Maintaining quality in a cut throat commercial risk market

Under stressed business conditions where price is all, the danger of underinsuring or sacrificing the quality of cover looms large, especially in the small to medium sized commercial risk market.

A good run of underwriting profit has seen commercial insurers cutting premiums to grow and maintain market share, both locally and globally. Cost-wise, this is good for small to medium-sized commercial enterprises struggling to manage their cost-base down. The danger, however, is that “as commercial cover providers compete to offer the lowest premiums, the quality and range of cover is often compromised” says Carel van der Merwe, Executive Leader, Alexander Forbes Commercial Solutions.

While selling quality and advice is bucking the trend to price in the current market, van der Merwe believes that “businesses buy cover to manage real risks.” Identifying and correctly covering risks key to the survival of the business should be the aim of any good risk manager. This can only be achieved by “focussing on quality advice and service at all times – as opposed to paying as little as you can and risking the sustainability of the business in tough times” explains van der Merwe.

Yet getting quality right means “evolving a commercial solutions practice distinctly different from our own past - and one unique to the market” explains van der Merwe.

This has been achieved by:

• Employing and developing quality advisors, all of whom are qualified representatives, as required by the FAIS Act - in line with its vision to professionalise the industry and improve the quality of customer service and advice.

• Spending time and effort on research and development “makes us confident that our commercial covers are unique and lead the market” say van der Merwe. For example, there’s no single approach to retail risk. Instead, “we’ve researched the risks particular to different retailers, coming up with distinct covers for, say, food, clothing or vehicle retailers, all of which have very different exposures” explains van der Merwe.

• The current 21 distribution points around the country allow advisors to get close to customers, know their businesses and tailor cover to meet their businesses’ core needs. This, coupled with expert advice and ongoing communication, keeps clients up to speed with relevant information and developments particular to their business risks.

• Using technology to streamline the processes between advisors and the group of insurers assembled to meet each client’s different needs means that much of the frictional cost that, historically, made individually tailored cover for commercial clients costly has been removed. This cost saving has allowed van der Merwe to offer full-suite commercial cover, comparable to corporate businesses, to the small to medium market.

Simply put, “we focus on the strengths of the parties involved in the supply-chain, by providing a seamless platform where the client can structure the best cover for their needs – while interacting with a range of expert advisors on-line in real time” adds van der Merwe.

• Allowing new generation business owners to purchase and manage their portfolios on-line, with administration done automatically in a separate location, empowers “new age business owners to book, seek advice and manage their own cover remotely – while benchmarking their overall commercial portfolio against best of breed in their industry” says van der Merwe.

• Longstanding relationships provide a thorough understanding of the cover and capacity of each of the insurers used. This knowledge becomes a key component of the advice offered and adds to the quality of the solution provided. For example, if fire is the biggest risk for a particular business, “we know which insurer has the capacity to cover a large fire claim and whether they deliver the best technical and administrative support in the event of a crisis” adds van der Merwe.

Going forward, even more value will be brought to clients by allowing them to benefit from procurement deals negotiated as part of the solutions structured for other clients. Ultimately, “clients will even be able to tender for projects associated with these solutions” explains van der Merwe.

In a market dominated by a short term rush to price, flying the quality, service and advice banner may well, initially, come at a cost. Van der Merwe, however, believes that “the sustainability of the price-driven market will be tested when claims start exceeding the underwriting premium.” It is then that poor choice of cover and advisor will become apparent as businesses learn that survival in tough times is in fact reliant on tailored, targeted and, above all, effective, commercial risk cover managed by a quality advisor.”