With all signs on the horizon pointing to a hardening market, clients who have been paying relatively low premiums may face increases for some products. This can create frustration and dissatisfaction unless, as their broker, you can work closely with your clients to communicate the reason behind the changes.
More importantly, acting as a trusted risk advisor, brokers have an opportunity to demonstrate significant value by collaborating with clients to explain the changes in the market and offer ways for them to navigate these changes. You can help clients reduce costs, mitigate risk, or change their coverage to better suit their requirements, offsetting any premium increases.
Signs point to a hardening market
While rates aren’t hardening across the board, we are starting to see pockets of the market show signs of hardening. In the past, when the market turned, it turned as a whole. Now, with a more fragmented insurance marketplace, insurers are increasing premiums in sections where losses are higher and remaining competitive in other areas such as specialty lines.
Capacity in the industry remains significant but it’s shifting around to accommodate new product areas such as cyberinsurance, which is increasing in popularity as people come to understand its significance.
Recent losses in the United States due to weather-related events are likely to affect some global markets, but it remains to be seen whether the Australian marketplace will see increased premiums.
The industry is seeing more of an appropriate approach to movement in rates. Predicting a movement in one product line won’t necessarily translate to an average of market movement overall. The market is most likely to stabilise rather than experience significant movement across the board.
There will be two potential responses to risk. Some insurers may look to diversify risk, which is a positive approach, or they may withdraw from product lines or reduce capacity, which is a more negative approach. The market will see varied responses over the next 18 months to two years.
A more bespoke approach
The rise of insurtech means brokers and insurers should be able to take a more bespoke approach to products in the future. This new technology sector will help insurers offer highly-individualised, custom-tailored products for businesses and individuals, making the insurance market more competitive.
Insurtech lets insurers and brokers deliver a more customer-centric experience. This will be important as clients struggle to understand the reasons behind rising premiums. Insurtech’s use of data and analytics can help keep some clients’ premiums low due to risk-reduction actions, while other clients will have little choice but to pay higher rates.
The opportunity for brokers
You should be communicating openly with your clients now regarding the chance of rising premiums. Because higher premiums could be received as bad news, it’s important for you to explain what’s going on in the market, what’s driving the changes, and how clients can deal with them.
Stay up to date with market changes so you can advise your clients effectively. Quality advice, combined with excellent placements and programs, will add value to your clients: start working with them to demonstrate that value now.
As an Austbrokers partner, you have access to market-leading insights and advice. We can work together to help your clients manage their risk optimally. To find out more, contact us today.