The Insurance Act (AKA a Shark Fest for the Callous Consultant)

The Insurance Act is a defining moment for insurers not insurance brokers.

Certainly, insurance brokers will have to make changes to the way they operate but that is some way off.

The most important issue to consider is how each insurer is proposing to respond to the Act and it is illogical that the quality insurance broker should have to do too much until the insurers’ proposals are clear.

One must also consider that the insurers will each try to be more impressive than the others in demonstrating their newly discovered philanthropic approach to underwriting and settling claims!

The wise insurance brokers are going to bide their time and consider the approach of all insurers before making their move.

I personally think that the insurance Act will lend itself to much more consolidation and a shrinking in the numbers of agencies.

But the hounds are out and if there is an angle to dispossess insurance brokers of their hard earned shekels they are likely to find it.

I do believe that the insurers have much to do if they have not done so already (the better insurers will have) but insurance brokers rushing to change now is, without a doubt, precipitative.

The smartest thing that the class insurance broker can do is to take time to acquaint themselves with what is going on and learn what decisions will have to be made.

This can be achieved by listening to and working with the insurers themselves and taking advantage of the plethora of ‘free’ events that will become available.

Contracting Out.  Surely a mockery of the TCF Outcomes

The overriding objective of the Act is to get a better deal for the customer and an insurance broker, as a member of a profession, should put their clients first.

It is therefore an utter mystery to me why those representing the insurance broking profession have allowed the insurers to push through the provisions for “contracting out” of being fair to clients.

They should be ashamed of themselves. This just strikes me as zero influence in the corridors of power.

Whatever spin the insurers put on it, to allow an Act that makes a client pay more to be treated fairly seems ludicrous. 

Many experts emphasised this at the consultation stage of the Act but it seems that those with the job of promoting the interests of insurance brokers and their clients were just ineffective.

It is so irresponsible that I fully expect the leading insurers to pay lip service to the contracting out nonsense in other than difficult to place insurances.

Working Together

What is absolutely clear to me is that this Act gives a prodigious opportunity to the insurers to work more closely with insurance brokers and to help them meet their duties and responsibilities to the client.

The trouble is that we spend our lives listening to the so called industry leaders making a meal of everything (some of whom have never worked at the coal face) but if one looks more closely at the opinion of the actual practitioners, the health of the insurance broking profession and the industry generally is in an admirable state.

This Act will, in my opinion, bring staff at the eminent insurers (large and small) closer to the insurance broker and the client and that cannot be a bad thing.

The Insurance Brokers' Standards Council has just issued its Draft Handbook on minimum standards and if you look at Principles 6, 8 and 9 (competence, giving information and gathering information) you will see that the responsibilities that this Act puts on employees of insurance companies, brings professional practitioners much closer together in an empirical sense.

I see the CII at head office is seeking to recruit another well paid marketing executive and that is the way in which its current management chooses to run the Institute at high level and perhaps this will lead to more support for the local CII groups and less selling of product.

What I see at the coal face is the local CII institutes reaching out to all practitioners and running all manner of events that breed an understanding of each other’s jobs, duties and responsibilities. Is this not more important than selling products?

The insurance broker lives in a glass bubble of responsibility. Every morning that an insurance broker goes to work, there is a risk of their standard of work being challenged and this has been, for generations, an enigma to most insurers.

Now we have an opportunity for all that to change.

Staff at insurers will have to know what their underwriters regard as material and disclose that to the insurance broker and their clients; they will have to know what is generally regarded as material which means that a knowledge of what is going on in the market is vital. No longer will they be able to walk away from their responsibilities on spurious grounds of non-causative breaches of warranty or disclosure of facts. No longer can they stiff the client by abuse of the “basis” clause.

This Act formally puts the insurer in a similar boat to the insurance broker by giving them responsibilities and limiting their draconian powers.

Insurance company employees will wake up to the risk of getting things wrong and having to pay the price. Underwriters might actually be allowed to make claims decisions on materiality again!

I started this blog by saying there is not much for insurance brokers to do just now but to find out what the insurers intend and I recap by saying that this is probably the model action to consider.

Above all, insurers and insurance brokers should be looking at ways in which their staff can be brought together to learn as a group.

Ultimately the Insurance Act is about a more harmonious way of doing business and that has to be better for the client.

I am not suggesting for a moment that insurer’s  and insurance brokers’ staff have to play cricket, go bowling or have quiz nights and barbecues together but I do think that well managed “Insurance Act get togethers” leading up to the inception of the Act would be a good thing.

I facilitated a Claims Master Class around the UK in 2013 and had the privilege and pleasure to work with a group of the most unassuming specialists in their own field. We brought together “at the coalface” claims staff, fraud specialists and  underwriters from insurers and account executives and claims staff from insurance brokers and frankly the outcomes were magical.

We all learnt from each other and I have no doubt in my mind that the customers of those insurance brokers were going to be better advised and generally better off following this process of working together.

I would suggest that get togethers are not commercial events and free to attendees (perhaps run by local CII Institutes or local insurers or insurance broking firms).  They need to be facilitated well and there should be no “side” (one party should not be trying to sell to another). They certainly should not be held under the questionable public gaze of press “round table” discussions which are about as useful to the cause of customer benefit as a chocolate teapot.

One Outcome

I am a fan of Ashwin Mistry who is currently President of the CII.

He has a motto for his presidential year which is “one voice” and in his speeches he highlights the Insurance Act and IMD2 as opportunities for the profession of insurance brokers and the insurance industry to work together.

Frankly the vision of a federal insurance industry fills me with horror (can you imagine the gong hunters, the marketing cohorts and non-insurance brokers running the profession of insurance broking) but I do think that Ashwin is absolutely right that the Insurance Act gives the opportunity for the practitioners to work together to a common goal.

“One voice” is perhaps an unfortunate choice of slogan. It is a rallying cry that I have always associated with oppressed or disadvantaged groups (a quick Google search will tell you more) and I do feel quite uncomfortable using it as a motto for organisations selling insurance products!

Might I suggest that if one changed that to “one outcome” (Which is, one presumes, the fair treatment of customers) then the multitude of different voices can be harnessed towards that most desirable outcome.

I see much excellence in insurance brokers and insurance practitioners who work with clients and I suspect that the Insurance Act is a catalyst for a greater mutual understanding of each other’s new duties and responsibilities in the interests of recommending quality products and ensuring claims are paid fairly.

 “One Outcome”…… has a nice ring to it.


Robin Wood's picture
Working initially for insurers and brokers in the London Market, Robin co-founded and built his own broking firm following some years with a national broker in the 1980’s. He served as a Council member of the IBRC from 1985 to 1993 and is now Chairman of RWA Group, one of the leading compliance, training and broker consultancies in the UK. Robin is an expert Witness to the Courts on Insurance Market Practice, most notably involved in the recent Environcom and Reynolds Vs Rossborough cases, and is regularly consulted on high level compliance and PI issues.
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