Regulatory requirements, simply too much
Where are the opportunities for growth in 2022, and what challenges will present themselves this year?
FAnews spoke to Andrew Coutts, Executive Head: Intermediated Business, Commercial and Personal at Santam, Anton Swanepoel, CFP® and Head of Advice at Momentum Financial Planning and Kurt Stanley (FIISA), Director of District Seven Risk Services, in partnership with SFP about the year ahead.
Regulations… are we coping?
“The industry has seen the introduction of a series of legislative additions in recent years, with the advent of the Twin Peaks model, a focus on Treating Customers Fairly (TCF) and the recent promulgation of the POPI Act. This has placed a strain, particularly on small and medium brokerages, who are required to meet ever-increasing compliance requirements with limited resources. This has influenced the movement of many smaller brokers to partner with larger corporate brokerages, to alleviate the compliance burden,” said Stanley.
“I do not think that the industry is coping. Business is tough as it is and the constant additions and changes to regulatory requirements is simply too much. Everybody in the industry is over-extended. During my discussions with advisers across the industry it is clear that clients are also complaining about all the paperwork, and I see advisers all over the place who have lost their joy as a result. It has become a place of serious responsibilities and paperwork – very little joy, except if the FSP you contract with does address these challenges via properly integrated systems and processes,” added Swanepoel.
The real question, according to Stanley, remains to what extent the influx of new legislation will have on the broker landscape in the future.
Coutts said, “For the insurance industry, the pandemic stress-tested the products and relationships that tie together insurers, intermediaries, and their clients. Work is required to ensure wordings are easily understandable and clients understand their insurance cover.”
Remaining resilient
“The pandemic has been a catalyst for brokers, to focus on their value-proposition and service offerings to clients to remain relevant. The brokers who have taken the time to augment their service offerings will be in a stronger position to add increasing value in an improved economic climate,” emphasised Stanley.
“We must firstly deal with all the loss that we have experienced. We will have to guard our minds to be able to identify the silver lining and opportunities that are surely there. It is easy to see the negatives, but we must surely focus on the positives and what we have learned during this time. We are already stronger, but I am afraid that all the challenges may not be over yet. We will have to remain resilient,” added Swanepoel.
“For some time, ‘price’ has been arguably the primary focus for brokers and insurers – specifically in the direct space. Insurers and brokers alike have seen the turmoil this strategy has caused on insurer margins and lack of retention on the part of the broker. As such, a move toward more professional broker-market is beckoning, where the aim is to employ sound risk management advice, tailored risk solutions and where the primary focus is on value-add, as opposed to price,” said Stanley.
“Insurers and intermediaries alike are going to have to confront the reality that many of their clients, particularly in commercial businesses, will require a more nuanced insurance offering to effectively protect them in an increasingly complex risk environment. Much of the traditional role of the intermediary was to sell generic products that would transfer risk away from their clients. However, the escalation of risk exposure and complexity, coupled with affordability issues and cheaper alternative channel solutions, render a product push only business model, by an intermediary, uncompetitive. This all points to the urgent need for a shift in focus to remain relevant,” continued Coutts.
Opportunities for growth
“If there is one thing that COVID has done to benefit advisers, it is that clients are more aware of the need for all forms of insurance. So, stick to the basics and make sure that you can deliver a client experience that makes you stand out. If you capitalise on clients’ awareness, a sound value proposition, looking after your existing clients, caring for people, and delivering a client experience that instils trust, your business will grow,” emphasised Swanepoel.
Stanley said, “The niche space offers opportunity for skilled brokers and risk managers to diversify their portfolio. Allied to this, the clients in these spaces tend to lend their ear more deliberately to the quality of advice and the value of the insurance solutions presented by the insurance professional. As the focus and skill among niche brokers grows, this opens the market in this space.”
“The growth of systemic risks, like pandemics, increasingly requires a move away from a product-push approach towards a more client-centric product build approach. Furthermore, though we have not yet seen much evidence of consolidation, we do expect to see more over time. The benefit of consolidation is that it provides the scale necessary to invest in technology, which is now an imperative for intermediaries. We also expect a trend towards more intermediaries joining a tied network. Other key deliverables for intermediaries who want to remain relevant include expert product knowledge and the keeping of a thorough record of advice,” said Coutts.
