Thriving in a changing industry
The changing insurance industry poses many challenges. Increased regulation is taking its toll, the requirement to reach new markets has placed the industry under pressure, the average age of brokers is creeping up and the barriers to entry into the industry make it difficult to attract new blood. But there are solutions.
Brokers and insurers in South Africa operate in a highly legislated environment. This places the independent broker in a precarious financial position as the costs of running the business increase. When the insurance industry in the United Kingdom (UK), for example, experienced similar regulations, many practitioners made alternative plans – it was only those that had stronger financial resources who survived the intensifying regulatory framework.
Sales are also affected as brokers spend a substantial amount of their time making sure that they comply with the standards set out by the Financial Advisory and Intermediary Services Act (FIAS) and other compliance issues.
The regulatory framework is making it impossible for many brokers to stay in business.
Unintended consequences
Inadvertently, this will push up the cost of financial advice resulting in a situation where only the wealthy can afford having a financial advisor for their financial planning needs. It is obviously an untenable situation in a developing country in which the financial services industry is expected to play a role in boosting economic growth and creating individual wealth.
New blood
In addition, to meet the challenge of access as outlined in the Financial Sector Charter, it is important the industry attracts new brokers who are properly trained and equipped to offer appropriate financial advice to clients, especially those in the lower-end of the market.
The challenge of an aging broker and the fact that the barriers to entry into the industry have been increased, make the challenge of attracting young blood even more pressing. The average age of a broker is 45 and this average age is creeping up.
Training and mentoring
The solution, in many respects, lies in training, mentoring and learnerships. For example, BBSN and Metropolitan through the Corporate College International (CCI) are jointly running a mentorship programme to ensure that there are at least 300 active and productive entrants into the industry every year. In addition, 640 brokers have been enrolled into a learnership programme to boost their skills levels.
Collective effort
The responsibility of life offices or insurance companies is to ensure that
* brokers offer appropriate advice to the client to ensure the best buying decision;
* every interaction with the client counts;
* both the insurer and the broker deliver on the clients’ expectations.
A new mindset
Not only are brokers expected to offer financial advice and increase their sales – they are now also going to be remunerated in the new Commission Regulation to service the customer for the duration of the policy. This, in turn, means that they have to build capacity to be able to service the client on a regular basis – a responsibility that resided largely with insurance companies in the past. Consistently delivering value to the customer is the mindset brokers will have to adopt in order to survive during these trying times in our industry.
