Brokers as Risk Consultants
Acting as a risk consultant

As brokers evolve beyond pure policy placement to provide wider risk consultancy, the necessity for detailed analytics becomes paramount. To achieve this leap up the value chain, brokers must integrate, analyse and communicate data, leading to actionable insights for their clients.

Benchmarking and advising on the market
Source: Lloyds

As the conduit between underwriters and insureds, brokers enjoy a unique insight into the pricing, terms, and the availability of capacity in the insurance market. Although there is a tendency to refer to ‘the Market’ as one forum, the re/insurance market is better expressed as a large network of concentric sub-markets loosely broken into classes, sub-classes and geographic territories. This highly fragmented structure causes the marketplace to appear highly opaque and mysterious to much of the population.
Global centres of re/insurance
Source: A. M. Best

Since the days of Edward Lloyd’s coffeehouse founded in 1688, brokers have delivered value to their clients by retaining detailed knowledge of the merchants and shipowners willing to share in the highly risky voyage, procuring valuable treasure from across the globe. Today, re/insurance capacity is now being provided by over 14,000 companies and as many underwriting agencies, with key underwriting hubs in 9 major cities. Keeping track of the individual appetites of underwriters in each of these organisations is well beyond the scope of any broker so the necessity for data driven strategies comes to the fore.
Treating Customers Fairly

With the exception of standardised retail products like motor which are placed through aggregator websites, re/insurance does not have an electronic list of ‘bid/ask’ like the equities or commodities markets. Accordingly it has always been the broker's role to establish true price discovery by negotiating directly with each underwriter to seek the best terms. In this endeavour, the finite human resources available to a broker are often best focused on finessing the best terms from a few select markets rather than conducting a broader marketing exercise, where many markets will be inappropriate.

This predicament can easily be missconstrued as a conflict of interests unless clearly articulated to clients. Proprietary benchmarking has been found to be a very effective tool, not only to enable brokers to identify the most competitive markets before their competitors when seeking terms, but also to keep clients fully informed of the placement process and the reasons behind their decisions.
Accurate benchmarking creates value
in the following ways:
  • Enabling clients to budget for insurance coverage.
  • Enabling brokers to conduct targeted placements with the most competitive underwriters.
  • Provides empirical evidence that the broker is in full compliance of regulatory responsibilities and customer care duties.
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