Trends reshaping financial advice
“Incorporating technology into your service function is paramount to differentiate service offerings and ensure speed of service to the end-client; clearly identifying a value proposition and ensuring consistent brand alignment, and constant communication of the message on various platforms; the use of social media to reach the target audience and create a constant professional presence; constant upskilling of brokers and administration staff to ensure seamless, consistent service; and engaging insurance partners to create innovative products on a more consistent basis, to create value for the client are the five key things financial advisers should be doing to ensure that their business continues to grow and prosper,” Stanley pointed out.
Sharing the same sentiment, Swanepoel added, “Start by looking after your existing clients properly. The industry is slowly but surely catching up on the value of annual client reviews. Make sure that your value proposition is still competitive and that your client experience makes you stand out. Ensure that the fundamentals of your business are still sound. Use technology to its full potential. Lastly, keep on going. Don’t give up!”
Coutts mentioned that intermediaries are going to have to start moving away from a product push style business model to a more client centric one, focused on risk management and advice. “Intermediaries are going to need increasingly strong product knowledge. This in turn will likely lead to increased specialisation. In addition to an intricate understanding of the insurance policies sold, intermediaries will need to place greater emphasis on the client’s record of advice as evidence that cover options (and the intent of the cover) and exclusions were thoroughly explained. They are going to need to sense and respond to risk in real-time.”
2022… a final word
In his concluding remarks Stanley said, “All seasons must conclude: the COVID-19 pandemic is not dissimilar. Brokers should begin gearing themselves with an expectation of increased market activity, but against the backdrop of COVID-19, to take the time to reinvent themselves as business and insurance professionals.”
Coutts said, “It is essential that the value proposition of the intermediary aligns with client needs. Additionally, intermediaries that offer clients value, in the form of advice, will struggle less in the price versus value debate.
“I believe that financial advisers are the unsung heroes of this time. I salute every adviser who, despite their own challenges, continued to serve their clients with compassion and care. Thank you for what you have done and what you continue to do,” concluded Swanepoel.
Writer’s thoughts
In all of the change and challenges presented, the role of the intermediary will become even more important as the insurance risk landscape evolves. They are the essential players in the insurance value chain, making material contributions across multiple channels and functions. And, although there are still so many unknowns, intermediaries have adapted well to the changes. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.
Comments
Regulations is killing the industry and job creation.
Consumers are too darn lazy to read their documents - often not even knowing their policy number. They stop listening after 10 minutes to your valued advice.
Insurers take great precautions to protect themselves, very often passing the 'buck onto the Intermediary'.
Yes, I agree that those that pass these regulations and 'police them' don't understand the financial landscape.
Then there are our Compliance Officers, what a farce. They only respond to legislations with little or no knowledge of financial products - how then can you 'police' the advisors?
A great example are banks and finance house's, dealing with them means signing forms with NIL explanation of what you are signing. There is simply no time for them to explain, perhaps they don't understand it themselves.
I often wonder whether any of the people in the Regulatory Bodies, ever bought a financial product, an asset, change a bank card etc...
If they did, they would know that all the legislation they pass, defeats its intended purposes. Report Abuse
Since FICA, identity fraud has skyrocketed because documents that used to be confidential are now handed out to dozens of places.
Money laundering and corruption seems so more prevalent than it was a decade ago.
So the additional rules have done nothing but make our lives more difficult. I am in favour of rules to protect the clients and to make our industry more professional, but some of these rules have been made with zero thought. I'll bet that the rules makers have never sat in front of a client and had to advise them on anything.
They are a bunch of paper pushers who need to keep themselves busy.
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Coutts said, “Work is required to ensure wordings are easily understandable" - here we are talking about policy wordings for policyholders and i would agree. How about a simplified understandable piece of legislation for a change? That would be a novel idea. I sometimes think the people drafting legislation get paid for the length and complication of each piece of legislation drafted. Report Abuse
It is high time that Brokers stop taking their cues from insurers and regulators and decide for themselves what would be best for their clients in whose interests brokers primarily are supposed to act. Report Abuse