To be or not to be, is that the question?

The modern consumer wants convenience, and buying online is quick and hassle free. That is unarguable. However, convenience in buying does not equal getting what you thought you paid for.

 

At the time of a claim, having access to someone with specialist knowledge to advise, assist and support customers during what is usually an emotionally charged time, is of significant value. The organisation that can field someone who understands customer needs and requirements, and has the ability to step up to help protect their financial well being and security, is the one likely to have long-term engagements and repeat business. In the insurance industry, the knowledge and expertise of an intermediary plays an invaluable role in securing customer relationships.

We then revert to the question of the intermediary either being tied to one organisation or remaining independent and being able to represent the customer with multiple insurers. Of importance here is what benefit either circumstance provides for the end customer.

The tied agent model is one in which the intermediary is linked to one insurer only and all business is placed via that selected insurer. The decision to go with one insurer can be based on a number of elements. The agent may specialise in a particular type of insurance and the insurer may then match those needs and requirements with the requisite expertise to be able to accommodate the intermediary and his or her customers.

Advantages to the intermediary could include support in marketing, possible administration services, specific allowable fixed benefits or improved service delivery by operating from the premises of the insurer.

The customers have the benefit of an insurer with specialised knowledge to suit their needs particularly when it comes to claims. The possible downside is that the customer and intermediary have a limited product portfolio to offer, and thereby limit the customer’s access to extended choice. This model has cost and convenience benefits and offers expansion opportunities linked to the insurer. It also offers the intermediary a certain amount of security.

On the other hand, an independent intermediary offers a wider range of products if he/she has contracts with multiple insurers. The intermediary also has the independence of placing business with more than one insurer and has availability therefore, to competitive premiums with the ability to expand him/herself into a fully fledged business.

Another advantage is that there are fewer restrictions in how they operate, other than that which all intermediaries and companies are subjected to, as they are running their own business and can model it as they see fit.

More importantly, as an independent adviser, the business owner establishes his/her very own brand and individual reputation.

However, in the modern insurance market where retail and other non-insurance type corporates are entering the insurance space with a pipeline drawn from their existing customer base, add to this the evolving regulatory requirements presents various challenges to the intermediary thereby making the decision of being a tied agent or independent more important.

Looking at it from all angles, neither of the two approaches is challenge-free. The bottom line is that anyone who wants to enter the intermediary insurance world has important, and sometimes confusing, choices to make and questions to answer.

However, the most important one of all is, I believe, the simplest too. How will what the intermediary chooses to do help him/her to better serve their future customers?