Upfront fees to provide an insurance quotation? The new norm.

As many within the general insurance industry agree the market has become extremely tough over the last couple of years. Almost every aspect of the industry has been impacted with most service standards and sentiment across the whole ecosystem dropping to all time lows. Whether it be talent retention, insurer turnarounds, relationship management, communication, claims standard, pricing, acceptance criteria, appetite and/or capacity. There is no function that isn’t struggling. When this will rebound is anyone’s guess.

There are many reasons for this which could become their own article. Most noteworthy is covid, reduced investment returns, increase loss ratio’s, catastrophes, expense scrutiny etc. But, the key message of this article is to ponder the positive impact of a trend slowly creeping into the industry that I believe will become mainstream in due course.

For this I mean both insurers or underwriting agencies, as well as brokers or intermediaries.

 

Focusing on the manual quote/bind/transact and leaving out electronic transacted business for now. Most insurers or underwriting agencies have a pain point of tyre kickers. Brokers (and I include myself in this statement) go to multiple options for their clients on the same piece of business and of course will only place the business with 1 provider each year. You don’t have to be Einstein to work out that this leads to multiple carriers wasting their time conducting manual labour-intensive work for no revenue. Particularly in the current hard market where resources are stretched to capacity that is exacerbating the already huge problem of too much work and not enough time to complete. This blows out service standards which in turn reduces industry sentiment and customer standards. This also destroys employee engagement and positivity towards their role and has no doubt been a main driver in talent retention for many organisations.

Insurers and underwriters will argue that brokers and intermediaries are causing the problem with sharp rises in remarketing activity. However, this is ultimately being driven by reduced options for clients and a desire to get the best outcome for their increasingly demanding customers. You can see how the whole situation continues to snowball out of control.

Now picture this as a game changer. Imagine if insurers or underwriting agencies charged a fee per quote request? Who could blame them for doing so? In fact, I truly believe this shift would have a positive impact on the general insurance industry. For starters, those carriers complaining of tyre kickers would only be seeing genuine opportunities. Sure, the volume of quote opportunities would drop. But their staff resources would have more time to invest into the chances they are seeing. Brokers/intermediaries could expect better turnarounds and more considered responses and losing out on opportunities wouldn’t cause a bitterness between the 2 parties because payment for their time would’ve taken place. I’m not suggesting this fee needs to be sheep stations, but just enough (maybe $100 – $250) to cover the hourly rate of the expense incurred. Brokers would of course look to on cost this to their client or potential client, which is what the next part of this article will address.

Now picture this as a game changer. Imagine if insurers or underwriting agencies charged a fee per quote request? Who could blame them for doing so? In fact, I truly believe this shift would have a positive impact on the general insurance industry. For starters, those carriers complaining of tyre kickers would only be seeing genuine opportunities. Sure, the volume of quote opportunities would drop. But their staff resources would have more time to invest into the chances they are seeing. Brokers/intermediaries could expect better turnarounds and more considered responses and losing out on opportunities wouldn’t cause a bitterness between the 2 parties because payment for their time would’ve taken place. I’m not suggesting this fee needs to be sheep stations, but just enough (maybe $100 – $250) to cover the hourly rate of the expense incurred. Brokers would of course look to on cost this to their client or potential client, which is what the next part of this article will address.

 

Senior figures within the general insurance industry have been calling for years that the industry needs to be viewed in the same high regard as lawyers and accountants. They get upset that general insurance brokers are lumped with mortgage brokers and used car salesmen when it comes to consumer sentiment. Yet, truth be told if you take a step back and view the current state of play from the customers perspective you’d have to acknowledge as an industry our remuneration strategy is much closer to that of mortgage brokers and used car salesmen and a fundamental change would need to take place to be viewed in the regard we desire.  

We don’t have to look too far to see what change could look like. An upfront fee to quote is already the case with the life insurance industry where many advisors that remain in the industry are charging a fee of usually $500 to assist with sourcing quotes. This cuts out the tyre kickers at the front line creating an efficient ecosystem that is now focusing on those customers that demonstrate they want to be helped. An upfront fee to quote would also reduce a brokers workload as they too would be weeding out tyre kickers from their ranks.

So, considering each carrier would be charging a fee to quote it would then make the process of obtaining multiple quotes a genuine consideration for the end customer.  The more markets they wish to approach the greater the cost. Which is more than fair. This is directly aligned to work, and hours involved and is more than justifiable. This would enhance the broker proposition as “advice” as to who, when and how often to approach certain markets would be placed in higher regard. As well as broker relationships with said carriers being strengthen. Carriers would feel more secure with their renewal book and end customers would start to see more loyalty benefit which is sadly lacking from the current market cycle. Brokers themselves would feel more secure as the increased cost to consumer to shop around would reduce broker shopping. And brokers could choose to either just pass on the direct carrier quote cost or place an additional margin on top of this.

You could even be quite creative as a broker in how you apply this new remuneration structure. Often in my brokerage we will charge an upfront fee to quote to a prospect. But we’ll add that if they take our option; the commission (which we’ll disclose) will likely be much more than this fee. With that being the case, we will rebate the original upfront fee off the customers invoice as an incentive for proceeding to being a customer. This is always well received and tends to have the desired impact and result.

My hope is that this article stimulates some discussion and critical thought that leads to a positive change to the industry. The present state of the market is unsustainable and will in certain policy classes lead to collapse if change doesn’t occur. We all know the definition of insanity being doing the same thing repeatedly and expecting a different result. Really keen to get feedback on this idea from as many sections of the insurance ecosystem as possible!