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The insurance broker is very often the conduit between the insurance company and the insured business. When the customer’s business changes, so does the insurance broker’s.
The National Insurance Brokers Association (NIBA) says brokers handle almost 90% of commercial insurance transacted in Australia, representing an estimated $18 billion in premiums annually. Brokers also play a major role in risk advice.
NIBA has 370 member-firms and 2000 individual broker members who hold the qualification Qualified Practising Insurance Brokers.
Today, the marketplace in which the insurance broker operates has arguably never faced such rapid and disruptive change. Among the factors impacting on the insurance broker’s role:
- Stricter environmental legislation has increased the complexity of public liability insurance while the emerging impacts of climate change and increasing weather-related natural disasters have heightened the need for new levels of protection against business and supply chain interruption and property damage.
- Globalisation and the growing trend for Australian companies to partner with overseas businesses, particularly in Asia, expose businesses to a new layer of business and supply chain interruption, reputational risks and exposure to regulatory breaches and partner disputes in unfamiliar markets.
- More stringent consumer laws are much tougher on businesses prosecuted by increasingly vigilant regulators for misleading advertising, deceptive conduct and product recalls.
- The digital revolution has not only transformed the competitive landscape for brokers but has turned the threat of cybercrime into a major headache for companies that do business online or store sensitive customer information on their data bases.
Insurance industry news site insuranceNEWS.com.au recently reflected on the changes that are reshaping the broking sector:
“Insurance is an industry that is arguably like no other. Built on centuries of tradition, its diverse practitioners share a passion for the business. Over lifelong careers they amass deep reserves of knowledge and expertise, and they hold firm a belief in the contribution that insurance makes to individuals, families, businesses and the economy,” it explained.
“The fundamentals of insurance remain largely intact, but vast changes in society, the economy and technology have altered the way business is done.
“New business models, technology, structural changes affecting whole industries, shifting consumer behaviour, intricate regulatory frameworks, globalisation and even climate change have combined to transform the way insurance is applied, marketed and consumed.”
On another occasion insuranceNEWS.com.au bemoaned “a regulatory environment seemingly in a constant state of flux”.
The industry has responded to this deep and continual change by strengthening qualification requirements and reviewing training and professional development frameworks.
Late last year NIBA announced a partnership with the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) in which ANZIIF would deliver nationally accredited broker education and training on behalf of NIBA.
NIBA CEO Dallas Booth says Australian brokers need access to “world class” education in order to satisfy the increasingly complex needs of business.
Booth says the historic partnership with ANZIIF – ANZIIF was formed in 1894, NIBA in 1982 – will “deliver positive outcomes for individual brokers and, ultimately, for their businesses and clients”.
Quality education and training, he adds, “is the foundation on which professionalism in insurance broking is built”.
“Brokers know what’s available in the market and are qualified to give professional advice tailored to a policyholder’s business or personal needs, including the appropriate level of cover. They are experts on the terms and conditions of various insurance policies available in the market,” Booth says.
“Their role is to get the best deal for the policyholder. They do not charge for providing this service, but receive payment from the insurer. Under their Code of Practice, insurance brokers are required to work in the best interests of the client.”
The courses include nationally accredited certificate, diploma, advanced diploma and graduate diploma qualifications as well as a revamped professional development offering.
Courses and course content are regularly reviewed and enhanced as industry practice develops and changes.
The new education framework offered by ANZIIF followed extensive industry consultation, says ANZIIF CEO Prue Willsford.
“Our reason for being is the success and health of the insurance industry and the brokers and brokerages within it. We are pleased that we – NIBA, ANZIIF and industry – are able to work so effectively together on what we are confident will provide brokers the best possible education and training,” Willsford says.
ANZIIF also offers a range of Australian Securities & Investments Commission (ASIC)-compliant “skill units”, shorter, more concentrated units that allow brokers to up-skill quickly which are designed to meet changes in the insurance industry “and to reflect the needs of brokers and business now and into the future”.
The stronger education base for insurance brokers underpins the traditional – and important – role that brokers play in industry and commerce.
The role of insurance brokers, as defined by NIBA, is to:
- Assist customers to assess and manage their risks, provide advice on risk financing and risk transfer, and determine what insurance is appropriate for the customer’s needs;
- Assist customers to arrange and acquire insurance; and
- Assist the customer in relation to any claim that may be made by them under the insurance.
The benefits of this intermediary role is critical, particularly for SMEs that may lack the resources, expertise or even time to dedicate to identifying the most suitable insurance coverage for their business.
These benefits include:
- Assistance with selecting and arranging appropriate, tailored insurance policies and packages;
- Detailed technical expertise including knowledge of prices, terms and conditions, benefits and pitfalls of the wide range of insurance policies on the market;
- Assistance in interpreting, arranging and completing insurance documentation;
- Experience in predicting, managing and reducing risks; and
- Assistance with claims and a higher success rate with settlements (about 10% higher than claims made without a broker, according to NIBA).
In exercising their role, Booth says insurance brokers act for and on behalf of the customer as their agent.
“In essence, insurance brokers do not sell insurance to their clients, they purchase insurance on behalf of their clients. They act in the client’s best interest when doing so,” he says.