Insurance brokers have an immense responsibility to Australian businesses. The National Insurance Brokers Association estimates that they transact 90% of all commercial insurance, and handle roughly $16 billion in premiums per year.
With the enormity of that task in mind, it's essential that all brokers look closely at the strategies they use. Hard selling may seem like the way forward, spiking short term profits – because after all if brokers don't make sales they don't get paid.
However, in the interests of long-term success, sustainability and the industry's reputation, brokers must be so much more than just salespeople. It's in the role of a trusted businesses advisor that the best brokers excel, by selling their knowledge as much as insurance cover.
Brokers who advise, not sell, are generally more successful.Clearly defining a broker's role
Businesses are rarely aware of the risks that face them, or which insurance cover is required to safeguard them. This knowledge gap is what insurance brokers must fill in a role as trusted advisor, teaching decision makers how insurance can help mitigate risks, and safeguard their futures.
Sharanjit Paddam, principal at Deloitte Actuaries & Consultants discussed the importance of being more than just a salesperson in a comment to Insurance Business on February 1:
"I think the real thing that they're selling is risk management. They're selling advice."
"Brokers need to think beyond themselves as salesmen for insurance, like selling your next policy, and to go back to the 'why' and what is the real thing that they're selling, I think the real thing that they're selling is risk management. They're selling advice … to consumers about how to be safe and how to be protected and what their risks are."
In theory this is a brilliant idea, one that will certainly result in a better outcome for clients. However, what does it mean for the insurance broker's bottom line?
Building long term sustainable business
From a client's perspective an insurance broker who advises and recommends (instead of selling) provides far more value. Not only will they get the cover that they need, they'll also understand their insurance and why they need it – allowing them to see its value. As a result, clients will be more likely to recommend brokers, or offer repeat business.
Advising instead of hard selling is more than just a nice idea. Brokers with the knowledge and training to better advise their clients, perform better and generally enjoy higher profit margins.
In fact, the Macquarie Benchmark Report reveals that those with high profit margins are 4% more likely to invest in training and development than those with medium margins and 13 % more likely than those with low margins. This shows that providing brokers with the necessary training and knowledge translates directly into profit.
Offering the products your clients need
All the advice in the world means very little if brokers can't offer the cover that their clients require.
However, we can recommend one such product that will make buying the necessary insurance far easier for your clients – premium funding. This gives businesses the chance to pay for their premiums over a longer period of time, instead of in one up front payment, easing the impact on their cash flow.
By offering premium funding, brokers can take the first step towards making insurance easy for their clients and ensuring they can easily afford to act on any advice.
