. Clients are becoming more sensitive to this and are starting to question their insurance premiums and sections. And we as a brokerage and a team have had to work through how important the balance between, I guess, coverage and price has been for clients. Importantly, it's also very important to ensure that clients understand that we're not on autopilot and we are doing what we can as a brokerage to ensure that they do find that right balance of price and coverage so we can continue to add real value to their programs.

Daniel: [00:01:53] So it sounds like you're getting a few more questions from your clients. So is kind of keeping that communication up and. Just making sure that those considerations are taken into account. Is that is that the main thing you're doing? What else are you doing to help your clients?

Matthew: [00:02:08] Absolutely. Communication is certainly up trying to explain to clients exactly what they're covered for. I think in good times, people just tend to take it for granted in some way, shape or form. Whereas now, with a bit of forensic lens on that rising costs across their businesses, but not only their insurance programs, I guess there's a brokerage where they're to defend our clients against the unknown and we want them to unsure. We want to ensure that we're putting our clients first and putting ourselves in their shoes and trying to understand by providing them that information around coverage and then for the price that they're paying for. And I think when we do that, it transforms the relationship from being a transactional one to that advisor process and being a genuine trusted advisor, which is what we want for all of our clients.

Daniel: [00:02:58] I suppose you're talking to the clients. On the one hand, I imagine you probably have to talk to the insurers too when the clients have an issue. I mean, do you have tough conversations with insurers sometimes about the concerns the clients have about the rising prices or the changes in their policy?

Matthew: [00:03:15] Absolutely. I think as we've spoken before, Danny, around the underwriting relationship with the insurer, relationships are incredibly important to our firm and our team. And yes, there are certain tough conversations that we've had to have around a client's history, whether they've been affected by claims from their fault or not on their own. But in turn, the macro, I guess, side of things with insurers of their pressures, capacity, investment, money and in other issues around changing appetites. So we certainly want to still be advocates for our clients and do have those tough conversations and lean on the relationships as a fine line and balance between helping our clients get the right outcome.

Daniel: [00:04:00] What areas of business are particularly hard to find coverage for at the moment, and has that changed much in recent months?

Matthew: [00:04:06] It certainly has been a moving beast over the last couple of years. Two classes of policy that we're certainly spending a bit more time on. Getting harder is probably just the nature of a couple of industries, one being professional indemnity. Professional indemnity as a financial alliance class specifically like in the design architect, engineering and construction space, certainly been moving for some time northwards in relation to premium but downwards in relation to the insurers that are offering coverage in that particular market. So we've got to be quite selective around the partners that we work with in that particular space. And the other one is property large, larger programs, I guess more in the mid market to corporate space with high value sums insured tend to be having more of a co line program than a sole 100% coverage by just the one insurer. So again, those relationships and understanding that space with which insurer will follow a lead insurer, i.e. it might be Berkshire Hathaway or AIG or CGU, might be a leading insurer on the property line, but then finding the supporting agencies or other major insurers to follow their terms certainly made it a bit more complicated than I've seen in the previous few years.

Daniel: [00:05:25] Is there a particular business that stands out in recent time that is a particularly interesting business that you had particular challenges finding insurance for?

Matthew: [00:05:35] Yes, steady, I guess. Call me an insurance geek. And I certainly love what I do. But the hardest something is I actually get more of a buzz and I find it more interesting to try and find and locate an insurer that can support a client's risk. So some of the harder examples might be in the mining space, might be project management in the mining space around that professional indemnity coverage or even the public products liability general liability side. I thrive on those relationships or trying to uncover a new insurer that I may not have had a relationship with or an understanding of. So certainly in the mining space, I've certainly certainly found that a challenge. The other one is being more in the, I guess, newer industry markets of fintech and the sharing economy. Businesses that are popping up in wanting to provide a financial technology platform working through their asset licensing has been certainly a challenge in the Australian marketplace as well as the blockchain risks, which there was a great article in seminar last week and insurer, and the other side as I mentioned, is that sharing economy risk where people are opening up their, their homes, their boats as a new market risks emerging in Australia tend to be more the challenging ones.

Daniel: [00:06:56] When you have those challenges. When and then you. You overcome them and you get the coverage. Is that because you've managed to I mean, generally speaking, spread the sort of insurance over a few more providers? Or is it more that you've had a conversation with an insurer and reassured them that this is actually worth them taking on? I suppose it's probably a bit of both. A lot of the time.

