The role of insurance brokers in battling underinsurance

How can insurance brokers break the mentality that cheapest is best when it comes to covering clients in a highly competitive trading environment? This was the question recently put to a panel of experts during an IB TV interview with AXA‘s Jon Walker and Financial & Legal’s Karen Beales among those lending their insights.

“Cheapest, as we know, isn’t always the best,” Beales said. “Sometimes it can be, we mustn’t assume that by buying more expensive, it will be better. However, the insurance industry generally has focused so very much on the sales process, I think it’s crucial that we also think about ensuring that customers understand the products that they’re buying, and Consumer Duty may well help that.

“By going on various aggregator sites, or perhaps contacting an insurer directly, the customer doesn’t always understand the insurance product. It’s absolutely crucial that they can understand what they’re buying and understand how one product compares with another. Then they can understand the value of that. The key thing for me is to make sure that the customers are really clear about the product that they’re buying and what it offers to them individually.”

For Walker, the crux of this question is also about understanding, and he emphasised the role that insurance brokers have to play in creating a greater understanding of a customer’s needs and what’s important to them. He also acknowledged that given the current economic conditions, the price of a policy is justifiably very important to consumers.

Where he believes more focus needs to be directed is towards helping an insured understand what happens at the point of a claim, and why it’s so important that they’re insuring their business appropriately. This prevents an insured from being left in a situation where, in the event of a claim, they’re wondering why the amount being paid isn’t covering the loss they have suffered.

“Underinsurance is a topic across the industry, it’s something I think we all have a responsibility to help customers with,” he said. “I think it’s also a really good way of talking about why price and price alone isn’t necessarily in the customer’s best interest but is part of a wider process and package of coverage that they need to have in place for their business – to get it back up and running in the quickest time possible and to the level which [they] are expecting.”