Call for better conversations, more transparency to inform crucial insurance decisions

Communication is the key to managing insurance needs

A recent survey of medium-sized Australian businesses suggests that many can do much better when it comes to managing the relationship with their insurance broker – and are left unnecessarily exposed as a consequence. And step one in addressing that is to have clearer, more engaging conversations with their insurance broker.

“The strong theme to come out of several pieces of recent research is that businesses should have clearer expectations of the services they receive from their broker. And extracting the value they want means both sides should be investing more time in their commercial relationship,” said Andrew Gordon, Aon Risk Solutions, Head of Marketing, which conducted the research.

This included a survey of 100 businesses with turnovers between $15 million and $100 million, along with qualitative research into the relationship between business and brokers and how they interact.

The survey showed some concerning deficiencies in the way businesses seek information about their insurance needs, with recommendations from colleagues (50%) ranking highest. Sounder forms of information, such as from industry associations and broker recommendation, lagged well behind at 34% and 33% respectively.

“This is a worry given that more than two-thirds (71%) of businesses rate their insurance needs as complex,” he said. “It’s frankly unlikely that consulting with colleagues is going to provide the information a business needs to get the right type and level of insurance.”

According to Mr Gordon, typically businesses are underinsured to the tune of 25% to 45%. And reliance on incorrect advice, false assumptions, faulty self-assessment and incorrect valuations all contribute to this situation. The hotels / pub sector is one in particular that experiences this risk.

Despite this clear deficiency, responses from the survey suggest that many Australian businesses are not aware that they are underinsured. Fifty-five per cent of respondents said their program had been benchmarked in the past year; while 38% said it had been benchmarked in the past three. And almost half (47%) also rate ‘regular and effective benchmarking’ as the ‘most important’ feature of their program.

“What this suggests to me is that businesses may not be clear on what effective benchmarking entails – and that, anecdotally at least – it’s being mistaken for ‘shopping around’ for cheaper premiums,” said Mr Gordon.

So how should a business go about getting the insurance program it needs?

According to Mr Gordon, an effective program is dependent on a number of factors – but it all starts with having a robust and open conversation with a reliable information source.

“Many businesses report frustration with a number of elements of their broker relationship, including infrequent transactional style contact, when a full and frank exchange of relevant information between broker and business is required.”

To this end, and based on these and other survey findings, Aon has embarked on an education campaign that offers businesses more information about the kinds of questions to ask in order to get the best value from their insurance broker.

Stage one was the launch earlier this month of a website for medium-sized businesses that features Q&As, video interviews and case studies that provide practical guidance on making the most of the broking and insurance sourcing process.

“It’s not necessarily been standard in our industry to reveal this kind of information, but based on survey findings and other evidence, it’s an approach we need to take to turn our industry knowledge into an advantage for our clients. That way they can avoid being unprepared to recover from even relatively commonplace events,” said Mr Gordon.

“We see it as a strong start, in some ways, to a new kind of practice for our industry.”

The website is at www.aon.com.au/mybroker. In the first week of launch, over 1,000 businesses visited the site.