Emerging risks underscore the key role of the insurance broker

With the proliferation of technology tools and digital platforms that allow customers to acquire insurance products and services directly, and almost instantaneously, from insurance companies, questions have been raised about the future role of insurance brokers – do we really need them?

Yet, despite the increasing shift to self-service by the modern customer, cutting out the middleman is not always a good idea, especially considering the raft of specialised and niche risks that are emerging in the modern era.

This is according to Justin Naylor, Managing Director of iTOO, a leading South African specialty insurer.

“The world of risk is rapidly changing and gone are the days when people can simply buy an off-the-shelf product for their business and expect to be adequately covered. While it may be simple and quick to source insurance packages online, the role of the broker is to provide expert advice and this is now more crucial than ever,” he says.

“It’s about context and brokers are experts that can guide and advise customers about the risks they face and the insurance products and services that will best meet their needs.”

Recent major events across the globe and in South Africa have highlighted the key role that insurance brokers play in the insurance value chain.

Coverage gaps

The global COVID-19 pandemic, which severely affected businesses and economies, has exposed significant gaps in organisations’ insurance coverage – with many finding that they either had inadequate or no cover for loss of profit and business interruption risks.

“A risk event such as COVID-19 stresses the importance of expert advice. Through personalised contact, a broker knows and understands your business and is thus in a position to give you expert advice about range of covers that best suits your requirements,” says Naylor.

Similarly, the recent spate of violent looting that saw the destruction of hundreds of shopping malls and businesses in South Africa exposed the fact that many companies thought that they are covered for such events when in fact they were not.

“While some were aware that they had some type of coverage for events such as riots and looting, how many actually talked it through with a broker to get a full understanding of this this coverage, and how many knew about the variety of products that are available for such events? This is another clear example of really specialist and expert insurance products that some businesses weren’t fully aware,” adds Naylor.

Cyber threats are also a growing area of concern, with a recent ransomware attack causing severe disruptions to cargo-handling operations at Transnet’s Durban port. The cumulative impact of the attack will likely cause long-lasting damage to the economy.

Expert advice

“Again, companies can buy a simple cyber policy online and think they are covered. But in reality, they need an expert who understands their business and their cybersecurity needs and give them the right advice about suitable cyber cover.

“In addition to COVID-19 and riots, cyberattacks are not covered by traditional insurance and this highlights a need for a specialist cyber insurer and an expert broker to guide businesses through this complex landscape,” says Naylor.

However, he noted that while the role of brokers remains key within the insurance ecosystem, going the digital route also has a role to play, especially for certain types of businesses that are looking for small, easy and convenient coverage.

“But if you are buying insurance digitally, you need to fully understand your needs and what you are buying. Also, you should only obtain insurance digitally from an expert company that you can trust and that can address all your concerns. As a company, we are looking for ways to use digital platforms to enhance the role of the broker. We want to bring our brokers along for the digital journey.”

iTOO currently has agencies with some 900 brokers across South Africa and has also expanded into Botswana, Namibia and Mozambique. The company has entered into a joint venture in Kenya and also launching a presence in Ghana. In addition, the company is also expanding its footprint into Europe and the UK.

Naylor points out that iTOO has grown its business by approximately 25% per year in the past three years, , while also growing its team of experts significantly. In addition, the company has added a host of specialist products to its already extensive portfolio.

“Our phenomenal growth and expansion into new territories speaks to the growing demand for specialised and niche insurance products backed by expert advice provided by our highly-experienced brokers,” he concludes.