The focus of an owner, chief executive or finance director may be on growth, maximising profit, expansion into new markets, product development or cost savings, but one thing is for sure, it will not usually be on buying insurance.
So it’s rather perplexing why so many brokers and insurers insist on trying to sell a product that companies do not seem to want, and do so by offering cheap prices with an increasing degree of commoditisation, even for larger commercial cases. Low-cost structures and cheap prices are all very well if the product actually meets the client’s needs. Unfortunately, in many incidences, this is not the case.
Nowhere is the saying “Price is what you pay, value is what you get” more true than in insurance where, for most customers, the product is only fully understood after they have paid for it. Actually understanding the client’s wider needs and finding an offer that matches those at an acceptable price is a far better way to transact business and build a relationship for the long term that delivers real value.
The client’s real need is to identify the risks and threats that their business faces, and then look at what can be done to prevent them from happening in the first place. Then if the worst should occur, what can be done to mitigate or even negate the impact and recover quickly. The final line of defence is financial compensation. However, money can never fully compensate for pain and suffering or customers finding new suppliers. Clients need risk management, of which the insurance product only forms a part.
So why don’t insurers focus on the client’s real needs? This will pay dividends for the client over simply buying a package of insurance cover. It may even mean they actually buy less insurance. This approach begins with a detailed, in-depth understanding of the business and a needs analysis.
Digital technology, globalisation, cyber threats and the challenging economic climate are rapidly changing the operating environment for UK business. Companies of all sizes are trading outside their comfort zones – with global sourcing of components and materials from countries like China and India, and dealing with just-in-time supply chains.
In contrast, the Confederation of British Industry identified a lack of in-house expertise among UK mid-sized companies in areas such as legal, human resources and risk management. Recent research from The Institute of Chartered Accountants in England and Wales (ICAEW) showed that as many as 51% of SME (Small and Medium Enterprises) businesses intend to increase their risk management spend.
All of this spells an opportunity for insurers to work in partnership with their selected brokers to meet clients’ needs more effectively to win and retain business.
Insurers can help businesses identify the risks they are exposed to, so these can be mitigated through proactive risk management, considering which risks could be retained and which can be transferred through insurance.
This can be achieved through the use of risk surveys and analytical tools, as well as help with business continuity planning and health and safety. Other areas where support could be provided include data backup, cyber and intellectual property risk, and legal and human resources advice.
Enriching the information already available with other geographical, behavioural and demographic data from various sources provides the most accurate picture, minimising the risks faced by both the business and its insurer.
Clients need to carefully differentiate between the various offerings of insurers and brokers, seeking out the firms that want to develop long-term relationships and offer more than just cheap insurance. Risk is a fact of life for every business. But not every business faces the same risks. That’s why it’s vital to get professional advice that considers the big picture.
Clearly, when it comes to risk, prevention is better than cure – which is where the art of risk management comes in. So it’s time to start selling what our clients want to buy – not what many think or assume they want to buy.
About the AuthorMore content by Kevin Pallett — Aspen Risk Managment