The current economic climate has increased the importance of insurance brokers, according to Mike Berris, a partner at KPMG.
Brokers function as intermediaries between insurance companies – the underwriters, or floaters of risk, behind every policy – and the end users who buy the policies.
Underwriters make their money from interest earned on investments collected from premiums. Low interest rates are consequently eroding that revenue, which in turn has increased pressure to cut costs. Included in that cost-cutting is increased diligence when it comes to paying out claims.
“Most Canadian companies are very good when it comes to the management of claims and paying the correct amount of claims out,” said Berris. “Nevertheless, brokers often have to get involved in helping their customers, the end users, the business or the individual.”
Brokers in B.C. are regulated through the Insurance Council of British Columbia, which dictates requirements such as training and operating procedures to ensure consistent service to the public.
“They often will take on a mediation role between the customer and the insurance company to ensure claims have been properly paid out.”
Despite the challenging economy, the industry has remained relatively stable because companies have responded by improving their processes and focusing on cutting administration costs.
“The industry’s come a long way in the last eight years in the way they handle claims and how they handle customer accounts,” said Berris, which he said is due in part to a “surge” in the use of technology to streamline procedures.
“It’s been a dramatic change.”
Ernst & Young’s 2013 Canada property-casualty (P&C) insurance outlook report states that the current economy has made organic growth challenging within the insurance industry, and that property-casualty companies should respond by using different strategies.
“P&C insurers can seize growth opportunities via acquisitions as well as by developing product solutions that target new insurable risks and coverage expansion,” the report says. “Decisions relating to distribution channels and customer interactions will play a larger role in both growing and sustaining market share.”
Berris said the question that remains on everyone’s mind is: how will the industry be affected as the economy improves?
“That remains to be seen.”
Key considerations for property-casualty insurers
In order to respond to current market forces through the upcoming year, P&C insurers need to consider:
•identifying growth and cost-containment opportunities;
•customer preferences and the distribution network;
•harnessing data for intelligent underwriting; and
•the changing regulatory and reporting landscape.
