A Fresh Take on Fair Analysis

The whole concept of fair analysis prompts a massive debate, particularly in the arena of advised sales.

Just how patronising does one have to be to an experienced insurance broker who has advised hundreds of commercial clients, is up to date with the market and knows instinctively which the best insurer and the best policy for any client at any given time is?

Do they really have to add an hour or more to every client’s costs by shunting cases around the market to ensure that what they already know is indeed correct?

In answer to this question, the regulator does have a very sound reason for creating the fair analysis requirement, and that is largely based on the practices of the minority, who do not routinely have the interest of the client at the forefront of their mind.

The empirical position that must be achieved is that the policy recommended is suitable for the client’s needs and, as it stands at present, a fair analysis must be documented for each policy recommended. Otherwise, the insurance broker must tell the client that the choice is from a limited panel or that it is a solus arrangement.

So how should a broker go about conducting a fair analysis?

The commonplace approach to fair analysis uses a ‘push’ scenario, whereby the insurance broker pushes the client’s details out to the market. The market then responds, but in most cases, many insurers will only respond to a portion of the business they are approached with. This can mean a lot of legwork to be able to complete the broker’s obligations.

The broker may approach their ‘usual suspects’ to obtain enough responses to meet the regulator’s requirement, but does this really meet the client’s needs?

As regular readers of Insight will know, RWA recently secured a contract to provide regulatory support to the insurtech start-up, Broker Insights. During our work with the team there, it quickly became apparent that their approach does offer an extremely interesting potential benefit for brokers in relation to their responsibility of fair analysis 

This article is not recommending that readers jump on each new idea that comes to market but we are suggesting that our clients have a look at important market developments such as this and then make their own minds up.

Broker Insights has created a ‘pull’ model, which collects client data from brokers and puts it forward, anonymously, to a panel of insurers. These supporting insurers can pull down the information they want and then ‘ask’ if they can quote on the risks that appeal to them. On the face of it, this cuts through much of the pain and wasted effort of hunting around the market to meet fair analysis requirements.

In simple terms, if a broker signs up to the service then, theoretically, they cannot be caught out by the uncertainty of pushing a case around the market because the market comes to them by delivering a list from competing insurers who might wish to quote for the business.

Of course, it is not quite as simple as that as much depends on the scope of the insurers supporting the system. Is the number high enough not to be a panel? Or, if the broker gets quotes outside of Broker Insights, does the fact that insurers come calling for business satisfy the fair analysis rules?

To be frank, we do not know the answers, but the senior team at RWA do think the idea is sufficiently worthy of consideration by professional insurance brokers.

RWA’s stance is an objective one, which is to express the view that this may or may not be a major new service for the future. However, we would invite our clients to take an hour or so to listen to or read about the idea and then tell us what you think.

Ultimately, we think this is one of those ‘body of opinion’ issues where insurance brokers themselves will decide.

The practical advantage seems to be that insurers come to you on a case by case basis, which naturally has an advantage to the client as well in that there is more time available for client service.

About the author

Robin Wood founded RWA in 1992. He is an acknowledged Expert on insurance broker's duties and Conduct Standards and Risk Management and has been an Expert to the courts on a number of reported cases including ​Environcom v Miles Smith, The Café De Lecq case and Eurokey v Giles.

Robin is happy to advise anyone who wants to know how to meet good and reasonable standards of conduct and behaviour whether that be a sole trader or a regulator. Robin has written a number of important guide books on topics such as Training & Competence, The Duty of an Insurance Broker, The Insurance Act and Professional Standards of Insurance Brokers. A regular speaker at industry conference events and Masterclasses, Robin is an engaging presenter who is known for filling a room and providing a challenging and effective delivery. He is a Member of the Expert Witness Institute.

Robin Wood

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