An Insurance Broker is your best friend

CPR insurance services has had a tough few months settling many claims for our clients. Some of them have been due to Cyclone Debbie and other storm events that have occurred within Australia. Then there are those that have not been helped by late reporting or testing policy conditions. However CPR insurance services has managed so far to have all claims paid. This is a terrific result although some have not settled for as much as we would have ideally liked. The essential principle in making an Insurance claim is being able to prove your loss, but the main thing is they have been settled.

Why are we describing this as such a battle? Unfortunately, for a number of reasons, many insurers have become much more difficult with their claims handling and approach. They look for ways not to pay, rather than look how to pay. They are trying to hang on to their money, but this is unethical. One reason for this is that many insurers have downsized or restructured their claims areas, which tends to have a demoralising effect on staff morale and places more demand on results. Then when a natural disaster or catastrophe hits they are under immense pressure to manage the huge volume of claims as quickly and effectively as possible. Whilst we as insurance brokers do not see this as an excuse, it is important to understand their position and work with them to obtain the best outcome for our clients. Most of our claims come from natural disasters these days.

Insurance company claims departments do not always get it right, and this is why the insurance broker role in the process is so important. In fact, regulators of the insurance industry do recognise the important role that an insurance broker makes to the claims process. The regulators of the insurance industry include ASIC, to oversee the role of the financial ombudsman service. Then there is a role by APRA which regulates the financial viability of licenced insurance companies in Australia. The Financial Ombudsman Service (FOS), handles complaints from the public for certain types of risks, such as life, superannuation, income protection, travel, motor insurance, householders and small business insurance. At the recent National Insurance Brokers Association (NIBA) Conference, it was reported that in 2016/17 FOS received nearly 40,000 disputes which is a record for this regulator. This was an increase of about 11 to 12% on the previous year. 39,471 disputes have since been closed but out of this only 216 disputes were made against insurance brokers. And this was a reduction of 37% from the previous year. Of those 216 disputes, 55% were resolved by the broker themselves. Only 37 disputes against brokers went to a decision. Twenty-two were ruled in favour of the Broker and 15 in favour of the applicant.

Insurance company claims departments do not always get it right, and this is why the insurance broker role in the process is so important. In fact, regulators of the insurance industry do recognise the important role that an insurance broker makes to the claims process. The regulators of the insurance industry include ASIC, to oversee the role of the financial ombudsman service. Then there is a role by APRA which regulates the financial viability of licenced insurance companies in Australia. The Financial Ombudsman Service (FOS), handles complaints from the public for certain types of risks, such as life, superannuation, income protection, travel, motor insurance, householders and small business insurance. At the recent National Insurance Brokers Association (NIBA) Conference, it was reported that in 2016/17 FOS received nearly 40,000 disputes which is a record for this regulator. This was an increase of about 11 to 12% on the previous year. 39,471 disputes have since been closed but out of this only 216 disputes were made against insurance brokers. And this was a reduction of 37% from the previous year. Of those 216 disputes, 55% were resolved by the broker themselves. Only 37 disputes against brokers went to a decision. Twenty-two were ruled in favour of the Broker and 15 in favour of the applicant.

Of those 40,000 complaints, there were 8,756 what we call general insurance disputes, out of around 13,000 it received overall. This was an increase of 28% on the previous year which was already in an increase of 20% on the year before. FOS see the broker role as being helpful in the dispute process and often resolve the matter on behalf of our client. We ourselves have a 100% track record of having claims disputes resolved where our clients have lodged legitimate claims on their policies.

In fact we use FOS on behalf of our clients to pressure insurers for the correct result. We also use our cluster groups, Steadfast and NAS Insurance Brokers to also assist us where necessary. We have even taken matters all the way to the Supreme Court to get some Insurers to pay their claims. Yet, according to Roy Morgan Research, we rate fourth from bottom as the least trusted profession, with Real Estate Agents, Advertising People and Car Salesmen just below us. For me, that hurts.

Many of the complaints that are lodged with FOS are from the direct placements with insurers (where a broker has not been used). The reason some clients prefer to go direct to an insurer is the belief that they will save money, but at the same time, they are totally responsible for making sure they have the correct coverage in place. They need to know that they have adequately protected their business, that the policy arranged does not knock out parts of their coverage but rarely do they know how that company is going to perform when it comes to claims time. An Insurance Broker is responsible for all these things and more. We also offer advice and sometimes, even a shoulder to cry on. Also, Insurance Brokers assist Insurers with the placement of the risk by supplying them with all the relevant information, make sure that full disclosure is followed and also arrange payment from the client. For that Insurance Brokers do receive payment from Insurance companies for this, in the form of a commission, which ranges from 10% up to 22.5%. In theory it does not cost anymore using a Broker, than going direct because we replace the need for insurers to have a sales and service department to handle client's queries, as we handle this for them.

Unfortunately, some insurer's resent the broker involvement because we act solely in our client's interests rather than theirs. Many Insurers have decided to bypass the Insurance Broker involvement instead offering on-line facilities and/or call centres. They often use inexperienced staff who are not allowed to give advice, but only talk about their product. Insurers have told various parts of the Insurance Broking industry, that they have a 20% lower loss ratio with their direct clients compared to the Broker placements. We see that as a compliment that we are making sure our client's claims are paid. John Price, the lead ombudsman at FOS made the comment that "Brokers have a duty of care to act in a professional manner - that of a competent and experienced broker"

Therefore, the responsibility on an Insurance Broker is huge. It is why we ourselves pay very large Professional Indemnity premiums. However, by always acting in our client's best interests, which includes accessing the available Insurance Markets on their behalf, negotiating the best deal for them and then should they have a claim, making sure they have the matter appropriately settled, then people in this profession should be able to hold their heads up high and be proud of what they do.