Matthew: [00:07:19] Absolutely can be a bit of both. I use the example of property before definitely that is spreading the risk across multiple insurers has certainly been a solution in the mid-market to corporate property space. But in other, I guess newer classes of policy or something, that's not a straightforward vanilla risk, like a real estate agent that can just be dealt with with a number of insurers straight away. Certainly relationships getting on the phone, talking to underwriters and talking them through that risk as providing them a level of comfort that they can find, sign off with some authority about their understanding of the risk as well. So I like to take not only the client on a journey of understanding the transfer of risk to insurer, but I also take the underwriter through the journey of exactly what the client's doing. So I mentioned before about we try and put ourselves in the client's shoes to understand what their business is and their risks. We try and transfer that knowledge to the underwriter just as much as we do to the client. On the flip side of what insurance is.

Daniel: [00:08:20] Let's change topics, although it does, of course, relate in actually very strongly into what you do. And the whole issue of broker commissions is in the spotlight again with this quality of advice review that the government's doing. Can you just summarize your position on commissions?

Matthew: [00:08:37] Absolutely, Danny. Look, I'm fully supportive, anything that seeks to lift the quality and professionalism of our insurance industry. We spoke some time ago around whether the removing of the Commission on all policies is something that is viable for the industry. And I think it's opening up further conversations around the transparency of commissions, whether they're removed in full, which I am a supporter of, for a number of certain classes of risk. There are also the transparency discussions around the code of conduct, the changes that is happening with that code of conduct first in November, the educational standards of us as an industry. I think that's really important for us to continue to lift the benchmark of professionalism across the industry. I'm not convinced removing all commissions, as I mentioned before, I don't think that's necessarily the right way of protecting the customer. And I think we'll have unintended consequences if we removed it overnight. As I think I've spoken about before. But the fact is, without commissions being there, many domestic and small business owners, I guess, are the ones that are less equipped to make insurance decisions without advice, may not be able to afford it, depending on the the fee for values that brokers decide to charge in lieu of commissions. And there's not to mention many brokerages and peers in the industry that service these clients that could potentially shut shop overnight if commissions are removed, where 99% of their re-numeration and income, it could be removed if there's no phase out period. So I guess in answering the question is I'm supportive of further conversations of removing commissions equally around lifting the professional standard and having more transparency around broker remuneration and the commissions earned by insurers.

Daniel: [00:10:31] The issue of transparency seems to be a key one, and I hear that brought up a lot by people, but there does seem to be some resistance to that in some parts of the industry, and that seems to almost be around that. Our clients aren't asking for transparency to this degree, so why are we doing it? I mean, do you do you feel that the transparency does need to be lifted?

Matthew: [00:10:54] I believe so, yes Danny. Brokers and broking is a relationship game. And we as a business and myself build long term trust and relationships with our clients. And if you can't do that, I don't think you're acting in their best interest and being transparent about it. Brokers want to be seen as a profession, which I strongly believe we are with our peers or parallel industries of accounting or legal practices. Then there's no need for us to hide behind the fees we charge, all the re-numeration we receive. We're adding real value to our clients, businesses and lives. And of course, that does come at a cost. So if we're doing the job right, I think it's a very worthwhile cost that we should be transparent and providing our clients with what that amount is.

Daniel: [00:11:46] On a completely different topic. But I've read that you also like going for walks in the very early morning. Did you have one this morning and what were you thinking about?

Matthew: [00:11:56] I did. I did this morning. So my dog Max short for Maximus. So. I was a big fan of the Gladiator movie, but we shortened it to Max. I like to see the sun rise, and I guess without sounding silly, Danny is like to solve the world's problems whilst I walk around the neighborhood, whatever that may be, that comes in my mind. This morning I was thinking about this particular interview and answering the questions, but also on a Monday morning I'd like to set up my week. So when I have my management team meetings and so I like to set up the week with the team. So we've got a bit of a focus. So I'm trying to keep my mind clear and just being around nature in general, it was a little bit chilly this morning, but always fine if I've got a problem that I've been sitting on or a hard task that I've maybe left in my in-tray from Friday. But the morning can solve that. And I can think about think about that just with no one else or just the sun rising in the morning. So when I least expect it, the morning walks can help solve some of those problems.

Daniel: [00:12:55] Well, Matthew Bates, thank you very much for your time this morning.

Matthew: [00:12:59] Pleasure, Danny. Great to speak to you as always.

Daniel: [00:13:02] And Matthew Bates is managing director of the brokerage Bell Partners Insurance. Thanks for watching. Bye for now.