National Insurance Brokers Association
The National Insurance Brokers Association’s role is to explain the insurance process, and of course the broker’s role in it, to government and regulators, and to make sure they understand the true impact of current or proposed regulations. There is a widespread misconception – not just among the public – that a broker is a salesman, but he is not. “Invariably, insurance brokers act for and on behalf of their client, the policyholder,” Dallas explains. They are not salesmen on behalf of the insurance companies; they are insurance buyers. It’s an important distinction.”
Thus when NIBA talks to government, it is on behalf of the buyers of policies, not the insurance companies themselves. “We can tell government what would be the impact of a proposed regulation on clients, not only on brokers themselves.” Dallas says the relationship with Canberra is good, especially at Treasury level. “They are always happy to receive us and they listen very carefully to our views.”
However, NIBA remains critical of the high level of taxation on insurance which varies state to state; New South Wales, says Dallas, “is actually one of the highest taxed places in the world when it comes to insurance.” The association deplores the concept that insurance should be a luxury and taxed like brandy or cigars and is running a campaign to educate Australian insurance buyers about state insurance taxes. The country is – in global terms – badly under-insured and high taxation acts as a further deterrent. It is also unfair. “The fire services levy now only exists in NSW and Tasmania (all other states and territories have abolished it). What it means is insured homeowners and businesses pay a tax for the state’s fire services. Uninsured people don’t pay, and they still get the use of the fire services.”
The government’s FSI enquiry is looking into what financial services should look like over the next five to ten years, and how should they be regulated. General insurance is, of course, part of the financial services industry but Dallas says it is barely under scrutiny because it is already well run and regulated. “We are different from investments, wealth creation or retirement savings,” he explains. NIBA concentrates on ‘general insurance’ (including areas such as workers’ compensation, public liability, or property), occasionally straying into life insurance but staying out of health insurance. However, “we also think it is important to look very critically at how you fund risk.”
Risk is something to which everyone is exposed – individuals and businesses alike – and everyone is aware that one way to manage risk is via the insurance process. In addition, there is the ever-present risk of natural disaster, and a lot of work is being done, not just in the FSI enquiry but also with the Productivity Commission, as to how the country should finance the cost of a flood or savage wildfire. “At present we spend millions on mitigation but billions on recovery and perhaps that formula is the wrong way round.”
Insurance broking is thought to be boring, with its quill-pen, Dickensian image. Not so, says Dallas, with some feeling. “You might think that is the case, but in fact it is a matter of the insurance broker understanding the business of their client and the risks associated with the client’s business. You cannot do that from behind a desk or by looking at a lot of actuarial tables. You have to get out and talk to the client, actually look at their business and how they operate.” For a broker, the time when they get a warm feeling of professional pride is when, if something does go wrong for their client and a major loss is incurred, the broker can then go to work on behalf of the client; he or she makes the claims and sees the business up and running again fast because there was a good insurance programme in place.
So the association has centuries of accumulated preconceptions to shift. Far from being a staid, actuarial and desk-bound job for those who prefer to bury their heads in books of statistics, broking requires an outgoing and active mind that enquires into the real conditions of a business before seeking a cost effective way of ensuring it can survive a major catastrophe – a fire, flood or some interruption of trading such as a computer wipeout.
NIBA has its own training college, a fully accredited, registered training organisation, to encourage brokers to obtain the appropriate qualifications. There is also a service called ‘need-a-broker’ which gives an online listing of brokers in various insurance categories in your area nationwide; this is being accessed almost 10,000 times every month. There is increasing recognition of the complexities of insurance, says Dallas – the subtle differences in levels of coverage, terms and conditions, exclusions and clauses that make even ‘standard’ packages for, say, tradies quite distinct from each other. It is a lack of understanding of those differences that in so many cases leads to a bad experience with an insurer if a claim needs to be made; but if all the terms of a contract are not followed, a pay-out can be lower than expected – or even non-existent. “If you have the time and expertise to put into your insurance premium renewal each year, give it a go,” Dallas suggests. “But probably you don’t.”
A competent broker should be an insurance in itself against such problems. However, even with a good relationship to a broker, a business client needs to keep that broker informed of changes to the business. Announcing an extension to that warehouse or taking on extra staff? If you’re sending a press release to the media, make sure your broker is on the mailing list too – he can then check out whether you need to alter or enhance your policies. It is his legal duty to offer you the optimum product and service and obtain the most cost-effective cover regardless of the commission paid by the insurance company. As Dallas says, “The obligations are quite clear.”
Apart from national qualifications, NIBA College provides a wide range of professional development programs and activities to assist individuals in keeping their skills and knowledge up to date. The College also runs regular seminars on a range of topics throughout the year. In addition, NIBA has a complimentary, online induction program available for new staff entering the insurance industry, no matter what their role is in the organisation. Many NIBA members are now incorporating this program into their internal induction procedures as it gives their new staff a basic understanding of insurance, the role of insurance brokers and regulations governing the financial services industry. It is divided into two parts, Insurance Basics and Working in a Brokerage, and can be completed within 60 to 90 minutes.
Insurance broking is about personal relationships: between broker and client, and between broker and insurance underwriter. “What is critical to the relationship is the role of the broker as trusted adviser. It’s not just a matter of processing transactions – it’s about adding value to your client, especially your business client, so they can be more successful in the operation of their businesses and manage the risk.”
Despite – or possibly even because of – the increasing availability of online quotations for so many forms of insurance, the broker has to have a value in order to survive. “We live in a very dynamic world. There are major demographic changes across Australia and the business community. Things that affect business will affect insurance broking.” In the digital world, people are constantly looking for new ways of doing business. But broker numbers remain stable and their share of the insurance business has also remained stable or risen somewhat in recent years, indicating that enough customers, especially in the business sector, see the value of employing a professional to sort out their insurance in much the same way as they have a professional to do their books or arrange their legal matters. As Dallas explains, “Adding value requires a strong element of advice and that is what we believe will be the real future of broking.”