Navigating a hardening insurance market

After many discussions around the fact that we need a hardening market, we have seen some signs of this happening. The question remains: is there really a hardening insurance market, and do the previous cycles of soft and hard insurance markets still exist?

Alternatively, could we describe the market as being consistently competitive with modern day business models and consumer challenges and do these present circumstances need to be dealt with and considered by brokers on an ongoing basis?

Competition is key

Firstly, consumer education around short-term insurance is essential. As a starting point, customers need to understand that low premiums in a high claims environment is not a sustainable business model. Of course, customers need to be able to obtain competitive premiums relative to their disposable incomes, but these premiums need to provide financial comfort when insurance events do take place.

An optimal way to achieve this is to consult with brokers who will be able to provide expert advice as well as cover options that are adequate, competitive and innovative within the current market parameters.

This will mean that the brokers will have to use their knowledge about the various products available in both the commercial and personal insurance space, and they will have to be well-equipped to guide clients via a required needs analysis. It is only then that the best cover at the best price can be attained.

Not as simple as it seems

This all sounds quite simple. However, the current landscape has witnessed many new entrants into the short-term insurance market, and with this comes innovation and competition.

So even in a potentially hardening market, the customer will still be looking for competitive prices and will, undoubtedly, have an array of available choices to consider. Simultaneously, brokers will need to balance their own business portfolios in a way that ensures that they are able to deal with a variety of customers with differing needs.

Manage your own risk

It goes without saying that brokers will also need to overcome modern day customer challenges, and provide effective, sustainable insurance solutions. Innovation will be central to achieving this.

In addition to the daily tasks, brokers will have to consider advice given and assess potential risk management programmes for their customers. This means that brokers always have to be on the lookout for ways in which customers are able to reduce their premiums by proactively mitigating potential risk factors such as installing additional security features on their cars, or installing home alarm systems.

Advising on the premium and cover is key, however, adhering to and understanding increased regulation in the market cannot be discounted. The principals of Treating Customers Fairly (TCF) have never been more important, with the voice of the consumer growing stronger every day. For the broker, focus will need to be placed on simplified policy wording and ensuring that the customer understands every aspect of the policy. It is vital that insurers and brokers collaborate effectively to ensure that they stay ahead of the curve when it comes to preparation and compliance.

Have we answered the question?

Let us go back to the first question about a hardening market. There is no doubt that the insurance landscape has seen significant shifts in consumer attitudes, especially when it comes to price acceptance, and the market will, therefore, be one that will remain competitive.

As a result, brokers constantly need to be aware of the changes and shifts in the market and how these could potentially benefit their customers. Failure to do this will certainly prompt customers to consider alternative ways to meet their insurance needs. Being aware of all the dynamics and pertinent aspects affecting a customer’s policy and premiums will place the broker in a strong position to navigate the challenges that lie ahead. If a broker is not aware of all these aspects, their book will be eroded by other brokers who are staying ahead of the ever evolving game.